A home equity release scheme to help older homeowners to raise cash on their properties has been introduced.

The scheme will allow older homeowners in the greater Dublin area to raise a cash lump sum or a guaranteed life income by transferring part of the property's value to the company, called Residential Reversions.

Known as the Home Owner Extra Income Plan, initially it will be available only to homeowners aged over 70 in Dublin, according to Mr Ciaran Deeney, managing director of the recently formed financial organisation. He said Residential would keep the age and geographical availability of the scheme under review. Under the scheme the homeowners choose the percentage of the property value they wish to transfer to Residential Reversions. But they cannot transfer less than 25 per cent of the value.

In addition the property must be valued at at least £150,000 and the stake transferred at least £75,000. There is no upper limit on the percentage transferred or the property value which can qualify for the scheme.

The scheme works as follows: The percentage transferred to the firm is secured for the benefit of Residential Reversions by a legal deed. Homeowners retain the title deeds.

This share can then be used to provide the homeowner with a lump sum or to generate extra income payable for life. The capital sum or the monthly income depends on the applicant's age and sex. The lump sum could be less than half of the value transferred.

On a house worth £200,000, for example, a couple aged 75 transferring 50 per cent of the value of the property (£100,000) would get a lump sum of £47,950 or a monthly income of £381, or a combination of both.

When two people apply, the income is paid for the lifetime of the surviving partner. All life income payments will be routed through corporate trustees. Homeowners continue to occupy their home rent free for as long as they live there and may opt to sell a further share in the property at a later date. Once the property is vacated for more than six months, or sold, the proceeds of the share bought by Residential pass to the company and the owner or their estate receives the balance.

Irish financial institutions have shied away from equity release products in the past because of the perceived reluctance of Irish people to dilute their equity stake and the inheritance value of their property.

Bank of Ireland was first to pitch a product at the older householder with its Life Loan scheme in October. The scheme will be available State-wide in February.

The Life Loan is a roll-up mortgage for householders aged 65 or over. Qualifying applicants will be able to borrow up to 30 per cent of the value of their homes, receiving a lump sum of £15,000 to £200,000 to be used for any purpose.

Usually, no repayment is necessary until the owner dies or the property is sold or vacated. Life Loan is applicable for homes valued at more than £60,000 or apartments valued at more than £80,000.

As both schemes will affect a house's inheritance value anyone considering the loan or equity transfer option should seek legal and financial advice.