How Does Equity Release Work?
Equity release works by allowing homeowners to borrow against their home with a lump sum or drawdown loan. The money is only repaid when the homeowner leaves their home, usually to move into long-term care, or when they pass away.
At this point, the equity release provider will request the sale of the property and recover the debt from the property’s sale proceeds. There’s much more to know about equity release, and you can find this information on our How Does Equity Release Work? post.
What’s a Lifetime Mortgage?
A lifetime mortgage is the most commonly used method of equity release. The equity release loan is subject to a compounded interest rate, which gets added to the debt each month. Therefore, due to no compulsory monthly repayments, the debt keeps getting bigger as time goes on.
The lifetime mortgage debt is repaid from the eventual sale proceeds of the property once the homeowner has permanently moved out or passed away. You can uncover further details about lifetime mortgages and who qualifies to use them on our lifetime mortgage page.
What’s a Home Reversion Plan?
A home reversion plan works by allowing senior homeowners to sell a percentage of their home but retain the right to continue living in their home without paying rent to the lender. No interest is charged on the money received.
When the homeowner passes away or moves out, the home reversion provider will request that the property is sold to recover its share of the sale proceeds. There’s a lot more to know about home reversion schemes, which you can find on our home reversion page.