What is equity release and how does it work?

Equity release is aimed at homeowners aged 55 and over. It allows you to take some of the value of your home as cash.

• The amount you can release is based on your age and the value of your home.
• The cash released is tax-free.

You can choose between two different types of equity release:

• Lifetime mortgage: A lifetime mortgage is a loan secured against your home. You continue to own your home.
• Home reversion scheme: With a home reversion scheme, you sell all or part of your property for less than the market value. You continue to stay in your home as a tenant.

Whichever form of equity release you choose, you continue to live in your home until the last surviving borrower dies or moves out of the home and into long-term care.

There may be cheaper ways to borrow money. A financial adviser will help you understand if equity release is right for you and which product best suits your needs. At Legal & General, we only offer lifetime mortgages.

Your financial adviser will help choose the right product and provider. Here is the process you should expect to follow, from getting advice to receiving the money.

The length of time it takes to release equity from your home depends on the product and provider. Releasing equity using a Legal & General lifetime mortgage takes around 8-12 weeks.

Find out more about our advice process

A lifetime mortgage doesn't have a set repayment date. You don't have to repay any of the money you borrow, or any of the interest, until:

• you die; or
• move permanently out of the home and into long-term care.

If the lifetime mortgage is in joint names, nothing is repaid until the last person dies or moves permanently out of the home and into long-term care. The loan is usually repaid through the sale of your home.

You can also choose to repay some of the money you borrowed. This will reduce how much you owe. Depending on which product you take out, you can choose to pay some, none or all of the interest.

• Optional repayments: You can choose to make partial repayments to manage the amount owed on the loan and interest. Subject to Terms and Conditions.
• Make monthly interest payments: You can pay some or all of the monthly interest to reduce the overall cost of the loan.
• Pay back the full loan and interest: It is possible to pay back the full amount but if you do, you may have to pay an Early Repayment Charge, which could be substantial.

There are limits on how much you can repay and how often you can make repayments. A financial adviser will help you find the right product for you.

There are steps you can take to protect how much you can pass on as an inheritance.

• Choose Inheritance Protection: This option lets you secure a proportion of the net sale proceeds of your home for the beneficiaries of your estate when you die. Choosing this option will reduce the amount you can take as a loan. You'll need to decide on the percentage you would like to protect (the Protected Percentage) when you apply for a lifetime mortgage.
• Make repayments during your lifetime: You can choose to repay some or all of the interest on the loan. You can also pay off some of the capital. This way you reduce the amount you owe, which could leave more for your family to inherit on your death.
• Living inheritance: You can use a lifetime mortgage to pass on money as a ‘gift’ while you’re still alive. For example, you may want to give a living inheritance to help children with university fees, wedding costs or getting onto the property ladder. If you give the money this way, the recipient might need to pay inheritance tax in the future.