Equity release continue to be a useful retirement planning tool. There area a variety of different equity release schemes available. They can provide a cash lump sum to be used immediately or they can provide money to be used to help supplement already existing income. Because these products are being used more prevalently during retirement, lenders have included a variety of features with some products and many of them can now be tailored to suit each individual homeowner’s needs.

There are currently two main types of equity release schemes. They are lifetime mortgages and home reversions.

Lifetime mortgages are by far the most popular equity release products available in the marketplace, partly because they are so flexible and offer so many different features. Lifetime mortgages currently account for more than 98% of all equity release plans.

A lifetime mortgage offers a level of flexibility as it provides a lump sum to you, the homeowner, but allows you to decide if you want to make any repayments against the balance. For example, you may elect to make interest-only payments on the loan balance, allowing for some level of control over the overall balance left on the loan. There are a number of variations, such as the interest-only repayment, that exist with lifetime mortgages. One key aspect of lifetime mortgages is that they allow you to maintain 100% ownership of the property.

Home Reversions have not maintained their popularity over time, particularly as lifetime mortgages became more flexible and allowed for more unique options. This product requires you to sell part or all of their home in exchange for an income, lump sum payout, or some mix of both. These products allow for a lifetime tenancy in the home, but you essentially become a co-owner of the property and do not maintain 100% ownership.

There are both advantages and disadvantages to using an equity release scheme. One of the biggest advantages is that they are a highly regulated product, protected by the Financial Conduct Authority along with the Prudential Regulation Authority. These policing entities oversee the rules of equity release schemes and the lenders who provide them. The Equity Release Council also promotes the safe guidance of these products. For example, the Equity Release Council ensures that you have permanence of residence while using one of these schemes and provides a no negative equity guarantee for those who are concerned with protecting loved ones.

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