New guide to equity release

The Council of Mortgage Lenders this week launched a new guide to equity release schemes aimed at helping older homeowners understand how they can unlock money from their properties.

Published as a booklet, the purpose of the guide is to explain the mechanics behind converting equity into a regular income or cash, but it also offers a concise look at which issues need to be considered before taking out one of the schemes on offer.

The Bank of England issued figures in October showing that homeowners were seeing the booming housing market as an opportunity to take out a record amount of cash from their homes. Mortgage equity withdrawals reached a record £10.6bn in April to June this year.

According to CML figures, equity release accounts for £1bn of outstanding mortgage lending, but it says the potential size of the market could be as high as £100bn.

Many people have been put off equity release schemes because of problems with some in the past, but the new booklet attempts to dispel fears and weigh up the benefits and drawbacks.

There are two main types of equity release schemes, lifetime mortgages and home reversion schemes. Under home reversion schemes, all or part of the home is sold and the owner either takes the money as a lump sum or uses it to buy an annuity. With lifetime mortgages, ownership is retained and a secured loan is taken out on the property.

The leaflet will soon be available on the CML's website, cml.org.uk and through mortgage lenders.