Equity release is becoming increasingly popular among homeowners of retirement age in the UK, and is available once you reach age 55.

UK equity release plans are designed to give you the opportunity to enjoy an amount of financial freedom in retirement by borrowing against the value of your home without the need to meet an ongoing mortgage payment.

Although there are many different types of equity release and home reversion plans to choose from, some are more popular than others such as Lifetime Mortgages. Equity release is not for everyone though, which is why it can be helpful to learn about these plans first and work with an equity release advisor to determine whether or not this is the right solution for your financial needs.

As an increasing number of people over the age of 55 find themselves 'Asset Rich, but Cash Poor', equity release has become a real option for many looking to improve their financial circumstance through an equity release scheme, without the burden of having to meet on ongoing monthly payment, as would be applicable with a secured or unsecured loan.

However, understanding the difference between the different plans is the part where many people get confused, causing them to take out the wrong plan or think that they have found the ideal solution when it is not really a viable solution for the long term at all.

A description of the three most common equity release scheme follows:

Home Reversion

With home reversion, you release money against the value of your property by agreeing to sell a percentage of your property for an agreed amount whether that be a lump sum payment, a monthly income or a combination of both.

The maximum amount that can be release will be dependent on your age, state of health, the value of the property and the percentage of the property to be sold to the home reversion company. If you only sell 25% of the property, then the home reversion company will enjoy 25% of the property value upon its eventual redemption.

Lifetime Mortgage

This is the most common equity release plan, and the one people are most familiar with. A lifetime mortgage includes a much simpler process than many of the other equity release schemes.

Based on the value of your home and your age, the lender will provide a lump sum or a monthly income or both. Nothing is repayable until you or the last survivor if a couple dies or moves into long term care, or you decide to sell the property. For all money released under a lifetime mortgage , interest is added to the amount borrowed each year, and rolled up over the term of the loan.

The amount of equity you can release depends on how much your home is worth and on your age, with larger amounts being available the older you are. For those in ill health, increased amounts are also sometimes made available.

For example, if your home is valued at £250,000, and you borrow £50,000 through a lifetime mortgage, the amount repayable to the provider will be £50,000 plus any interest rolled up against the loan for the period it has run.

Interest-Only Mortgage

An interest only equity release scheme is not often available, but when it is, it allows you to pay either a portion or the full amount of the interest charge applicable to the amount of equity being released, on a regular basis, and with the ability to switch back to a standard Lifetime Mortgage with 'rolled up' interest at a later date without the need for a new application.

A major worry for those considering a Lifetime Equity Release Mortgage is how the size of the loan increases over time with compound interest, and so for those that can afford the monthly interest payment, keeping a lid on interest charges for as long as possible can be advantageous.

These are the three most common types of equity release schemes. At a glance, you can probably see with ease whether or not one might be suitable for your situation. However, in order to determine whether it is actually the right plan for you or not, you will need to speak with a qualified equity release advisor.

Through our partnership with Key Retirement, you have access to a specialist equity release adviser who will be able to assist you every step of the way. The only goal of your adviser is to educate you so that you are able to make a confident and well informed decision about which equity release scheme is right for you.

For more information, simply

, either in your own home, or over the phone depending on which option suits you best.