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What types of equity release plans are there?

Which equity release scheme is right for you? And how do equity release plans work anyway? Let’s see how you could unlock tax-free cash from your home…

person holding a piggy bank and small house

It’s all about you

There are lots of different equity release plans available today – each with their own features and benefits. Whichever one you choose, you’ll be able to access to tax-free cash without having to downsize. This goes to pay off your existing mortgage first (if you have one), and then the money is yours to spend as you like. Perhaps it’ll top up your pension in retirement, or maybe you’d like to see your family enjoy some of their inheritance during your lifetime – it’s up to you to decide.

Everyone’s different, so the right option for you all depends on your circumstances. Like how much equity you need to release, your age and health, and whether you’re prepared to sell off some (or all) of your home. But we’re here to shed some light on the most common equity release plans on offer.

The first thing to know is that there are two main equity release schemes to choose from: lifetime mortgages and home reversion plans. Read on to find out more…

older married couple looking at information on a laptop

Lifetime mortgages

This is the most popular kind of equity release scheme – and it lets you unlock a tax-free lump sum from the equity (or value) tied up in your property. Basically, it’s a loan secured on your home – and you retain ownership of your property.

Unlike a typical mortgage, there is no need to make any monthly repayments. The loan and accrued interest will be repaid when your home is sold in the future (when you pass away or move into long-term residential care) – and your family will still be able to benefit from any increases in your home’s value. Here’s a brief run-down of some of your options:

  • Roll-up lifetime mortgage – get a cash lump sum with nothing to pay back until your home is sold
  • Drawdown lifetime mortgages – you can take, or ‘draw down’ an initial lump sum and withdraw smaller amounts when you need
  • Flexible lifetime mortgage – allows you to make voluntary repayments if you wish to reduce your mortgage loan amount
  • Enhanced lifetime mortgage – designed for those with medical conditions, this allows you to unlock even more cash from your home

Learn more about lifetime mortgages

Don’t worry – you’ll never owe more than your property is worth

You can rest assured that the amount you owe will never exceed the value of home. And you won’t leave your family with a bill to pay when you pass away. The Equity Release Council’s codes and standards are in place to prevent this from happening.

Home reversion plans

This is another common type of equity release scheme that could be available to you. Home reversion simply means selling a part or all of your home to your equity release provider and getting a cash sum in return. You can get it in regular instalments or a single lump sum – it’s up to you.

Usually, this kind of plan enables you to raise a bigger amount than you would with a lifetime mortgage. And even though some or all of your home will belong to your equity release provider, you’ll have the freedom to stay in your home rent-free – for the rest of your life, or until you go into long-term care.

There’s absolutely no interest to pay

Home reversion plans aren’t loans, and that means you won’t have any interest to pay. When your property is eventually sold, your equity release provider will take the proceeds of the percentage that it owns. And anything left over will go to you or your estate.

That said, it’s worth bearing in mind that if your home increases in value over time, you’ll only benefit from the increase in value of the proportion you still own.

two hands holding wooden houses

A few key differences...

Just to make things easier, we’ve put together a table below to show you a few key differences between equity release schemes.

One of the main things to bear in mind is that a lifetime mortgage means you’ll still own your own home. Meanwhile, a home reversion plan means you’ll sell a share of your home in order to release cash from your house.

Lifetime mortgageHome reversion
Unlock tax-free cash from your home by taking a loan against your home. Unlock tax-free cash from your home by selling a share (or all) of your property to your equity release provider.
You still own 100% of your home. You could still own a proportion of your home, and live there rent-free.
You don’t need to make monthly repayments – interest is simply added to your loan. No monthly repayments – and no interest to pay.
The interest is usually added to the mortgage – then the loan plus interest is repaid when your home is sold. When your property is sold, the provider will take back the percentage they are owed.
Fees could apply if you choose to pay back the mortgage early. If you decide you’d like to buy back the share of the property you sold to your equity release provider, then you’d have to pay the full market value.
a couple looking over their paperwork

What else do you need to know?

Before making any final decisions about equity release, it’s a good idea to talk it through with your family. That’s because, whichever type of equity release scheme you go for, it will reduce the amount you may leave behind as an inheritance. Equity release may also affect your entitlement to state benefits. Find out more in our handy equity release guide.

Equity release can be a valuable way to increase your income in retirement, but it isn’t always the right solution for everyone. It’s always best to talk through your options with a professional equity release adviser – they’ll be able to answer your questions and help you decide whether it will work for you.

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.

SunLife offers a range of straightforward and affordable products including over 50s life insurance, funeral plans, life insurance, equity release, pet insurance, home insurance, car insurance, ISAs and Will writing services

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). Phoenix Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and is entered on the Financial Services Register (registration no. 110418). As part of SunLife’s commitment to quality service and security, telephone calls may be recorded.

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?

The funeral services are arranged and provided by Dignity Funerals Ltd which 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.

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.