There are three different types of regulated equity release:
Lifetime Mortgage
Flexible Drawdown Lifetime Mortgage
Home Reversion Plan
With a lifetime mortgage, you borrow a percentage of the value of your property. Interest does need to be paid on the loan but it's not like a standard mortgage, there's no set term and you don't need to make any monthly repayments.
The loan carries on until you leave the property and then that's when the original amount borrowed needs to be repaid together with any interest.
A flexible drawdown lifetime mortgage follows the same pattern but it also offers the option of a cash reserve from which you can withdraw amounts as and when needed until the reserve has been used up. Normally you will release a small initial lump sum of around 10,000 and then sums as low as 2,000 can be taken.
Home reversion plans involve selling a percentage of your property in exchange for a lump sum or monthly income, or both. Once the property is sold the provider will take back the percentage they lent you. There's no interest build up with a home reversion plan.
Your circumstances and preferences will dictate whether you opt for a lifetime mortgage or home reversion plan but the vitally important thing to remember is to take independent advice from an FSA regulated equity release specialist; one that has access to every provider on the market and who is well known for their in depth advice process and examines all the alternatives for you before making a recommendation on whether a lifetime mortgage or home reversion plan is the best course of action for you.
Equity release may involve a lifetime mortgage or home reversion plan. To understand the features and risks, please ask for a personalised illustration.