Record numbers of people are choosing equity release mortgages but how do they work?

Wed 26th Apr 2017

New figures show that record numbers of people are opting for equity release mortgages. Heidi Start of the Residential Property team explains how the schemes work.

According to figures released by the Equity Release Council, more people than ever before are choosing equity release mortgages. Homeowners took out a record 13,452 new equity release loans between July and September 2022.

Equity release mortgages are available to homeowners aged 55 and over. They allow homeowners to unlock the wealth held in their housing to boost their retirement finances. They can be a great option for those people who took out Interest Only mortgages and now find that they are coming to the end of their term with no means of paying off their mortgage.

The money available from an equity release loan will be determined by the homeowner’s age, the state of their health and the value of their property. The money can be used for whatever the homeowner chooses but if they want to stay in their own home and pay off their current mortgage and have no savings to fall back on, it is an ideal way of achieving this.

There are two types of schemes available:

1. Lifetime Mortgage

This is the most popular type of loan which provides a cash lump sum. No repayments are required during the term of the mortgage and the loan is re-paid when the home is sold, if the homeowner enters into long term care or upon their death. Many schemes of this type offer a No Negative Equity Guarantee meaning that the amount to repay will never exceed the market value proceeds of sale.

2. Home Reversion Plan

This type of scheme enables the homeowner to sell a percentage of their property to the provider who grants them a lifetime lease in the property rent free in return for a tax free lump sum. The property is sold when the homeowner dies and the proceeds of the sale are divided between the plan provider and the homeowner’s estate in the percentage that each party owns.

Homeowners who find themselves in the situation where they cannot pay off their mortgage at the end of their term who maybe facing repossession proceedings should seek advice from an Independent Financial Advisor as soon as possible. The adviser will help them decide if an equity release mortgage is for them and will advise which scheme would be best given the client’s circumstances.

Once the homeowner has received advice and decided which scheme is right for them, they need to appoint a solicitor to act on their behalf. Coodes has a specialist Equity Release Team who can guide the homeowner through the process and advise them on the legal implications of entering into such a scheme.

For advice on these issues, please contact Heidi on 0800 328 3282 or

Wed 26th Apr 2017

Get in touch

Call us on 0800 328 3282, or complete the form below and we’ll get back to you as soon as possible.

This field is for validation purposes and should be left unchanged.

Search News & Events



Changes to Paternity Leave in April 2024: What do you need to know?

As of 6th April 2024, paternity leave will be changing to reflect a shifting attitude…

Read more


Suspecting a Power of Attorney of financial abuse: what can you do?

What steps should you take if you suspect someone is committing financial abuse as a…

Read more

Portfolio Builder

Select the legal expertise that you would like to download or add to the portfolio

    Download    Add to portfolio   

    Remove All


    Click here to share this shortlist.
    (It will expire after 30 days.)