Turning property into cash

Equity release schemes are available from a number of different financial companies, some of them household names. Different schemes work in different ways, but all work to the same basic principle. They allow you to access the untapped wealth in your home to provide an income or lump sum to spend as you wish-without selling your home. Schemes may even allow you the freedom to move home afterwards if you wish.

Put simply, most equity release schemes work by allowing you to borrow money against your home, then repay the loan from the sale proceeds of that property on death.

These schemes are not for everyone. But careful planning and independent advice can help you decide whether you want to turn your bricks and mortar into much-needed cash.

Why choose equity release?

Equity release schemes are only appropriate for those who have passed a certain age and cannot raise money from other sources. The older you are, the more you will benefit, as the money you raise from the scheme will not have to last as long. Those aged 70 and above will benefit most. People use the money raised from equity release schemes for a host of reasons. Many are struggling on the basic state pension and simply want to boost their standard of living. It makes little sense to struggle financially when you own a valuable asset.

Others want the cash for a specific reason, to decorate their home, buy a new car or pay for a dream holiday. Some want to help their loved ones, perhaps by helping their children put a deposit on a place of their own or start a business.

What schemes are available?

There are different types of equity release plan offered by a number of banks, insurance companies and specialist lenders. All share the same principle of unlocking wealth in your home to spend as you wish, but they work in slightly different ways.

Is it right for you?

Your house is almost certainly the most expensive asset you own and you are likely to have a large emotional as well as financial stake in your home. You must therefore consider carefully any decision you make. Releasing equity from your home generally involves handing part of its value to a third party. On some schemes, you will give up all ownership rights, although will still be able to live there.

What next?

Unlocking capital in your home is a major step. There are many personal and financial issues to consider. The range of different plans available from different companies makes the picture seem even more confusing. Do not take such an important decision without first seeking an independent financial adviser who specialises in this area.
You should also talk to those family members close to you. Their financial interests are also at stake. They may be required to sacrifice a large part of their inheritance if you opt for an equity release scheme. It is best to tell them your plans, so the news does not come as an unwelcome shock later.

This factsheet has been approved by a person regulated by the Financial Services Authority. Not all the mentioned products and services are regulated by the FSA. Eligibility for any of the above products and the tax situation will depend on individual circumstances. Remember that if you release your equity from your home you are still responsible for insuring the house and for payment of all household bills.

Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it.

If in any doubt, seek independent legal advice.