With house values rocketing over the last two decades, more and more people own properties with substantial equity (the value of the property less the mortgage taken out on it, if any). At the same time, living costs are increasing, with pensions and endowments often under performing. This is something that particularly affects those people that are approaching or beyond their retirement age. For those people, equity release is an increasingly popular way of releasing the equity in their homes to provide lump sum payments or regular incomes.

With more and more providers entering the market, our clients have a wider and wider choice of equity release products. This is great news in the sense that more and more needs are being catered for at less and less cost, but it also means that there can be a bewildering number of different products and plans to choose from. So while we hope that this guide is of use to you, having a chat with one of our consultants really is vital if you are considering equity release.

An FSA guide on Equity Release is available via the icon to the right.

Why Equity Release?

There are hundreds of reasons why people choose equity release, but these are the most common:

• Help with living costs
• To pay for home improvements or adaptations
• To raise a deposit to allow children or grandchildren to purchase their own home
• To pay for holidays or other luxuries.

How does it work? Types of equity release

How this money is raised from equity release depends on the type of product chosen. The most popular equity release products fall into two broad categories:

• Lifetime mortgages. Otherwise known as rolled-up-interest mortgages. The homeowner takes out a mortgage on their property, but unlike conventional mortgages, no monthly payments are required by the product provider. Instead, interest on the amount paid to the homeowner is rolled up monthly and added to the loan. When the homeowner dies, sells the property or moves into residential care, the amount owing is taken from the sale of the property, with the remainder (if any) passed to the ex-homeowner or their estate.

• Home reversion plans. The homeowner relinquishes all or a percentage of the value of their property in exchange for the lump sum outlined above. When the homeowner dies, sells the property or moves into residential care, the home is sold and the proceeds or agreed percentage of those proceeds is retained by the plan provider. So, for example, if a homeowner takes out a home reversion plan for 40% of their property worth £100,000 and then sells the property ten years later when it is worth £200,000, the plan provider receives £80,000 of that £200,000.

This is only a brief outline of equity release product types, and both have their own pros and cons. We can tell you more.

Is Equity Release for me?

Equity release has brought benefit to many thousands of people who are now enjoying a higher quality of life as a direct result of taking it. But it has also had a controversial reputation in the past. Since taking equity release will reduce the estate of the home-owner on death and therefore the inheritance left to loved ones, it is an emotive subject. This is why we are happy (in fact, we recommend) involving your family at some point during the discussion and/or application process.

There are other reasons why, following an appointment with you, we might recommend that you do not take equity release. For example:

• It may reduce or eliminate your eligibility for state benefits.
• If you are seeking funds to adapt your home for health reasons, there may be assistance available from your local authority.
• It may not be cost effective when compared to other options.

In other words, equity release is not for everyone, because everyone's circumstances are different. But the good news is that with our expertise and well-earned reputation for honesty and clarity, we are there to work out whether it is a good option for you, and tell you why. And, like the other areas we give advice on, we do not charge advice fees at the initial consultation stage, which is when we make our recommendation and you decide what. We do charge an application fee of £500 for equity release cases, but only when you tell us that you would like to go ahead with an application.

This is a lifetime mortgage or home reversion plan. To understand the risks and features please ask for a personalised illustration.