Releasing equity can be an appealing way to access money that’s tied up in your property, but there are a number of details to be aware of and factors to consider. We’ve produced this handy guide to make sure you know the important facets of equity release.

How to release equity from your home?

Releasing equity is simply a way to unlock the money that’s tied up in your home, and it’s available as a tax-free lump sum. There are two ways to release equity from your home: either as a lifetime mortgage or a home reversion.

Lifetime mortgage
Taking the lifetime mortgage route allows you to retain full ownership of your home while releasing a portion of your home’s value. It acts as a loan against the value of your property and you can choose to either pay the interest of the loan off over time or as a lump sum at the end.

The loan itself is repaid when the last homeowner on the deed either passes away or moves into fulltime residential care.

Home reversion
Home reversion involves selling a portion of your home. This does not change who can live in your home, and you’ll know exactly what proportion of the home you’ve sold and how much you’ve retained.

When you come to sell, the value of the sale will be divided up between yourself and whoever owns the remainder of your home, as per the percentages you each own.

How long does equity release take?

Releasing equity in your home shouldn’t be rushed, and you should take legal advice early in the process to make sure you are aware of all the important details.

Other parts of the equity release timescale include the application process, a survey, valuation, an offer and the release of the equity itself.

All in all, this process typically takes about 6-8 weeks.

Is equity release a good idea?

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Is equity release a good idea?

As with much of life, there are pros and cons to consider carefully, based on your own situation and needs. We have summarised the key factors below:

Pros

You’ll have quick access to a tax-free lump sum of cash (or a series of smaller payments) to do with as you please. This may be to pay off debts, improve your quality of life, take that bucket-list holiday, help your loved ones…
Interest rates for equity release are fixed for the duration of the plan, so you can rest assured they will not suddenly rise after you take out the product.
There’s no obligation to make any monthly repayments. The money doesn’t have to be paid back until after you pass or move into full-time care. There are options to pay the money back sooner if you prefer (although this may come with a fee).
If you release equity through a lifetime mortgage, you’ll still have complete ownership of your home.
You can use an equity release scheme to reduce the inheritance tax you may be liable to pay, by reducing the value of your estate.
You’ll never owe more through equity release than the value of your home. When the time comes to repay the loan, it can be fully cleared by selling the property – with any remainder either helping to cover care costs or being distributed as per your will.

How much equity can I release?

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There are a number of factors that affect how much equity you can release from your home, but as a rough guide, you can expect to be able to unlock 20-60% of your home’s equity through a lifetime mortgage or as much as 80-100% of your home through home reversion.

Factors that will affect the amount of equity you can release are:

Your home:
- The value of your home
- The materials used to build your home>
- The condition of the property>
- The value of any outstanding debt secured against your property, i.e. a mortgage
- If your home is a listed building

Your life expectancy after taking out the plan
- This is based on your age and health (or that of the youngest applicant in a joint application)

How much does equity release cost?

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The main costs associated with equity release, aside from the interest accrued, are fees for solicitors, a valuation and a surveyor. The fees can set you back between £1,500-£3,000.

Some consider the act of selling off part of your home through home reversion as a cost, however, this is subjective.

Can I sell my house if I have equity release?

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Yes, you can still sell your house if you have taken out equity against the value of your property. You can repay the money to your lender and sell your house as normal. You should check with your lender about any early repayment fees.

You are also able, dependant on your lender, to take your equity release with you when you move. If you move to a property of the same, or greater, value, there shouldn’t be any problem and they can simply ‘port’ your lifetime mortgage or home reversion scheme the new property. If, however, you are looking to downsize, you may be required to pay back some of the value of your loan.

One thing to be aware of when looking to port a scheme is any conditions your lender requires of the new property (beyond its value); for example, they may require it to be a freehold property.

Alternatives to equity release

If you are looking to free up money in your property quickly but don’t feel that equity release is for you, consider selling your home to House Buyer Bureau. We have been helping people sell their properties quickly, with no fuss or faff, for over 10 years and are rated as Excellent on Trustpilot.

We are a friendly team who offers a clear and transparent service to help you sell your home and free up cash quickly for whatever you need, with no strings attached. Get in touch today to find out how we can help you.

Chris

Chris has worked in property all his career, first as a successful estate agent before spotting a gap in the market for buying property directly from people looking for a simple, quick sale.

He has a passion for property and as an experienced valuer, has looked at well over 50,000 properties so far at HBB. He has extensive experience in property buying and regularly comments in the press on property matters, trends and promotes ways to simplify and speed up the selling process.

View articles by Chris

How to release equity in your property

How to release equity from your home?

How long does equity release take?

Is equity release a good idea?

Alternatives to equity release