Frequently Asked Questions
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Equity release is increasingly common. It allows older owner-occupiers
to take some of the equity out of their home. Normally, this is done
via a "lifetime mortgage", a form of mortgage on which no interest or
capital repayments are usually made. The lender usually gives the
customer a lump sum.
As equity release should not be done for investment, all or most of the
lump sum raised will usually be spent within a short time of being
released. In such cases, the spending should not be regarded as
"voluntary deprivation of resources", as the capital has been raised for
specific purposes, and then spent, and this is clearly unconnected with
the DFG means-test.
In some cases, equity release is done via a "draw down" process, where
the lump sum is taken as needed over a period of years. If the draw
down is set up on a regular basis, e.g. £1,000 per month over 5 years,
then the payments should be treated as income for means-testing
purposes. If the draw down facility is used to take lump sums at
irregular intervals, then it should be treated as merely adding to the
customer's capital.