Equity release glossary

The jargon, in plain English. These are the terms you will meet when looking at equity release and later life lending.

Lifetime mortgage

The most common type of equity release. A loan secured against your home, repaid when the last borrower dies or moves into long term care. You keep ownership.

Home reversion

A less common plan where you sell all or part of your home for a cash sum or income, while keeping the right to live there. You no longer fully own the home.

Drawdown

Taking your money in smaller amounts over time rather than one lump sum. You only pay interest on what you have actually taken.

Roll up interest

Interest that is added to the loan each year rather than paid monthly, so the balance grows over time. Compounding makes the later years add up faster.

No negative equity guarantee

A protection on Equity Release Council plans meaning you or your estate can never owe more than your home is worth.

Early repayment charge

A fee that may apply if you repay the loan early or outside the plan rules. Can be a fixed percentage or linked to gilt yields.

Retirement interest only mortgage

Known as RIO. A mortgage where you pay the interest each month and the capital is repaid when you die or move into care. An alternative to equity release for those who can afford the interest.

Equity Release Council

The standards body for the sector. Its member plans must include the no negative equity guarantee, the right to stay for life, and other consumer protections.