What is Equity Release, and how could it be used to consolidate your debts?


Equity Release is a debt solution that could be suitable for you if you’re a homeowner aged 55 or over, with little or no outstanding mortgage.

Basically you receive money that is loaned to you by a third party, and in return you agree that the repayment is to be made upon the sale of your property, either when you die or move into permanent long term care. This can be an effective way of raising a lump sum with which to consolidate your debts.

However, be aware that the claim the third party will have on your property can sometimes cause complications if you ever want to move house after entering into an Equity Release agreement, because technically the loan is usually repayable upon the sale of your property. If you’re planning to move house after entering an Equity Release agreement, check this with your provider.

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Equity Release is becoming more and more popular with homeowners who need additional income in retirement and/or have outstanding debts when they retire. If you are due to retire, but cannot afford to do so yet because you are still paying off your debts, Equity Release could be a solution for you.

It’s worth noting that taking out an Equity Release plan will nearly always mean a reduction in the assets your beneficiaries will inherit when you die, as Equity Release normally involves signing-away part or all of your home to a 3rd party in exchange for an up-front payment to you.

The money you unlock via Equity Release will not normally need to be repaid until you die, or move into permanent long term care.

Equity Release is only available to homeowners aged 55+ with little or no mortgage.

How does Equity Release work?

There are 2 main types of Equity Release: Home Reversion Plan and Lifetime Mortgage.

  • Home Reversion Plans

With a Home Reversion Plan, you agree to sell part – or all – of your home in exchange for an amount of money that will usually be less than the property’s current market value. When you die – or move into permanent long term care – your home will be sold, and the scheme provider receives the contracted portion of the proceeds of the sale.

  • Lifetime Mortgages

With a Lifetime Mortgage, you receive a loan from the scheme provider, normally with a fixed interest rate, that is only paid off when your home is sold after your death, or when you move into long term care on a permanent basis.

Equity Release – possible disadvantages

Home Reversion Plans and Lifetime Mortgages do offer homeowners (aged 55 or over) ways to raise money to consolidate debts and/or support them in retirement, but it is important to be fully aware of the possible disadvantages.

If you enter into an Equity Release agreement and then later want to move house – or need more funds – your options may be restricted due to the fact that your scheme provider has a claim on your home. Also, Equity Release inevitably means that the value of your estate will be reduced, so there will be less for you to leave to your loved ones.

Find out more

If you’d like to find out more about equity release, please contact an Independent Financial Advisor (IFA) to discuss your options. To find an IFA in your area, visit www.unbiased.co.uk.

What if equity release isn’t right for me?

At PayPlan, we provide free debt help and advice – and access to a wide range of practical debt solutions that help people to deal with their debt and get on with living their life.

The best way to find out what makes us different is to call us free on 0800 280 2816 and have a chat with one of our fully trained advisers. They’ll listen to you and talk about you, your life, your debt and your aspirations. You’ll find them understanding of your situation and helpful in your search for a solution that’s right for you.

Call us today on 0800 280 2816 for a confidential, no obligation chat about your options. Or you can complete and submit our online Debt Help form and we’ll call you back.