Equity Release Mortgages

All about Equity Release

Equity release is a financial product that allows homeowners, to unlock some of the value (equity) tied up in their home without having to sell it. It provides a way to access cash, either as a lump sum, a regular income, or both, while still living in the property.

The two main types are lifetime mortgages and home reversion plans. With a lifetime mortgage, you borrow against the value of your home, with interest rolling up over time and repaid when the house is sold, usually after death or moving into long-term care. A home reversion plan involves selling a share of your home to a provider in exchange for a lump sum or regular payments, while retaining the right to live in the property rent-free.

Equity release reduces the value of your estate and can affect your eligibility for benefits, so it’s important to seek financial advice before proceeding.

At Helen Ferneyhough Associates we advice solely on Lifetime Mortgages as a form of equity release. We do not offer advice or services related to Home Reversion schemes. If you need advice on Home Reversion this can be provided via a third-party.

Equity Release

Equity release can be utilised for a variety of purposes, including: 

• Assisting a child or grandchild with a university education or a house deposit
• Adapting and upgrading a property so that the owner can remain independent for a longer period of time
• Paying off outstanding debts, such as mortgages, credit cards, and personal loans
• Paying for help around the house, such as domiciliary social care
• To make up for pension deficits, increase disposable income, and improve quality of life
• Purchasing a new car or other major purchases

Lifetime Mortgage

A Lifetime Mortgage is the most common form of equity release in England and Wales, allowing homeowners aged 55 and over to borrow against their home while retaining ownership. Repayments are only made when the homeowner passes away or moves into long-term care, with the loan and interest repaid from the property’s sale.

There are options for voluntary or interest-only payments to reduce the total debt. Regulated by the Financial Conduct Authority (FCA), these mortgages often include a “no negative equity guarantee”, ensuring you won’t owe more than the property’s value.

Eligibility depends on age, health, and property value. Independent legal advice is required, and it’s crucial to seek financial guidance, as a Lifetime Mortgage may affect means-tested benefits and reduce inheritance.

A Lifetime Mortgage is not suitable for everyone and may affect your entitlement to means tested benefits, so it is important to seek financial advice before taking any action. If you are considering releasing equity from your home, you should consider all options available before equity release.

The interest that may be accrued over the long term with a Lifetime Mortgage, may mean it is not the cheapest solution. As interest is charged on both the original loan and the interest that has been added, the amount you owe will increase over time, reducing the equity left in your home and the value of any inheritance, potentially to nothing.

Although the final decision is yours, you are encouraged to discuss your plans with your family and beneficiaries, as a Lifetime Mortgage could have an impact on any potential inheritance. We would also encourage you to invite them to join any meetings with your adviser at Helen Ferneyhough Associates, so they can ask questions and join in the decision, as we believe it is better to discuss your decision with them before you go ahead

Home Reversion

A Home Reversion scheme differs significantly from a Lifetime Mortgage. With this option, you sell a portion, or all, of your home to a home reversion provider in exchange for a lump sum or regular payments. You can continue to live in the property rent-free (or for a nominal rent), but you no longer fully own it. When the property is eventually sold, the provider receives their share of the proceeds based on the proportion of the home you sold.

Home Reversion plans are generally available to those aged 65 and over. Like Lifetime Mortgages, these schemes are regulated by the FCA to ensure fairness and transparency. However, you should be aware that the amount you receive is usually less than the market value of the share of the property sold, as the provider allows you to live there for the rest of your life. 

Disclaimer: Helen Ferneyhough Associates provides advice solely on Lifetime Mortgages as a form of equity release. We do not offer advice or services related to Home Reversion schemes. Both products are regulated by the Financial Conduct Authority (FCA). Should you require advice on Home Reversion schemes, we recommend seeking guidance from a specialist in that area.