An Equity Release Mortgage Can Provide Financial Freedom in Retirement

An equity release mortgage could make the difference between existing and living life to the full in your retirement.

house on pile of cash

Thanks to the property boom during the baby boomers lifetime homeowners are likely to have a considerable amount of equity tied up in their home. The average house price has risen from £62,244 to £154.066 in the last 20 years.

If you're nearing retirement or have retired and you have dreams of taking more holidays or travelling, or you simply would like to make some improvements to your home an equity release mortgage could be the answer.

In the past we have all heard horror stories about people losing their home due to getting involved with equity release schemes. However, like everything the providers of equity release mortgages have moved on and improved.

The Financial Services Authority regulates all equity release mortgages. It provides protection, security and if need be, access to official compensation schemes.

To protect homeowners further, the Safe Homes Income Plans (SHIP) was established to protect the interests of equity release customers. When choosing a provider of an equity release mortgage or plan always ensure that they are members of SHIP. The majority of the leading plan providers are.

Who Qualifies for Equity Release?

  • People aged 55-95
  • If your property is worth at least £50,000.
  • If you have little or no outstanding mortgage.

You can use the capital released for anything you wish. It is important however that you seek advice from a professional adviser who can help you consider which option is going to be the right one for you.

5 FAQ's on Equity Release Mortgages

1. Will equity release affect what I can leave in my Will?

Yes it will. Taking out an equity release plan will reduce the value of your estate. So it is wise to discuss your plans with your family.

2. Are there any monthly repayments to make?

Up until recently no monthly payments were payable like a regular mortgage. Interest accrues, onto the loan amount and is repaid when the property is sold.

However, there is a new one on the market where you can opt to pay the monthly interest if you prefer with the option to stop at any time in the future should your income change.

3. What Fees are Payable?

There are usually one-off fees involved as with any mortgage. These can vary between equity release mortgage providers, so it's best to check exactly what is payable at the outset.

4. Will my family end up with debts?

Not if you take out a SHIP approved plan, as these come with a 'no negative equity guarantee'. The amount owed on your plan will never exceed the value of your property.

5. What happens if my partner dies first?

With SHIP approved equity release plans you are guaranteed the right to stay in your home as long as you want. With a joint application the plan only ends when the last surviving partner dies or moves into long term care.

Which Type of Equity Release Plan?

There are typically three types of equity release plans.

  • Lifetime Mortgages
  • Home Reversion Plan
  • Drawdown Options

Lifetime Mortgages

With a lifetime mortgage, you take a loan that is secured against the value of your property, providing you with a tax-free cash lump sum or income to spend as you wish.


  • The choice of a tax-free cash lump sum or income, normally with no monthly repayments.
  • You retain full ownership of your home, so you or your estate benefit from any increase in its value, above the total amount owed.
  • This may be a better option for younger people who may be too young for a home reversion plan.


  • The amount you leave as an inheritance is reduced and cannot always be guaranteed.
  • With compound interest rates the amount owed grows over time. At an interest rate of 6.25% the amount owed would double every 12 years.
  • The provider has a first charge against your property and an early repayment charge may be payable if you decide to pay back the loan early.

Home Reversion Plan

With a home reversion plan, you sell all or part of your home to a home reversion company in exchange for a tax-free cash lump sum and a guaranteed lifetime lease to remain in your property.


  • You are able to guarantee an inheritance.
  • You receive a tax-free cash lump sum to spend as you wish.
  • You or your estate benefit from any increase in the value of the share of your property that you retain.


  • The home reversion provider owns all or a share of your home, sharing in any increase of your property's value, and reducing the amount you can leave as an inheritance.
  • The plans cannot usually be reversed as you are selling part of your home.
  • You typically won't receive the full market value of the share of your property that you sell.

Drawdown Options

Many equity release mortgages and home reversion plans offer the option to take a drawdown of funds rather than releasing all of the money at the outset.

The main workings of the plans are the same, however, instead of taking all of the cash you release as a single lump sum, you can choose to take instalments as and when you need them.

The main advantage of this type of scheme is the saving in interest. This is only charged on the amounts released, which could save a great deal for your estate.

For further information on an equity release mortgage go to Key Retirement Solutions.

Click here to learn about New Equity Release Products coming onto the market.

For more financial articles click on the links below:-

Retirement Income Planning

Index of Financial Articles

Home Page