Equity Release

Homeowners over 55 years old might be able to release equity from their home using an equity release plan. 

Equity release plans – namely lifetime mortgages and home reversion plans – are methods of borrowing for senior homeowners. These plans could allow you to release equity from your main residence and make no monthly repayments. 

The equity release plan is only paid back after the last surviving plan holder dies or moves into care, using some or all of the sale proceeds of their home. Equity release plans are often used to help senior homeowners help fund their retirement, but the money can be used for any purpose. 

The pros

  • Receive a lump sum or drawdown loan with no monthly repayments
  • Keep living in your home with no rent to pay
  • Never pay back more than what your home eventually sells for due to the negative equity guarantee
  • Option to make voluntary (interest) payments to mitigate the debt growth
  • People with adverse credit history can still get approved for equity release

The cons

  • The overall cost of repaying an equity release plan can be high
  • A significant wealth increase could stop your eligibility to receive means-tested benefits
  • Equity release will reduce the value of your estate and your beneficiaries will not inherit as much wealth
  • It can be expensive to get out of an equity release plan due to early repayment fees
  • There may be more suitable options available

More information on equity release

Equity release plans are complex and there’s a lot to understand about how they work and further implications. You’ll need professional equity release advice before applying for a plan, but MoneyNerd is also on hand to help you get to grips with these loans. Learn more about equity release here on our equity release hub. 

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