Saga Equity Release Service
What you need to know
Equity release plans and how they work
There are two main types of equity release plans available: lifetime mortgages and reversion plans. Within each plan type there are a number of different products available from many different providers. You should also be aware that these plans can also involve potential risks, and it is important that you understand these before making any decision about equity release. Our specialist advisers can explain the options available and help you find a solution that best fits your circumstances.
Lifetime mortgages
If the solution includes a lifetime mortgage, to understand the features and risks you should ask for a personalised illustration. Read more…
Interest–only mortgage
An interest-only mortgage is where you borrow a lump sum, secured against the value of your property, and you pay the interest on a monthly basis. When your home is eventually sold the original lump sum is then repaid. You will need to ensure that your pension and other income is sufficient to pay the monthly interest and still provide you with the extra money that you need to improve your standard of living. The interest rate may be either fixed or variable.
Rolled–up interest loans
A rolled–up interest loan is where you release money against the value of your home, and the lender provides a lump sum and/or a regular income. You pay no interest until the last borrower dies, the property is sold upon death or moving into long term care, or you sell the property and repay the loan. The interest is ‘rolled up’, which means that it is added to the loan either monthly or annually and can significantly increase the amount to be repaid over the period of the loan. It's possible that the effect of this increase might be reduced by any future rises in property prices. There are products available which offer a ‘drawdown’ facility. This is a reserve of equity that can be accessed at a later date meaning you would only pay interest when you release the funds.
The amount you can borrow will depend on the value of your property, and your age. The older you are, the higher the percentage of the value of your property you can borrow. The rate of interest may be fixed or variable.
Rolled up interest calculator
Our rolled up interest calculator demonstrates the effect of rolling up interest over time. View calculator…
Interest rates of between 6% and 7% are typical in the current market. Rates can vary according to providers and the customer's individual circumstances, please contact the Saga Equity Release Service if you would like a personalised illustration by calling 0800 015 6256.
Reversion plans
With a reversion scheme you sell all or a part share of your property to an investment company, which allows you to continue living in it for the rest of your life. Read more…
The agreed price is usually between 20% and 50% of its value (depending on your age and that of your spouse or partner). In return, the reversion company provides you with an income and/or lump sum, and a guarantee that you can remain in the property completely rent–free for as long as you live, or until the property is sold.
The risks involved in equity release
The risks will depend upon the type of equity release scheme you choose. Read more…
A rolled–up interest loan will continue to increase, as you are not paying any interest until the property is sold – you could finish up owing more money than your home is worth. To avoid this, there should be a guarantee that the repayment amount will never exceed the sale proceeds of your property. Saga's Equity Release Service only includes plans with this guarantee.
With a reversion scheme, you sell a percentage of your property to a reversion company in return for an income and/or a lump sum. When the property is sold the agreed percentage belongs to them. You or your heirs will not benefit from any future rise in house prices on this percentage.
Equity release is a serious decision and not right for everyone because it may affect your entitlement to state benefits and may reduce the value of your estate. Taking professional advice and discussing your options with those close to you is essential.