A Drawdown facility is now the most popular income option from an equity release scheme. Smaller tranches of funds are taken and spent as income, rather than all in one go. This allows for further withdrawals at a later date. This also has the additional benefit that more equity remains in the property for longer and less interest rolls up on a lifetime mortgage.

Within FCA regulation the definition of a regulated mortgage including Equity Release schemes states that 40% of the dwelling must be occupied by the borrower/s for residential purposes.

As an alternative to equity release an individual may consider renting a fully furnished room within their main residence. Under UK tax rules an individual or a couple can rent a room within their own property and receive up to £7,500 in rent tax free. Any amount above is taxed as income at their highest marginal rate.

As part of the information gathering stage an adviser must establish the purpose of the funds from equity release as it will help determine which scheme is the most suitable. An aspirational borrower will use the equity in their home for extra capital or income to improve an already sufficient standard of living, as opposed to a needs borrower that often has no alternative.

One of the disadvantages of a home reversion plan is that the property owner loses ownership of the property as they sell it to the reversion provider for less than the market value and become a lifelong tenant.