The pros and cons of borrowing against the equity in your home

What is equity release?

The equity in your home is the difference between your house value and the mortgage that you have left to pay. Equity is what you would have in cash if you sold your home and paid off the mortgage.
There is an option called equity release which allows you to access some of the equity in your home without selling it. This allows home owners to be provided with a sum of money but remain living in the home.

How does equity release work?

Mortgage providers who offer equity release provide the home owner with either a lump sum or a paid income which is a proportion of the value of the home. There are two main forms of equity release these are:
  • Lifetime mortgage
  • Home reversion

What is lifetime mortgage?

This is the main type of equity release and most popular. The lump sum is borrowed in the form of a mortgage and is repaid once your home is sold or in the event of your death or moving into a care facility. The older you are usually the more you are able to release. Typical equity release on a lifetime mortgage is between 18% and 50%.
As the interest grows you will increase the amount you owe when your home eventually sells or the event of death. However, there is an option to reduce this by paying off some of the interest. When choosing a lifetime mortgage providers will usually offer a no negative equity guarantee which ensures you won’t end up owing more than the value of your property when it sells.

What is home reversion?

Home reversion involves selling all or part of your property but you have a legal protection that you are able to live in your home until you die or you have to be taken into long term care. The options include being paid a regular income or a lump sum.
With home reversion it is important to remember that you won’t receive the full market value of your home. This option is often only available if you are over 60, you are also more likely to be able to take a larger share of the equity if you are not in the best of health.

What are the benefits of borrowing against the equity in your home?

  • Money to spend now rather than being tied up in your home
  • Supplement retirement income
  • Money can be utilised instead of being left to beneficiaries or to cover care costs
If you are thinking of an equity release scheme, contact our mortgage-heroes at Warrington Mortgage Centre and we can provide you with impartial guidance and advice to help you decide if this is the right option for you.
Disclaimer: As a mortgage is secured against your home, it could be repossessed if you do not keep up the mortgage repayments.

Ready to get going? Request a Call Back

"*" indicates required fields