equity release

[j.throsby]

what is it

[Ethel]

Equity release is frighteningly complex, but in simple terms:

Mrs B is 70
She owns her own home with no mortgage
It is worth �200,000
She needs capital, but doesn't want to move home.
She takes out an equity release for �50,000.

She now has her home and �50,000.

This �50,000 is charged to her property, so when she dies, or sells her home, the debt is repaid from the proceeds of the sale.

In the meantime, that �50,000 equity release is charging interest.

Mrs B can either pay this interest monthly or add it to the debt.

In the first option - �50,000 will have to be paid from the proceeds of the house sale, but Mrs B will in effect be paying a mortgage every month.

In the second option, Mrs B will not be paying monthly interest, but when the house is sold x years later - the charge against the property is much, much more than �50,000.