What are the different types of equity release plan?

We’re here to help you choose the right kind of equity release plan for a tax-free lump sum or boost to your income

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Choosing your equity release plan

An equity release plan is a way to turn some of the equity in your property into tax-free cash. There are two main forms of equity release, with a number of additional options and features to consider for maximum flexibility.

Whichever plan you choose, the money you release is typically repaid only when you pass away or move into long-term care. You are able to remain in your property in the meantime and may have the option of protecting a percentage of its value to pass to your loved ones.

There are two main types of equity release plan:

  • The most popular type is a lifetime mortgage, where you borrow money through a loan secured against your home.
  • A much less common type of equity release is a home reversion plan where you sell all or a proportion of your home.

Here at Equity Release Wise, we bring you access to the best equity release plans and deals through one of the UK’s largest and best-established equity release specialists. To find out how much you could borrow, check here or talk to one of our friendly consultants by calling 0808 178 3055 or request a call back.

Lifetime mortgage plans

A lifetime mortgage is a form of loan that releases tax-free cash secured against the value of your home. The loan and interest are typically repaid by selling the property when you pass away or move into long-term care.

When your plan ends, any money left after paying off the loan and interest goes to your beneficiaries. It may be possible with some plans to ring-fence some of your property’s value to ensure that there will be an inheritance to leave.

All the lifetime mortgage providers we work with support the Equity Release Council’s no-negative equity guarantee. This protects your beneficiaries from paying any money if the value of your property doesn’t cover the full amount of the loan and interest.

You can read more about your lifetime mortgage options through the links below, or call us on 0808 178 3055 or request a call back and one of our equity release consultants will be happy to help.

Product lump sum icon

Lump sum lifetime mortgage

Access a tax-free cash lump sum if you’re a homeowner aged 55 or over. You retain full ownership and can stay at home until you pass away or move into long-term care.

Read more about lump sum lifetime mortgage plans
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Drawdown lifetime mortgage

Instead of making a one-off cash withdrawal, you take an initial cash sum and additional funds as and when you need them. This helps to reduce the total interest you pay.

Learn more about drawdown lifetime mortgage plans
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Interest-only lifetime mortgage

A more cost-effective method of equity release where you make voluntary interest payments to reduce or prevent compound interest building up.

Discover more about interest-only lifetime mortgage plans
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Enhanced lifetime mortgage

Certain health conditions or lifestyle factors could qualify you for higher cash releases or lower interest rates. A simple questionnaire is all that’s needed to check eligibility.

Read more about enhanced lifetime mortgage plans
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Second home lifetime mortgage

If you have a second home you may be able to secure a lifetime mortgage against it, or make your dream of a second home come true with a release from your main residence.

Read more about second home lifetime mortgage plans
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Buy-to-let lifetime mortgage

These specialist plans could enable you to release equity from a buy-to-let property, or to use the wealth in your home to help you make a buy-to-let investment.

Read more about buy to let lifetime mortgage plans
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Home reversion plans

This much less common form of equity release may be a more suitable alternative to a lifetime mortgage for some people. With a home reversion plan, you sell all or a percentage of your property at less than market value in return for a lump sum, a regular income, or both. You can then stay in your home as a tenant, with no rent to pay until you pass away or move into long-term care.

Read more: Learn more about home reversion plans

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Check your eligibility for an equity release plan

Each provider has their own criteria for equity release, but the following are examples of typical criteria:

  • Age 55+ for a lifetime mortgage, or 60+ for home reversion.
  • When a couple applies, the minimum age requirement applies to the youngest applicant.
  • You must own your own home in the UK, and it should typically have a value of £70,000 for a lifetime mortgage, or £100,000 for home reversion.

Read more: Am I eligible for equity release?

Check your eligibility

Call us on 0808 178 3055 and we’ll arrange a free, no-obligation appointment and equity release advice* from a specialist who will confirm whether you are eligible. If you’re unable to talk now, request a call back and we’ll call when it’s convenient for you.

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Already have a lifetime mortgage?
You could switch for a better deal

Now could be a good time to switch to a different lifetime mortgage. You may be able to release more tax-free cash due to being older than when you took out your existing plan. An increase in your property’s value or being in poorer health could also qualify you for further cash. Interest rate changes may also save thousands over the lifetime of your plan.

Why not arrange a free review* to find out if switching works for you?

Learn more

Which companies offer equity release plans?

There are a number of equity release plan providers to choose from and it could be time-consuming and daunting for you to contact them all individually. This is where Equity Release Wise comes in: we can arrange a search across top equity release providers to help you find the best plan for your unique circumstances.

Here are some of the leading equity release providers the search will cover. All of them are of course authorised and regulated by the Financial Conduct Authority and are members of the Equity Release Council.

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Apply for your no-obligation equity release quote

Find out if you qualify for equity release and how much you could borrow. Just click ‘Get started’ or call us on 0808 178 3055 and one of our team will be delighted to help arrange a free consultation and quote*.

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1. Start your quote journey

Simply click ‘Get started’ to begin your search for the best plan for your circumstances.

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2. Tell us what you need

Fill out some simple details about your situation so we can start to prepare your quote.

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3. Compare your best deals

You’ll get personalised quotes tailored to your unique circumstances and goals.

Answering your questions

Still unsure of a few things? We’ve got you covered with answers to some of our most frequently asked questions.

  • What is the difference between a lifetime mortgage and home reversion?

      When looking at a lifetime mortgage vs home reversion, they are both forms of equity release plan but a major difference is that with a home reversion plan, you no longer own all of the property.

      A lifetime mortgage plan is a loan secured against your property and you retain full legal ownership of it. The loan and the interest are repaid when the property is sold when you pass away or move into long-term care.

      A home reversion plan does not require you to borrow against the value of your property, therefore there is no interest to pay. Instead, a home reversion plan involves selling all or a percentage of your home to a home reversion provider.

      Both of these equity release products can help your finances by providing you with a tax-free lump sum, future payments, or both. You’re also free to remain in your home for the rest of your life with both a home reversion and a lifetime mortgage.

      While home reversion used to be a popular equity release product, now only a relatively small number of plans are sold. Even so, it could be a suitable equity release option depending on your circumstances.

  • Do I have to make interest payments with a lifetime mortgage?

      With a regular lifetime mortgage, you have zero monthly repayments and any interest that builds up is paid along with the loan itself once the property is sold when you pass away or move into long-term care.

      An alternative is an interest-only lifetime mortgage where you make voluntary payments of some or all of the interest to reduce or prevent the interest building up. Some lifetime mortgage plans also allow you to pay off some of the borrowed capital.

  • What are the costs of setting up an equity release plan?

      Just as with a normal residential mortgage, you should be aware of costs involved in setting up an equity release plan. Your adviser will make sure you understand these in full before you decide whether to take out a plan, but below is a summary.

      Your lender will typically charge valuation, arrangement and completion fees, with further fees payable to the solicitor who acts for you. Some of these fees can be paid from the money you borrow, so you may not have to worry about finding them from your existing savings.

      Our selected advisers naturally charge an advice fee – but remember that any initial advice or information you receive from them is completely free and without obligation. You only pay them a fee if you apply AND your case completes.

      Once a plan is taken out, there aren’t normally any fees. One exception is an early repayment charge that some lenders request if some or all of your lifetime mortgage is paid off before you pass away or move into long-term care.

  • What are the potential risks of an equity release plan?

      Equity release has worked for thousands of over 55s in need of tax-free cash. But it’s important to understand both the benefits and risks before deciding if it’s right for you, so here are some potential risks you need to be aware of.

      Lifetime mortgage risks:

      • Interest is calculated daily and added to the amount you owe each month. The amount owed therefore increases and reduces any equity left in your home when the plan ends, unless you choose to make interest payments while the plan is running.
      • Taking equity out of your home will mean that the inheritance you leave to loved ones will reduce.
      • If you give some of the money you release to family as a gift, they may be liable to pay inheritance tax in the future.
      • You may have to pay an early repayment charge if you choose to pay back some of the loan early.
      • Borrowing money through a lifetime mortgage may affect your entitlement to some means-tested state benefits. During your appointment with one of our selected equity release advisers, they will help you establish whether your benefits could be affected.

      Home reversion risks:

      • There is a considerable shortfall between the value you’ll receive for a share of your property, compared to its current market value.
      • If you pass away soon after taking out a plan, your loved ones will lose a significant proportion of your home’s market value.
      • If you decide to sell 100% of your property, your loved ones will not inherit anything from your home when you pass away.
      • It’s difficult to reverse a plan if you decide to buy back part of your home. In this case you would pay the full market value, not the discounted rate at which you sold it.
      • You no longer retain full legal ownership of your home.

      Having a large cash lump sum in your bank account might affect your entitlement to some means-tested state benefits. During your appointment with one of our selected equity release advisers, they will help you establish whether your benefits could be affected.

Still have questions?

We hope this information has been useful. To find out more or arrange a consultation with an adviser, please call or request a call back and we’ll be happy to help further.

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+ Client testimonials refer to the service provided by our selected equity release advisers. We have changed the clients’ names and certain identifying information to protect their privacy.

Please note that equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. To fully understand the features and risks, ask for a personalised illustration. Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long term care.