How does taking equity out of your house work

What is equity release?

Equity release unlocks the value built up in your home as a tax free lump sum. There’s no need to move out and you’ll still own your home. With equity release you don’t have to make monthly payments, unless you choose to. It’s usually repaid when the last borrower moves into long term care or dies.

Lifetime mortgages are the most popular type of equity release product and are available to homeowners who are 55 or over.

How does equity release work?

If you're 55 or over, your home could look after you with an equity release Lifetime mortgage. Find out how our equity release Lifetime mortgage works with our handy video.

Why choose equity release?

Some of the most popular reasons our members give for wanting to release equity include:

• clearing debts.
• helping a loved one buy their first property.
• paying for home improvements.
• making a major purchase, such as a new car, and
• taking the holiday of a lifetime.

Taking out an equity release mortgage means being able to do this without having to dip into a pension or move home, and without using your other finances.

Alternatives to releasing equity

Releasing equity can impact the inheritance you leave, and any state benefits or local authority grants you receive.

Before deciding whether to borrow, it’s a good idea to speak with trusted family or friends. They could give you support or suggest other ways to raise the money you need.

Alternatives might include:

• using any available savings
• moving to a smaller home (downsizing)
• getting help from family members
• state benefits – if you're eligible
• a local authority grant – if you're eligible
• a personal loan or credit card.

Things to consider before equity release

It's worth considering these factors before deciding if it’s right for you.

Impact on inheritance

Equity release can reduce the inheritance you leave. This could be due to the fact that you have spent the money, and also due to the interest on the amount you borrowed. That means there could be less for your beneficiaries when it’s time to sell the property.

Claiming benefits

If you are considering taking out a Lifetime mortgage, it’s important you know that this could affect your ability to claim means tested benefits, including support for long term care. Your Nationwide specialist mortgage adviser will discuss this with you.

Negative equity

Our Lifetime mortgage has a ‘no negative equity’ guarantee. This means that when your property is sold, if there isn’t enough left to repay what's owed, your estate won't have to pay the extra.

Costs involved

There are no valuation, product or advice fees with our Lifetime mortgage.

You’ll need to take independent legal advice for this type of mortgage. Our Lifetime mortgages offer £1,000 cashback on initial completion, which you could use towards these legal costs.

Nationwide’s equity release Lifetime mortgage 

Our equity release product is a Lifetime mortgage. This can unlock the value in your home as a tax-free lump sum.

With our Lifetime mortgage, the interest rate is fixed for life, and you only make monthly payments if you want to. But, if you don’t, bear in mind that the balance will increase over the term.

Usually, the loan is repaid when the last borrower moves into long term care or dies, and your home is sold. Any money left over is passed on to the people you name in your will.

Maximum borrowing amount: depends on your age and how much your property is worth.

More about our equity release Lifetime mortgage

Other Nationwide mortgages that let you release equity

We also offer two retirement mortgages. These also help you live a little better by unlocking money built up in your home.

Retirement Interest Only mortgage

This is similar to a standard interest only mortgage. So your payments can be lower than a typical repayment mortgage. Unlike regular interest only mortgages, it doesn’t have a fixed end date to repay the balance.

This could be right for you if you:

• want to keep your payments lower than a repayment mortgage.
• are happy knowing the loan is usually repaid through the sale of your home after the last borrower moves into long term care or dies.

Retirement Capital and Interest mortgage

This is like a standard repayment mortgage, where you pay back both interest and capital on a monthly basis. However, where it differs is that you can borrow up to a higher age. The mortgages are still designed to be repaid in full by the end of their term.

To get advice about our Lifetime and retirement mortgages

You need to be:

• an existing mortgage member aged 55 to 94
• applying for a mortgage on your main residence only

If you want to apply for a retirement mortgage, you’ll also need to be:

• receiving a state, private or workplace pension.

Speak to us and find out how to apply

To find out if our Lifetime and retirement mortgages are right for you, and how much equity you could release from your home, get in touch.

We can arrange an appointment for you with one of our specialist mortgage advisers.

Important:

Think carefully before securing other debts against your home. Your mortgage is secured on your home, which you could lose if you do not keep up your mortgage payments. Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.