Equity Release – an Overview

Equity release is a scheme which allows you to get cash for the equity built on your home. The money you get can be taken as a lump sum amount, as a regular source of income or a combination of both. This is an excellent plan for elderly people who have little or no source of income as it allows them to still stay in the house that they have given for equity release. Equity release schemes include, lifetime mortgage plans and home reversion plans. The minimum age eligibility for lifetime mortgage plan is 55 years while for home reversion plan it is 60 years and above. When you take up an equity plan, the lump sum amount you get is tax free. However, if that money is invested in a saving account, any income that you get from it will be subject to tax.

The lifetime mortgage plan allows you to borrow money as a lump sum amount or as a regular source of income at certain interest rate. You continue to be the owner of your property and are entitled for any growth in the value of your home. However, in home reversion plans, you sell a part or whole of your house to a company who gives you the right to stay in the house till you want to move or are alive. The type of plan that you would like to take depends on your requirements. However, equity plans are not suitable for anyone and one need to get the advice of a financial advisor to find the eligibility and if it is beneficial to take up the plan. One should keep in mind that taking up an equity plan will reduce the value of their estate and also reduce any entitlement to the state sponsored benefits.