An Introduction to Equity Release

An Introduction to Equity Release

For many people approaching retirement, having access to some extra income is often a priority. Equity release is frequently offered to people in later life to ‘unlock’ some of the value of a property, providing a cash lump sum in return. However, this can reduce the value of your estate considerably, so equity release is not without risk and not the right decision for everyone.

What is equity release?

Your equity is the value of your home, minus any loans outstanding on the property. With house prices continuing to rise, homeowners reaching retirement may find themselves with a large amount of equity tied up in their property whilst receiving little income from elsewhere.

Equity release is a way to partially unlock some of the value of your property, giving you access to a cash lump sum.

It is important to remember that this is not an entirely ‘safe’ option. The value of your estate can reduce significantly, leaving your heirs with considerably less inheritance, so seeking financial advice before you make a decision is key.

The most common equity release plan is:

Lifetime mortgage:

A lifetime mortgage is the most popular type of equity release, allowing you to access a portion of the value of your home whilst you continue to live there. As you are essentially borrowing against the value of your property, this interest must be repaid when you die or vacate the property and go to a care home.

  • The mortgage runs for the rest of your life or to the point you move into a care home
  • You can either receive the cash in one lump sum (a roll-up lifetime mortgage) or in separate installments which only accrue interest when you access the money (a drawdown lifetime mortgage)
  • There are no monthly repayments, but you do have the option of paying the interest if you want to
  • Instead, interest is repaid in the sale of your home at the end of your life

Lifetime mortgages offer more flexibility than other equity release plans, as most equity release providers will give you the option to make voluntary payments towards the loan as you please.

Equity release is no small decision. However, seeking financial advice can help you to navigate the risks, ensuring you make the right decision for your specific circumstances.

If you would like to talk to a member of the team here at gpfm, please don’t hesitate to get in touch over email at or call l01991 500261.

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.

About gpfm

gpfm are an independent financial planning company dedicated to the provision of personal, professional, and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.