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There was a time when pensioners who were living off their state pension and struggling with day to day living expenses just had to make ends meet without any additional financial assistance from the state.

However, there has been a staggering increase in the number of people who are starting to realise that their property holds the key to a large chunk of finance to help make life just that little bit easier. The release of this finance is done through what's called a 'home equity loan' or just 'equity release'. This allows the applicant to get a lump sum or a regular monthly income.

This type of equity release finance can be realised in one of two ways.

One is called the 'lifetime mortgage', highly regulated by the FSA, where the homeowner takes out a secured loan. This is a loan secured on the property and is normally around 40% of the house value. The interest on the loan is then accumulated and repaid along with the capital when the homeowner dies. Or if the homeowner goes into care and the house is sold off.

The second type of equity release is called a home reversion plan and they are completely different than a loan. With this method the property is sold to a provider for a lump sum and the homeowner remains in the property. At death the sale of the property helps to pay the lender and any money left over is given to the relatives.

The home reversion plan has only come under regulation recently and with good reason. In the past it was deemed to be a property sale rather than a loan so it avoided any proper regulation. As a result a lot of companies were not very ethical in their selling and many people in vulnerable circumstances were convinced to sell their properties at massive discounts.

Now, anyone who feels they have been mis-sold a reversion plan can complain to the Financial Ombudsman Service can potentially claim up to 100,000.

Conclusion

Home Equity release plans can be a great way to help ease your financial situation in your later years of life. However it is also a complicated area so you should seek the right advice from the right people. In the UK one such body is the Safe Home Income Plans, which is an equity release trade body and they can provide you with excellent advice on the right product to take out for your circumstances.

Paul Hockney is an online loan expert who provides Fast Homeowner Loans tips and advice.