What happens to the ownership of your home?

The answer depends on which type of equity release arrangement you take. Most new equity release business in the UK is written as a lifetime mortgage. Under this type of plan, you borrow against the value of your home and the loan is normally repaid when the property is eventually sold.

You remain the registered owner and continue to make the ordinary decisions that come with owning a home. The lender's interest is protected by a legal charge registered against the property. This means the debt must usually be repaid when the plan ends, but it does not mean the lender owns the home while you are living there.

Home reversion plans use a different legal structure. Instead of borrowing, you sell a percentage or all of the property to a provider. You are then granted the right to remain living there, usually rent-free, for the rest of your life or until you move permanently into long-term care, subject to the plan terms.

Does the lifetime mortgage lender own any part of my home?

No. With a standard lifetime mortgage, the lender does not normally own a percentage of your property. You remain the owner and any increase or decrease in the property's value belongs to you, subject to the outstanding mortgage balance when the home is sold.

The lender instead has a legal charge over the property. This gives it security for the money borrowed, the interest added and any permitted charges. When the plan ends, the property is normally sold and the amount owed is repaid from the sale proceeds. Any money left after repayment belongs to you or your estate.

Can I be forced to leave my home?

A plan meeting Equity Release Council product standards should give you the right to remain in the property for life or until you move permanently into long-term care, provided the plan conditions are met.

The plan is not designed to remove you from your home simply because the loan balance has grown or house prices have changed. Problems could arise, however, if serious conditions were breached—for example, if the property stopped being your main residence, was left unoccupied for longer than permitted without agreement, was not maintained or insured, or was let out without the lender's consent.

This is why the terms and conditions need to be understood before proceeding rather than relying only on a general promise that you can stay for life.

How is a home reversion plan different?

With a home reversion plan, you sell all or a share of your home to the provider. In return, you receive a cash payment or regular income and a legal right to remain living in the property under the terms of the plan.

The amount paid is usually below the open-market value of the share sold because the provider may have to wait many years before it can realise its investment. When the home is eventually sold, the provider receives the agreed percentage of the sale proceeds and your estate receives the remainder, if any.

This distinction is important: a lifetime mortgage is a loan secured on a home you continue to own, whereas home reversion involves giving up some or all ownership.

What responsibilities do I keep as the homeowner?

With a lifetime mortgage, you usually remain responsible for buildings insurance, repairs, maintenance and council tax. You may need the lender's approval before making major structural alterations, allowing another person to acquire legal rights over the property or leaving the home empty for an extended period.

You should also tell the lender about changes such as a permanent move, the death of a joint borrower or a move into long-term care. These events can affect when the loan becomes repayable.