Equity release schemes
This content applies to England only.
Housing laws vary between England and Scotland. Get advice relating to Scotland
Equity release schemes give homeowners over the age of 50 what is effectively a mortgage for life. The homeowner, who is often retired, can get a loan for up to 40 per cent of the value of the property. This loan will be in the form of a lump sum, or regular payments.
How does equity release work?
Equity release schemes increase your income by allowing you to turn part of the value of your home into cash.
All of the interest and the capital will be rolled into one, and you do not need to repay the loan (or any interest) until you die, the property is sold, or you move (eg if you have to go into care). It may involve less disruption to your life than alternatives such as selling the property and moving to a smaller home.
Equity release scheme are regulated by the Financial Services Authority (FSA). Regulation helps to protect you from being ripped off by unscrupulous companies.
Equity release schemes are different from private sale and leaseback schemes. Always get independent advice before you commit to anything. Use our directory to find an adviser who can help you.
What are the risks?
There are negative aspects of equity release schemes:
- It will limit any other future options you may have had in relation to your property, such as paying for significant adaptations.
- It will reduce any inheritance that you leave behind as the loan will be repaid before your family inherits anything.
- By taking advantage of an equity release scheme, you may also lose your entitlement to certain benefits.
- If you are likely to need care and support (either now or in the future), any equity that you release may be counted as capital when your ability to pay for care is assessed by social services. This means that you might end up having to pay more for your care than you would do if you do not release the equity. Please see our information on care and support costs for more information about this.
How do I know if it’s the right option for me?
It is always a good idea to talk to an independent adviser before you make any decisions about your home. Use our directory to find a Shelter advice centre or Citizens Advice in your area.
You may be eligible for help that you are not aware of which could mean that you do not need to sell the equity in your home. For example:
- benefits (and by taking advantage of an equity release scheme, you may also lose your entitlement to some of these)
- home improvement grants
- pensions or pension credit.
