An equity release mortgage is for people over the age of 55 and is usually designed to run for the rest of your life. You borrow money secured on the value of your home to give you a lump sum, a regular income, or a combination of both. 

You do not have to make any repayments to the lender (although some equity release mortgages allow you to do this) but interest accrues during the term of the mortgage. This is ‘rolled up’ over the life of the mortgage. The mortgage and accrued interest are repaid to the lender on the sale of your home when you die or move into residential care. 

How much you can borrow is based upon your age and the value of your property. Generally, if you are older, you can borrow a greater percentage of the value of your home. Most equity release lenders offer a ‘no negative equity guarantee’. This means that the amount you owe can never be more than the value of your home. Even if the amount you borrow (plus the rolled-up interest) is more than your property’s eventual selling price, your estate will not have to repay any more than the amount your home is sold for.

Your home is worth £400,000. You borrow £50,000 at a fixed rate of interest of 2.34%*. There are no monthly payments. Instead, interest is added on and rolled up over the lifetime of the loan. Because you do not pay off any interest as you go along, the amount you owe mounts up more quickly; so that after 15 years (for example) you owe the lender £71,585. This includes the £50,000 you originally borrowed. Any increase in the value of your home after paying off the loan and interest belongs to you or your family. 

To understand the features and risks associated with this type of mortgage, you must ask for a personalised illustration.

*Illustration purposes only.