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The A to Z of equity release

We want to make equity release as simple as possible. So we’ve created this handy jargon buster to make things clearer for you.

Understanding the terms you should know

When exploring the world of equity release you’d be excused for wondering what some of the terms and phrases mean. It’s a big decision, requiring careful consideration, so it’s important to understand what you are committing to. That’s why we’ve put together this handy glossary to help you.

Equity term in a dictionary

APR

Stands for Annual Percentage Rate also referred to as the Effective APR. The annual interest rate payable on a loan.

Arrangement fee

The money you pay to your provider to cover the various administration costs involved in releasing the equity from your home.

Beneficiary

The person or people you nominate to receive the proceeds of your estate when you die.

Compound Interest

Interest accrued on a lifetime mortgage that is added to the loan amount and then future interest is charged on top. In other words, interest paid on interest. See also Lifetime Mortgage.

Downsize

Selling your home and buying another property (typically smaller) of lesser value to live in.

Drawdown lifetime mortgage

An equity release mortgage with the facility to draw money out as and when you need it, up to an agreed limit. Interest is only charged on the loan when money is released to you.

Early repayment charge

A fee required by a provider if you pay off a lifetime mortgage early.

Equity

The market value of your house, minus any outstanding mortgage debt and other loans secured on it. If you own your home outright, then 100% of the equity is yours.

Equity release

A financial arrangement that allows you to benefit from the value of your home whilst continuing to live in it, either by borrowing against it or selling all or part of it, for a cash lump sum or a regular income. See also Home Reversion Plan and Lifetime Mortgage.

Equity Release Council (ERC)

The industry body that represents providers, qualified advisers, lawyers, intermediaries and surveyors who work in the sector. Members must adhere to the Council's Statement of Principles which puts in place safeguards and guarantees for you.

Estate

Everything you own (e.g. property, investments and possessions) when you die less any money you owe.

Financial Conduct Authority (FCA)

The independent body responsible for regulating the conduct of financial services firms and markets in the UK, to ensure consumers get a fair deal. The Financial Conduct Authority is the conduct regulator for 56,000 financial services firms and financial markets in the UK and the prudential regulator for over 18,000 of those firms.

Freehold

Outright ownership of a property including the land it’s built on. See also Leasehold.

Home Reversion Plan

A scheme that enables you to sell part, or all of your home to a provider at a reduced price in exchange for a tax-free cash lump sum. Ownership of your home passes to the provider, but you can continue to live there for the rest of your life, rent free.

Impaired life

When the provider allows more equity to be released from your home if you have health problems.

Income

Receiving money on a regular basis rather than as a one-off lump sum. See also Lump sum.

Inheritance protection guarantee

A feature that allows you to protect a portion of your home's value so you can guarantee an inheritance for your loved ones.

Joint plan

A scheme that includes another person living with you, such as your spouse. Should one of you die or go into care, the other person can continue to live in your home until they die or move out permanently.

Key Facts Illustration

See Personal Illustration.

Leasehold

Ownership of the property and its land for the duration of a lease agreement with the freeholder. At the end of the lease, ownership returns to the freeholder. See also Freehold.

Lifetime lease

Legal authority to stay in your home rent-free for the rest of your life or until you permanently move in to long-term care. See also Home Reversion Plan.

Lifetime mortgage

A lifetime mortgage is a loan secured on your home, which is repaid with interest, when you die or go into long-term care. You maintain ownership of the property and continue to live there. See also Compound interest.

Loan to value (LTV)

This is the size of your mortgage in relation to the value of your property. It is usually shown as the percentage of your home that is mortgaged (e.g. 60%), with the balance being the percentage of the property that you own outright (e.g. 40%).

Lump sum

Taking a one-off cash amount upfront rather than receiving a regular income. See also Income.

Negative equity

When the value of a property is less than the debts owed on it.

No-negative equity guarantee

An assurance that neither you nor your beneficiaries will ever owe more than the value of your home. All ERC members must honour this guarantee. See also Equity Release Council.

Portable/ Portability

The right to transfer a scheme to a new home provided the new property is acceptable to your provider. All ERC members must include this feature in the schemes they offer. See also Equity Release Council.

Personalised illustration

A quotation presented in the format required by the Financial Conduct Authority (FCA) to aid customer understanding. Also referred to as a Key Facts Illustration.

Secured loan

A way of borrowing money using an asset, such as your home, as a guarantee. If you don’t keep up repayments, the lender can repossess this asset and sell it to get their money back.

Solicitor

A qualified legal professional engaged to provide legal advice and support to clients. When arranging the release of equity from your home, a solicitor can be engaged to review contractual arrangements and prepare any legal documentation required.

Solicitor’s fees

The money you pay to your solicitor for providing legal services.

Tax-free

The money you release from your home is free of both Capital Gains Tax and Income Tax.

Valuation

The formal assessment of a property’s value based on its condition and the current housing market, usually carried out by a surveyor on the provider’s behalf.

We hope this glossary helps make equity release a little clearer and sheds light on some of the jargon you may come across when considering your options.

Whenever you’re ready, we’re here for you

For more information and to check your eligibility, call The SunLife Over 55 Equity Release Service today on 0800 633 5566 or request a call back.

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). 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.

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 the funeral services are arranged and provided by Dignity Funerals Limited. Dignity Funerals Limited is a company registered in England and Wales No. 00041598. VAT registered No. 486 6081 14. 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands, B73 6AP. Telephone No. 0121 354 1557. Fax No. 0121 355 808. Part of Dignity plc. A British Company. Dignity is not authorised or regulated for this activity by the Financial Conduct Authority or the Prudential Regulation Authority but is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services. 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 Family Life Insurance?

SunLife Family Life Insurance is provided by Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Details can be found on the Financial Services register (registration number 110002). Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. 

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.