Equity release can be defined as a way for you to keep a possession with capital value, like a house or a car, while earning income from the value of this possession, either in lump-sum or in a steady stream. In exchange, the entire “income”  paid for you will be paid back at a certain period, usually at the death of the owner. Thus, the “income” you receive from equity release would be subtracted from your existing assets. Lifetime mortgages and home income plans are examples of equity release.

This means that equity release is just a method of “liquefying” your assets, allowing you to gain a steady amount of cash while trading off the ability to bequeath more property or assets to your heirs upon your death. While this may not be an issue if you are childless, or do not intend to provide your heirs with too much inheritance, this may pose a risk of overrunning your assets, placing your heirs in debt. On the upside, it will definitely reduce the inheritance taxes which your heirs should pay.

Equity release is also good as the increase in the value of your property. If the increase in the value of the property is greater than the amount paid out to you, then you (or your heirs) will still have a net profit from the deal. If the value of the property decreases, on the other hand, then you will lose some money.

Therefore, equity release is most effective when a property’s value is on the rise, or is expected to reach a high level soon. Property close to new development or roads is a good property to place on equity development. So are vintage cars and other rareties.

Equity release is also known as reverse mortgage in the United States. It is most practiced by senior citizens who are already into aged care facilities. This allows them to make their assets, like their houses or cars productive and liquid while retaining ownership. This option is only open to people 62 years old and above.