You take out a loan secured on your property. Normally, interest is rolled-up until (second) death or the need for the (survivor) to move into long term care. At this time the property is sold with the lender taking the original loan plus the rolled-up interest with the remainder being passed on to your beneficiaries (or yourself if you have moved into long term care).

You sell all or part of your home, but remain living there rent free until (second) death or the need for the (survivor) to move into long term care. At this time the property is sold and the proceeds are split between the home reversion provider and yourself or your beneficiaries depending on the percentage sold originally.

Taking impartial, specialist advice from a ‘whole of market’ adviser beforehand means you can be confident that any equity release plan is right for you and can meet your actual needs.

Your adviser will explain the risks of any product and will examine other ways of raising capital or income before making recommendations.

Your adviser will only recommend providers that adhere to the SHIP code of practice meaning that there are no catches or unfair terms and conditions. You are also guaranteed that you can live in the property for the rest of your life and should the debt ever exceed the value of your property there is a ‘no negative equity’ guarantee. This means that any shortfall is the responsibility of the lender and not you or your beneficiaries.

All companies allow you to transfer the plan to a new property providing the property is acceptable to them. If a plan cannot be transferred, it has to be paid off. Check restrictions before deciding.

Benefits may be affected, but it depends on the type of benefit and what you want the money for. The money you draw out of the property is not taxable, but if you draw out more than you need and invest it you will probably have to pay tax on any interest. Get advice.

You must make informed choices before making a commitment. You can pay off a lifetime mortgage subject to any early repayment charges but it is difficult to cancel a reversion scheme.

You can take out joint schemes that last until second death or the need for the survivor to move into long term care. If you get married after taking out a scheme your new partner may not have the right to stay in the property should you die first. Advice should be sought in this scenario.

Equity Release is fully regulated by the Financial Services Authority (FSA).

The trade association SHIP – (Safe Home Income Plans) also sets minimum standards for member companies.

Always seek advice from a company that is regulated by the Financial Services Authority. Some unregulated companies get round the rules by offering ‘sale and rent back’ schemes that do not give you the right to stay in your home for the rest of your life.