What is equity release?

If you are a homeowner and are at least 55 years old, equity release is a way of using the money you have tied up in your home while you still live in it. 

How can equity release help?

You can release money you have tied up in your home to help with different things. For example: 

• You can pay off your creditors where there is a risk of serious consequences, such as the loss of an essential service or item. 
• You can reduce your debts, making them more manageable. 
• If you are on a low income it can help with expenses. 
• It can help you repay your mortgage. 

Does equity release affect tax and benefits?

Equity release might affect your benefits and taxes so seek advice if you have any concerns. 

If you receive benefits, tell the DWP or council about any money you get from equity release. If you do not currently receive benefits but could claim in future, you may be treated as having the money even if you have used it. 

Usually, equity release from your main home isn’t taxed.  

Different equity release schemes

There are different types of schemes. For example: 

• Lifetime mortgages offer lump sums or monthly payments.  
• Home reversion involves selling part or all of your home. You get a lump sum or monthly payments but you can still live in your house. 

An equity release loan is usually paid back when you die or move into long-term care. The terms of your loan may allow you to make earlier repayments, but there could be charges for doing this.  

Both schemes are regulated by the Financial Conduct Authority (FCA) to ensure that firms recommend the scheme that is right for you. The Equity Release Council (ERC) also provides guidance and safeguards, although not all equity release providers are members. These include product standards and member requirements. 

There are fees for equity release schemes. Make sure you understand these before going ahead. These may include: 

• a property survey fee 
• an application fee 
• payments to solicitors.  

It’s very important that you get impartial financial advice about the advantages and disadvantages of an equity release scheme. Financial advisers may charge a fee, or commission from the lender.