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Equity Release

Equity release is a way of receiving income from a bank, by using your home as a collateral while also keeping on living there. Of course, the bank must be repaid at some point, usually when you pass away.

There are two kinds of equity release plans:

  • the most popular one is called “lifetime mortgage”: you take out a mortgage on your home, while still owning it and living there. The loan and any interest are paid back when you pass away or when you move into long-term care.
  • the second kind is called “home reversion”: you sell a part of your home in return for a lump sum or regular payments. You can continue living there, rent-free, until you pass away. At the end of the plan, your home is sold, and the money is shared between the home reversion provider and any other beneficiaries.

Equity release and personal taxes:

  • you do not pay any tax on money from equity release
  • however, releasing equity from your house will reduce the value of your estate, so it could help lower the amount of inheritance tax (IHT) your family will pay after you pass away.

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