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Equity Release Glossary
We know equity release is a big decision to make and understanding all the facts and terminology is important to ensure you decide on what's right for you. To help you understand all the jargon that you may read when learning about the equity release process, we've created our handy A-Z glossary below.
Use the alphabet below to navigate through the page index:
A
APR (Annual Percentage Rate)
The annual rate charged for borrowing, expressed as the actual yearly percentage
Arrangement fee
An agreed fee that is paid when your equity release plan is completed
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B
Beneficiary
A legal person or entity that would receive money or other benefits from an individual
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C
Compound interest
Also known as roll up of interest, this is interest that is added and paid on any interest accrued on a loan, as is the case with a lifetime mortgage
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D
Downsizing
The process of selling your home in order to move to a smaller property
Downsizing protection
Downsizing protection applies after five years of taking out your lifetime mortgage plan. This means if you need to move home but your new property doesn't meet the lender's criteria, you can repay your loan in full without an early repayment charge.
Drawdown plan
A lifetime mortgage with the option to release smaller amounts of capital as and when required, after taking an initial lump sum
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E
Early repayment charge
Dependant on your provider, you may be required to a pay an early repayment charge if you pay off all or some of your lifetime mortgage early
Enhanced plans
A type of lifetime mortgage with enhanced loan-to-values or preferential interest rates due to any qualifying health conditions and lifestyle choices
Equity
The market value of your home, less any outstanding loans or mortgages secured against the property
Estate
The collective term for everything in your ownership, such as your home, finances and possessions, when you pass away
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F
Freehold
Outright ownership of the property and the land on which it is built
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G
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H
Home reversion plan
A form of equity release where money is released by selling a part of or all of your home to a home reversion provider in exchange for a cash lump sum
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I
Inheritance protection
A feature available with some lifetime mortgages that allows you to ring-fence a percentage of your property's future value as a guaranteed inheritance
Interest only mortgages
A type of mortgage where the customer only pays the interest on the capital borrowed
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J
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K
Key Facts Illustration (KFI)
A required document in a set format, provided during the advice process, which helps customers to understand and compare the features and any risks of prospective equity release plans
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L
Leasehold
When the ownership of a property has a set duration, after which said ownership is returned to the landlord (sometimes known as "freeholder")
Lifetime mortgage
A type of equity release and is a loan secured against your home. It allows homeowners aged 55 or over to release tax-free funds tied up in their home.
Loan-to-value (LTV)
This figure represents the size of the loan amount expressed as a percentage in comparison to the value of the property
Lump sum
An amount of money released to the customer in a single amount
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M
Means-tested benefits
Payments available to people where income and/or capital is demonstrated to be below government-specified limits
Mythbuster
Our articles aimed at dispelling common equity release myths
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N
No negative equity guarantee
A guarantee with all plans that meet the Equity Release Council standards is that you can never owe more than the value of your home, so no debts from equity release can be passed to your beneficiaries
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O
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P
Provider
A company which provides and finances the equity release plans that are sourced via your equity release adviser
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Q
Qualified equity release adviser
Key Equity Release's fully qualified advisers specialising in equity release
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R
Release amount
The amount of tax-free funds you are able to release from your property
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S
Secured loan
A loan that is secured by the lender against an asset you own, usually your home, that enables the lender to recover any outstanding debts if you cannot pay back the loan
Solicitor
A legal professional qualified to give legal advice and support
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T
Tax-free
The money released from equity release is not usually taxed via either Income Tax or Capital Gains Tax, however it may affect your tax position overall
Trustpilot
A public consumer review website where customers can review their experiences with Key Equity Release and other businesses
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U
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V
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W
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X
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Y
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Z
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Things to consider
Your specialist equity release adviser will explain:
- All our equity release advice relates to Key lifetime mortgages only - a loan secured against your home
- Equity release will reduce your estate’s value and may affect your entitlement to means-tested benefits
- A lifetime mortgage may result in limited or no property equity remaining and will reduce your financial options in the future
- The loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care
- Our fixed advice fee of £1,299 is only payable on completion
Page last updated: Tuesday 19 March 2024