What is equity release?
If you’ve lived in your home for some time, it’s highly likely that you’ll have a considerable amount of equity in it. Home equity is the market value of your home minus any outstanding mortgage or loans secured against it.
For example: If your home’s worth £250,000 and you have an outstanding mortgage of £20,000, the equity in your home would be £230,000.
Equity release is a way of tapping into some of this value in your home without having to downsize or move away from the place you love. The tax-free money released can be taken as a one-off lump sum or series of lump sums to spend as you wish, or it can provide you with regular payments to supplement your income in retirement. Most importantly, you don’t have to make any monthly repayments, unless you choose to do so. It’s important to note that a lifetime mortgage is secured against your home and will reduce the value of your estate.
The truth about equity release
- The cash you release is tax free.
- You can use the money for almost anything you choose.
- You still own your home, and you have the right to stay there for life.
- There are no monthly repayments to make, unless you choose to – the loan is normally repaid when you die or move out permanently, e.g. into long-term care, and the house is sold.
- You can still choose to move if you want to, as it is usually possible to transfer the loan to your new home. (subject to the new property meeting the lenders criteria).
- All lenders and advisers must adhere to the standards set by the Financial Conduct Authority (FCA).
- As long as you meet your terms and conditions, the money paid back will never be more than the value of your home, even if house prices go down.
The myths about equity release
- There’s no regulation.
- The equity release provider could force you to move out of your home.
- You won’t be able to move if you want to (subject to the new property meeting the lenders criteria).
- You won’t be able to leave an inheritance.
- Your family will end up with a debt they can’t pay.
- You can only use the money on your home.
- You can’t release equity if you’ve got an outstanding mortgage
The Saga Guide to Equity Release
Find out more about equity release with our helpful online guide.
You can also find out more about the service and fees on the Important Information page.