Sales of capital release plans have increased in recent years. In Scotland, figures from the Equity Release council indicate that clients took an average lump sum of £39,834. Average figures for the UK across the UK are around £72,000 with those in the South East showing an average of £84,000.

What is the Equity Release?

Equity release schemes were first introduced in 1965 and have since undergone a number of changes. It is a method of retaining your property while at the same time earning a lump sum or steady stream of income from the value of the property.

Who can enjoy a share release plan?

If you own a home in the UK and are aged 55 or over, you may be eligible to access money tied up in your home.

What are the different schemes?

There are two types of equity release: lifetime mortgages, where you can borrow money against your home; and home reversion, where you sell a portion of your property.

Mortgages for life In a lifetime mortgage, you can borrow a proportion of the value of your property and interest is charged on this amount. You generally pay nothing until you die or sell your home. The interest is compounded over the term of the loan.

Start Reversal With a home reversion scheme, you would normally sell a portion of your property to the provider for less than market value. You have the right to live in the property for the rest of your life. When you move or die, the property is sold and the vendor receives the same portion of the property that they paid for (for example, if you sold 40% to the vendor, the vendor would receive 40% of the sale price).

Why has it become so popular?

Stock release has become popular in recent years for a combination of reasons. One of the key reasons people release income from their properties is to supplement their lifestyle in retirement. Rising home prices have made homeownership a key part of many people’s retirement plans. For some, downsizing is the best thing to do, however, for those who want to stay in their home, equity release offers an alternative way to access the value of their home, while still able to live in it.

Another reason stock releases have become popular is due to changes in attitude. While ownership was once expected to cascade down through the family, today many younger generations do not have the same expectations, or would rather their parents use the equity to enjoy their retirement, now likely to last two or three decades. .

Why release the equity in your property?

There are many reasons why you can free up the equity in your home. Some of the most popular reasons include financing home or garden improvements, financing a vacation, paying off credit card debt or loans.

What do you need to consider?

Freeing up equity in your home is not a simple decision. It is a lifetime commitment and it is important that you fully understand the obligations and consequences before committing to a plan.

Seeking capital release advice from a trusted financial advisor is an important step in ensuring you’re making the right decisions. A financial advisor will be able to assess her needs and circumstances and will inform her whether or not she is eligible for the capital release and whether or not it would be a smart financial move.