Equity release is a scheme that allows you to take part of the value of your home as cash. It is an important decision that should be considered carefully under the advisement of financial specialists.

There are two main types of equity release plans:

Lifetime Mortgage – this is a loan that will be secured against your home whilst permitting you to release tax-free cash without requiring you to move out. Depending on how much you need, you will receive a certain percentage of what your property is worth. You may wish to take the money as a large lump sum or a series of smaller payments.

You must have little to no mortgage left to pay before taking out a lifetime mortgage.

Home Reversion Plan – this plan involves selling all or part of your home for a lump sum, a regular income or both. The amount you choose to sell will then belong to someone else. However, the advantage is you may remain living in your property until you pass away or move out.

You will usually receive between 30% to 60% of the market value of your home, depending on your circumstances.

A commercial mortgage is specially designed to cover properties that are used for business purposes. This could be a shop or office or anything not generally habitable as a home. 

Development finance is structured differently compared to a traditional mortgage. The lender will assess the predicted value of a project based on your presented plans. Your lender will generally monitor the progress of the development and release money in stages until completion. You can borrow against the land along with funding the entire build.

You may use development finance to fund a newbuild housing project, a commercial development, or major renovations. Providing there is the ability to achieve profit through building or renovating then development finance can be considered.

Depending on the equity you have accumulated in your home, you may be able to borrow money through a secured loan on top of your main mortgage. This might be beneficial in order to;

• Achieve approval even with a low credit score – some second charge lenders are less reliant of credit score and therefore may be able to assist without losing the benefit of your current mortgage.
• Increased borrowing potential – Some secured loan providers will lend more than typical mortgage lenders based on affordability rather than income multiples.
• Avoid early repayment charges – You may have early repayment charges on your current mortgage, and can avoid restructuring your entire deal with the use of a second charge loan.
• Make stylish home improvements. Increase the value of your home by using the money borrowed on your second charge mortgage to invest in the quality of your home.
• Handle big expenses. You could also use the money to pay for significant life events such as a wedding, honeymoon or a luxury family holiday. You may even wish to invest in starting a new business.

A bridging loan is a short-term loan that allows you to borrow money for a defined, short period. They ‘bridge’ the gap if you cannot sell your old home before purchasing your new property. 

There are two types of bridging loans:

• Open – this type of loan does not have a guaranteed exit strategy or a set date in place for when they will repay the loan. For example, if the sale of the old property is due to cover the loan repayment, but it is not on the market yet, this is an open bridging loan. 
• Closed – in contrast, here, the exit plan is clear from the beginning. The lender knows precisely how and when you will repay the loan. This may be through the sale of your property or funds from inheritance. Thus, the interest rate will be lower as the lender is not taking much risk as they know precisely when you will repay them.