FAQs about Equity Release
Here we answer some of the most frequently asked questions about equity release.
WHAT IS EQUITY RELEASE?
It’s a way to access some of the wealth tied up in your property without having to move out of your home. You can either borrow against the value of your home or sell all or part of it in exchange for a lump sum or a regular monthly income.
IS IT THE SAME AS A LIFETIME MORTGAGE?
There are two main types of equity release: Lifetime Mortgages and Home Reversion plans.
1) Lifetime Mortgage
Lifetime Mortgages are by far the most common type of equity release. A lifetime mortgage is secured against your home, just like a normal mortgage. You retain full ownership of your home. The interest is either added to the loan throughout your lifetime, known as interest roll-up, or you can pay back some or all of the interest every month. There is no end date and the loan is paid back when you move into long term care, or when you die.
You can protect some of the value of your property as an inheritance for your family, meaning that you can benefit from releasing equity while ensuring you have something to pass on to your children. Equity release will reduce the value of your estate, but there are plans which will guarantee an amount for your loved ones to inherit. Specialist advisers can help you decide what is best.
2) Home Reversion Plan
With a reversion plan, you sell all or part of your home to a reversion plan company in exchange for a cash lump sum. You are guaranteed a lifetime lease with no monthly repayments to meet. Most plans allow you to exchange more of the remaining value of your property at a later date, however, this is not always guaranteed.
A reversion plan can move with you should you choose to move home, although you would need to check the individual terms and conditions of your plan.
HOW DOES EQUITY RELEASE WORK?
You are releasing some of the equity, or the ‘wealth’ tied up in your home. The amount you are able to release is calculated based on your age and a surveyor’s professional valuation. If you are making a joint application your partner’s age will be included.
Not everybody is eligible and some properties will not qualify. For example providers will generally not accept properties valued at less than £70,000.
An equity release adviser will help you understand the benefits, the risks and the costs involved before you proceed.
AM I ELIGIBLE?
To qualify for a lifetime mortgage you need to be over 55 and a homeowner. If you are taking out the plan with your partner, then the age of the youngest borrower must be at least 55.
For a Home Reversion plan, you must be a minimum of 60 years old.
Each provider has their own criteria and your adviser will need to check that you are a suitable candidate for equity release.
Your adviser will also assess your circumstances and make a recommendation to you.
If you would like to find out if you are eligible, click here to be contacted.
CAN I RELEASE EQUITY AND STILL LEAVE AN INHERITANCE?
Yes. This is something your adviser can help you with. You might want to guarantee a percentage of your home’s future value as an inheritance for example. You may wish to seek independent tax advice from a specialist.
It is always worth discussing your plans with family. You may decide as a family that it would be better for them to receive money now to help them get onto the housing ladder or to pay for university fees. There are many options to think about.
Equity release will reduce the value of your estate. After you and any joint partner on a plan die, your home will be sold. The amount owed to the lender will be paid and the remainder that is left will go to your beneficiaries.
WILL I STILL OWN MY HOME?
With a Lifetime mortgage - yes - you will still own your home.
A reversion plan means that the provider will own all or part of the property, but you have the right to live in the property for the rest of your life.
WHAT IF I MOVE?
You can normally move to a new home and take your plan with you. However there may be charges involved depending on the lender and you should check any plan that you are considering. For example, some types of property may not be acceptable to your provider.
HOW LONG DOES IT TAKE?
It usually takes around six to eight weeks for your equity release application to complete.
Equity release is not suitable for everyone. That's why the first step is to talk to a specialist equity release adviser and find out if it is an option for you.
Would you like to find out more about equity release?
The equity release service is provided by Access Equity Release - a trading name of Your Mortgage Decisions Ltd - which is authorised and regulated by the Financial Conduct Authority, number 459763.