WITH demands on our money seemingly increasing every day, the concept of Equity Release is one which many people are considering in order to put more pounds in their pocket.

Equity Release helps property owners unlock the capital that is tied up in their main asset.

There are several schemes which allow people to tap into the property’s value without having to sell it.

Over the past 15 years thousands of asset rich but cash poor retired homeowners in particular have discovered that these schemes offer a safe method of releasing a cash sum or a regular income to improve their quality of life.

The key points to Equity Release Schemes are: Homeowners over the age of 55 can release a cash lump sum, a regular income or a mixture of both.

They can continue to live in their home and be responsible for its maintenance.

There are no restrictions on the use of the money for legal purposes.

All Equity Release Plans are regulated by the Financial Services Authority and the latest options provide more flexibility than in the past.

The most popular Equity Release product is the Lifetime Mortgage which gives the borrower an immediate lump sum and/or income.

Anyone interested in Equity Release should ensure their lender is a member of SHIP (Safe Home Income Plans). BHP Financial Management Ltd only advises on lenders who are members of this self regulating body.

It was set up by lenders after the scandal created by earlier schemes which left many elderly people in financial difficulties.

These schemes were banned in 1990. SHIP approved schemes have guarantees which ensure people can never lose their home.

They also come with a “no negative equity”

guarantee, which ensures that the homeowner will never owe more to the lender than the value of the property.

No repayments are required – the interest is rolled generally at a fixed interest (currently this is typically between six and seven per cent).

The loan plus rolled-up interest is repaid when the homeowner, and their partner, dies or moves into long term care.

Equity Release is an area where emphatically one size does not fit all.

Equity Release may involve a Lifetime Mortgage or Home Reversion Plan. It is essential that the individual circumstances of anyone thinking about a scheme are fully considered and that they ask for a personalised illustration to be provided so the parties understand all the features and risks.

■ Sheila Storey is an Independent Financial Advisor with BHP Financial Management Ltd. Contact her on 01325-376402.