These type of mortgages provide a way for older people to access cash from their homes without having to downsize or move. This can be particularly useful for:

• Retirees needing extra income in later life
• Older people wanting to help younger family members financially
• Those needing to pay for care costs or supplement a pension
• Homeowners wanting to make home improvements and modifications
• Anyone wanting to clear an existing mortgage or other debts

How do Equity Release Mortgages work?

With an equity release lifetime mortgage, you take out a loan secured against your home. This type of mortgage allows you to release a tax-free cash lump sum from a percentage of the value of your property. You retain full ownership of your home and do not have to make any repayments on the loan during your lifetime.

The loan, including rolled up interest, is repaid by your estate when you die or move into long-term care. The repayment value cannot exceed the value of your property at that time, providing certainty that you can live in your home for life.

There are two main types of equity release lifetime mortgage [3]:

• Drawdown lifetime mortgage - This allows you to take an initial tax-free cash lump sum, usually up to 50% of your property's value. You can then draw down further sums over time as needed.
• Lump sum lifetime mortgage - This provides a tax-free lump cash sum in one payment, typically up to 30% of your home's value.

The amount you can borrow depends on your age and your property value. You may get a higher loan to value ratio the older you are. Interest rates are usually fixed, providing certainty over monthly payments. Voluntary repayments can usually be made if desired.

What are the Pros and Cons?

Advantages of equity release include [4]:

• Accessing tax-free cash from your property without having to move
• No need to make monthly repayments unless you choose to
• Interest rates are fixed, giving certainty over costs
• You retain ownership of your home and can live rent-free for life

Potential disadvantages include:

• Reducing the value of your estate to pass on to your heirs
• Less money left to fund care costs if needed later on
• Your home may end up with negative equity if house prices fall
• Early repayment charges can apply in the first few years

Always seek professional financial and legal advice before committing to any equity release product. Make sure you understand all the costs and implications for your estate and inheritance. Shop around for the best deals.