Equity release guide
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‘Equity’ simply means the difference between the market value of your home and any outstanding mortgage (or other debt) secured against it, or the full market value of your property if you own your house outright.
Over the years, your home may have gone up in value, and you may have paid off most or all of your mortgage – so the amount of equity you have could be significant.
Very simply, ‘equity release’ is a way to unlock some of this money from your home – without having to move house or downsize.
There are two main ways to do this: with a lifetime mortgage (a loan secured on your home) or a home reversion plan (where you sell all or part of your home). Either way, the cash you release is tax-free and you can use it however you like.
Read our article: What is equity release?
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Equity release is a way to unlock the value (cash) from your home to supplement your income in retirement. To apply for equity release, you must be:
The money you unlock is yours to use as you wish. You can stay living in your home for the rest of your life and you don’t have to make monthly repayments.
Even if you haven’t paid off your mortgage yet, you could still be eligible for equity release. You’ll just need to use some of the money you unlock to clear your mortgage first and can then use the remainder of the money as you wish.
Read our article: How does equity release work?
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There are two main types of equity release schemes: lifetime mortgages (the most popular type) and home reversion plans.
A lifetime mortgage is a loan secured on your home, and you can receive your money in one lump sum or smaller amounts as and when you need it. You still own your home and there are no monthly repayments. Instead, the loan and interest are repaid when your home is sold, which is usually when you pass away or move into permanent care.
You sell all or part of your home in return for a tax-free lump sum. This lump sum will be worth less than the market value of your home, but you can continue living there rent-free for the rest of your life. When you pass away, your home will be sold and some or all of its value will go to your plan provider.
Read our article: Types of equity release plan
The amount depends on your provider, and if you don’t have the funds available immediately, don’t worry – you can cover costs using the equity you release.
Usually, you’ll need to pay for advice from a financial adviser, as well as the provider’s administration or application fees. You’ll also need to think about solicitor’s fees (for conveyancing, for example) and charges for a surveyor to value your property.
Interest rates for lifetime mortgages vary but can be fixed for the lifetime of your loan.
But even though the interest stays the same, the amount you owe can grow quickly. For example, with a roll-up lifetime mortgage (which gives you one tax-free cash lump sum), interest ‘compounds’ every month or every year – meaning it’s calculated based on original loan amount, plus the interest charged every month or year.
Based on an annually rolled-up lifetime mortgage loan of £50,000 with an interest rate of 6%.
|Year||Loan||Interest at 6%||Total owed|
Source: Equity Release Council
Read our article: How much does equity release cost?
Today’s equity release market is fully regulated by the Financial Conduct Authority (FCA). In addition, most providers and advisers are also members of the Equity Release Council (ERC), which means they must adhere to the Council’s Statement of Principles – which provides important safeguards.
These safeguards include a ‘no negative equity guarantee’– meaning you can never owe more than the value of your home and you won’t leave your family in debt.
There’s also the ‘security of tenure’, which gives you the right to live in your home for life – so you’ll never be forced to move out.
However, equity release isn’t right for everyone. And it’s important to consider other options (such as downsizing) before making any commitments. As with every financial decision, it’s important get the best advice before you decide to go ahead.
Read our article: Is equity release safe?
Equity release isn’t right for everyone, so it’s important to understand the pros and cons. We’ve outlined a few of the advantages and disadvantages of equity release below, but it’s important to seek further advice before making any final decisions.
Read our article: The pros and cons of equity release
If you would prefer a handy guide that makes understanding equity release easy, just request a guide below:
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The ‘equity’ (or cash) in your home is its market value, minus any mortgage or debt you have against it.
When you call the SunLife Equity Release Service, we’ll refer you to an equity release expert adviser from Age Partnership. They’ll assess your needs and help you decide whether equity release is right for you.
Well, that depends on many factors, like the type and value of your home, and your age when you start your plan. It’s likely that the older you are, the more equity (or cash) you can release. Feel free to use our equity release calculator for a guide.
With many equity release schemes, the answer is yes. Just be aware that certain conditions may apply and there may be fees to pay. Your Age Partnership adviser will be able to discuss these items in more detail with you.
Equity release mortgages from an Equity Release Council member come with a ‘no negative equity guarantee’ to protect you – ensuring you never owe more than the value of your home.
With a mortgage from an Equity Release Council member, you have the right to remain in your home until you die or move into permanent long-term residential care. Only then will your home be sold and the outstanding equity release loan be repaid. You can discuss this with your Age Partnership adviser.
No. Usually, equity release loans are repaid when you die or go into permanent long-term care and your home is sold. Any residual equity value will be available to pass on as an inheritance. Depending on your equity release plan, you may be allowed to make regular repayments of the interest on your loan.
Today’s equity release market is regulated by the Financial Conduct Authority (FCA). This should give you valuable reassurance.
The Equity Release Council (ERC) is a dedicated industry trade body. It represents providers, qualified advisers, intermediaries and surveyors who work in the sector – and all members have to adhere to the Council's Statement of Principles, which are there to provide important safeguards for you. You can find out more at equityreleasecouncil.com.
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Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.
Who are SunLife?
Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269).
SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).
You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.
If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.
Who provides the Funeral Plans?
Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.
The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.
Who provides My Smarter (ISA)?
My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.
Who provides the Will writing services?
Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).
The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.
Who provides SunLife Pet Insurance
SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.
Who provides SunLife Home Insurance
SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.
Who provides SunLife Car Insurance
SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.