Equity release

Equity release is a way for mature homeowners to release cash from the value of their home without having to move.

Schemes are available to homeowners aged 55 and over; and the older you are, the more you'll generally get.

There are two main ways of releasing equity: Lifetime mortgages and home reversion plans.

Lifetime mortgages

Lifetime mortgages are by far the most popular. Homebuyers release cash by mortgaging their homes, which they can then spend on whatever they want (for example, boosting income or paying for home improvements).

Unlike an ordinary mortgage, a lifetime mortgage is not repaid during the homeowner's lifetime.

Instead, the loan rolls up with interest and the equity release company is repaid from the homeowner's estate when the house is sold after their death.

Reversion schemes

Reversion schemes raise cash in a different way: You sell a percentage of your home to the company, which is repaid after your death.

The amount you can raise on a lifetime mortgage or reversion scheme will be limited: You won't get anything like its market value.

Equity release is a big undertaking and you must take legal advice. There are also charges to set up a plan, and once you've taken it out, they are hard to reverse.

Interest rates used for lifetime mortgages also tend to be higher than on standard mortgages.

However, you won't be forced to move even if house prices fall, and most plans come with a negative equity guarantee which means the debt rolling up cannot exceed the value of your home.