Simply put, equity release is a way for property owners to unlock some value of a property and turn it into a cash lump sum. There are 2 main property equity release schemes that are available, Home Revision Plan and Lifetime Mortgage.
Home revision plan - This type of property equity release means that you sell all or a percentage of your home to a private company. In return, you will receive an agreed cash lump sum, a monthly income or both.
Usually, under this plan, you are able to remain in the property, rent-free or for a nominal monthly rent, until the property is sold. When the property is sold, the private company who purchased your property would receive the proceeds of the sale (depending on the share of the property that was sold).
Lifetime mortgage - This type of property equity release differs to a home revision plan as rather than selling the property, you would borrow against the value of the property. This sum can be paid as a lump sum, income or both.
You can continue to live in the property and you will retain all legal ownership. This loan doesn’t require being repaid until you either pass away or move to different accommodation. There are interest rates under this equity release scheme which are charged at a fixed rate (and added on to the total sum of the loan).
When entering into either of these schemes, you will need to consider the impact any received money will have on your welfare benefits, Capital Gains Tax, Income Tax and Inheritance Tax. You should also look to consider any other type of finance source that could be utilised before looking to release equity in your property. This is something we can discuss with you to ensure that you have clarity.