Equity Release Terminology Explained

Equity

Equity is the difference between the value of your property and the value of any borrowings (i.e. mortgage) secured against the property.

Equity Release

Equity release involves releasing the equity tied up in your property in the form of a cash lump sum.

Financial Services Authority (FSA)

The FSA is the regulator of the UK financial services industry. They are responsible for regulating the sale of equity release products in the UK, and also for regulating the advice given to customers regarding equity release products.

Home Reversion

A home reversion is where you sell ownership of part of your property, as a means of releasing the equity in your home.

Independent Financial Advisor (IFA)

An independent financial advisor is an expert in finance, and can provide information on, and even recommend, specific equity release schemes.

Interest

Interest is the charge levied on debt by the lender. Interest is determined by the interest rate applicable, and the amount outstanding.

Interest Only Mortgage

An interest only mortgage is similar to a lifetime mortgage, but instead of all the interest rolling up and being repaid along with the capital when the property is sold, the interest is paid periodically. As a result, the amount to be repaid at the end is lower. Interest only mortgages are another form of equity release.

Lifetime Mortgage

A lifetime mortgage is a special type of mortgage, which is used to release equity from your home. Under a lifetime mortgage, you take out a mortgage (debt) against your property, but unlike most other mortgage types, you are not required to make any repayments. Instead the interest is rolled up into the amount owed, and is repaid from the proceeds of the eventual sale of your home.

Mortgage

A mortgage is a debt secured against your property. There are many different types of mortgages available.

No Negative Equity Guarantee

A no negative equity guarantee ensures that the total amount required to be repaid under a lifetime mortgage will never exceed the value of the property it is secured against.

Safe Home Income Plans (SHIP)

SHIP is a self regulated body. Members of SHIP are required to offer a number of guarantees of quality to customers. Many of the leading equity release companies are members. A full list is available on the SHIP website.