Equity Release Facts

Equity release is, in a nutshell, a way to release the value of your estate and convert it into a cash lump sum.

You can unlock the cash through several modes (like the home reversion plan and the lifetime mortgage) which allow you to access – or ‘release’ – the equity (capital) tied up in your house if you’re 55+. Moreover, don’t need to have fully paid off your mortgage to do this.

There are several alternatives to equity release, including downsizing, moving to a less expensive neighbourhood, or by asking your relatives or friends for help.

No. You can’t lose your estate with an equity release plan. The ERC demands that you keep the right to sell whenever you want to and to leave it to whoever you wish to once you have settled your mortgage.

Moreover, since the ERC governs these plans, you have a guarantee that your home will always belong to you and can’t be repossessed under normal circumstances. Other mortgages may repossess your property for non-payment. So, your Equity Release lifetime mortgage is more secure than a normal one.

However, sometimes your lender could instigate repossession of your home if:

• You deliberately falsified information on your application
• You leave the estate unoccupied for over six months, without going into long-term care
• You fail to comply with the terms and conditions: failing to maintain the property routinely or not having valid Buildings cover insurance

A: Probably.

Again, this is dependent on your preferred scheme, its on-going balance, and if any fees are due for getting out early. You first have to ensure that you conduct a switch plan analysis to know if it will be beneficial to make the transfer. Switching can be for three reasons:

1. To attain lower annuity stipulations – it can hypothetically save your property over the longer term.
2. To borrow more funds – if you cannot, or will not be offered more, you may need to look for an alternative lender.
3. To gain more features – where old plans had limited flexibility, by swapping plans now, you can gain access to a host of fresh options.

If you have an existing equity release, it’s always a nice idea to see what the sector is offering & consider switching to another plan if its terms are more favourable.

If you want to – yes, you can with the voluntary repayment plans. However, it’s imperative to reiterate how an equity release lifetime mortgage is designed to remain in place before you die or move out into long-term care.

Unlike conventional mortgages, a lifetime mortgage doesn’t have a set timescale where you have to pay back all the money owed plus interests in full. Two principal life events trigger full repayment, and that’s your death or relocation to residential care.

For joint applicants, this depends on the last applicant’s passing away or if he/she moves into permanent care. At this point, your plan provider can use the security they hold on your estate to instigate a sale and recover the money they’re owed.

If you choose to repay all your equity release mortgage, then it’s probable that you might pay an early repayment fee.

No, you don’t pay tax on equity release. The money you unlock is tax-free. However, how you choose to spend your capital could be taxable.

If you, perhaps, decide not to spend it and instead hold it in several savings accounts, it could be subject to tax.

Today, most of the traditional high street banks like Barclays, NatWest, TSB, and Santander don’t offer equity release products. It’s mainly because of them failing to provide their consumers with the right products in the past, and prioritising lending opportunities across various sectors of the mortgage market like first-time buyers. There’s now a reluctance to re-enter the equity release market.

As with the banks, most major high street building societies, except for Nationwide Building Society, no longer offer equity release plans. It’s because of issues with the product offering and, eventually, a lack of funding following the credit crunch.

Today’s leading equity release providers are insurance companies and finance houses like L&G, Aviva, and More2Life.

These companies have been continuously successful at offering consumers a range of products that all have a unique selling point and offer various perks. The current range of equity release schemes also provide consumers with the most diverse range of equity release plans and competitive interest rates in the market.

You aren’t required to settle your lifetime plan during your lifetime unless the last surviving owner moves out permanently.

Alternatively, you may have a considerable lump sum available and want to settle your plan so that you can include your home in your will.

You aren’t obliged to repay your lifetime mortgage pan during your lifetime unless the last surviving homeowner moves into permanent care.

Alternatively, you can have a lump sum available and may want to pay off your lifetime mortgage plan so that you can include your home in your will.

Yes. As per the federal law, the Financial Conduct Authority (FCA) regulates all home-owner mortgages. However, most buy-to-let mortgages aren’t.

Lifetime mortgages, like the equity release plan that allows older borrowers to unlock cash, also have their own FCA rules.

Extending your mortgage term can decrease your monthly payments or aid you in avoiding a probable foreclosure. Still, it would be best if you gave the decision to extend your mortgage loan some cautious thought.

Perhaps you can manage your loan payments better if they are smaller once you lengthen your mortgage.

Yes. The home reversion plan enables you to sell part or all of your estate to your preferred home reversion plan provider.

In return, you’ll receive a lump sum or regular payments. You’ll generally get between 20% and 60% of the market value of your property (or the part you sell), whether or not you release equity in several payments or as a single lump sum.

If you have a lifetime mortgage plan, you borrow equity against the value of your manor and then repay this cash, plus interest, at the end of the deal.

If you want to move home, your lender should be able to transfer the debt to the new estate.