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Equity Release FAQ’s

I think you’ll agree with me when I say…

There’s a lot to learn when it comes to equity release.

However, getting the right information on equity release can be a challenge.

Lucky for you, here is an Equity Release FAQ’s.

Hopefully, you will find the answer you are looking for. If not, please be sure to see below how much equity you can release or chat with us.

Equity Release FAQ’s


Q: Who Qualifies for Equity Release?

A: Qualifying for equity release is contingent on the maturity of the youngest person on the title deeds & also your property criteria. Lifetime mortgages, for example, you need to be at least 55, whereas a home reversion plan’s, at 65. You must also:

  • own your home,
  • or have it on a freehold basis,
  • it also helps if your residence in in good condition.

It is also vital to keep in mind that the least property value acceptable in the equity release sector is £70,000 at the moment. 

Q: How Much Equity Can I Release?

A: The equity you can release is dependent on:

  • age of the youngest borrower,
  • current value,
  •  if you have any pre-existing health issues.

You should, however, initially withdraw only what you need.

It is vital to remember that there will be consequence to drawing more than you need. It is also unwise to withdraw equity exclusively for investment purposes.

If you need more money in the future, there are schemes where you can take cash in stages, rather than all at once.

Q: How Frequently Can You Release Equity?

A: The frequency depends on:

  • the existing terms,
  • the outstanding balance,
  • if the property value has increased since its inception.

Lenders will use a combination of you and your partner’s recent age, the property valuation, and the loan-to-value tables, to help them determine whether you can release any more funds.

If not, then you can always consider alternative equity release plans.

Q: Do You Settle Tax on Equity Release?

A: No, you do not.

Equity release allows you as an asset-rich owner to unlock wealth from your residence in a large, lump sum or lesser amounts over an extended period.

While there are no levy implications, there are other issues which would need to be addressed, so it is imperative that you fully comprehend all the consequences before taking out this type of plan.

Q: Can You Release Equity with a Mortgage?

A: Yes, you can.

The advantage is in how it allows you to claim rights to bricks and mortar. It allows you to build up some equity in your name as the value typically increases. 

However, you might find yourself struggling at some point being property rich but money tight, and that’s where equity release comes into play.

It is a lifetime mortgage scheme, which gives those at 55+ to release money from their property to use as needed.

Q: Can I Use Equity Release to Settle a Mortgage?

A: Yes, you can.

However, with the equity you release, you must repay your balance first.

Equity release must be the only charge listed against your home.

Q: Can You Settle Equity Release Early?

A: It depends on your plan provider.

Typically, equity release schemes are designed only to be settled if you move into long-term care or die. Defined as, if the plan is settled in full within the contract’s course, then charges may arise depending on the plan.

Q: What is the Equity Release Council?

A: The Equity Release Council is a self-regulated non-profit organisation that specialises in all things equity release-related.

It was initially recognised as Safe Home Income Plans, or SHIP until it was re-launched in 2012 and broadened its reach from equity release to financial advisers. Its roles include:

  • Offering you with all the information you might demand on equity release and its products.
  • Protecting you and the consumer using or considering taking out an equity release.
  • Raising awareness on how equity release might be an ideal option after retirement.
  • Representing over 180 member firms and over 500 people in the equity release industry, from financial advisers and lenders to representatives and surveyors.

Its members also have to abide by a strict code of conduct:

  • Loanee have a right to remain in the habitation for life.
  • Loanee will be offered clear, concise paperwork which includes all setup bills and changes in residence values.
  • The consumer’s representative preference steers any legal work. Then he signs a certificate stating that the plan has been clarified and its clients comprehend the risks.
  • The client can move their plan to another property without penalties.
  • Equity Release Certificate defines the cost to the client’s asset and estate.
  • Equity Release carries a “NO NEGATIVE EQUITY GUARANTEE.

Q: Can You Switch Your Equity Release Plan?

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 is always a nice idea to see what the sector is offering & consider switching to another plan if its terms are more favourable.

You & Your Kin

Q: How Does Equity Release Affect Benefits?

A: Equity release may not be right for everyone. It can hurt your claim to state privileges and it lowers the value of your habitation.  It can alter your means-tested benefits like pension and savings and council levy.

It is, therefore, vital that you fully understand your circumstances. You can also always see what you are entitled to with your Benefits Agency, the Citizens Advice, or your Local Authority.

Q: How Does Equity Release Affect Inheritance Tax (IHT)?

A: It may reduce how much inheritance levy you have to pay (your inheritance levy liability) contingent to how you use your release.

There may be more fitting ways of reducing your liability, and so it is crucial to get financial guidance from a levy specialist so that they can offer you proper advice on inheritance levy planning.

Nevertheless, if you wish to get more advice from a levy consultant, see how much equity you can release and chat with one as a perk.

Q: What Happens When Someone Dies?

A: If you took out the equity with your spouse, the abode is usually sold once the last remaining lendee has died. If you took it on your own, then when you perish, the lenders are obliged to merchandise your property.

With lifetime one, the capital that is made from the transaction is used to settle the initial pledge, plus any annuity that has accumulated. If there is sufficient value in your home or if your family members wish to repay, the lender does not have to put your property up for auction.

With a home reversion plan, however, a fraction of the property will be the reversion firm’s. If any piece of the residence doesn’t belong to them, then the fraction from that portion will go to your residence. In some circumstances, the percentage sold can be repurchased by other funds in the residence or for example by family members.

Q: What is Equity Release?

A: Equity release is a financial product that allows leaseholders who are over 55 to release the value in their residence by turning it into a lump sum or recurring income. It allows you to continue residing in your home until you perish or move out permanently.

Q: What are the Different Types of Equity Release?

A: Essentially, there are two types of equity release; the lifetime one which consists of options such as the drawdown mortgage and lump sum, among others. There’s also the home reversion plan which involves you selling all, or part, of your home.

Q: What is a Lifetime Mortgage?

A: It is when you borrow funds secured against your property, provided it is your principal residence, while retaining full ownership.

Q: What is a Home Reversion Plan?

A: With a home reversion plan, you sell part, or all, of your property at below market value in return for a tax-free lump sum. Unlike others, you get to live in your dwelling rent at no charge – until you depart on or move into long-term residential care. Home reversion is a segment of the two primary forms of equity release. The other is the prestigious lifetime plan.

Q: What is the Difference between Equity Release & Lifetime Mortgages?

A: The central difference between the two is when you take out a lifetime plan, you still own your own home. However, with home reversion plans, you sell part or a share of your residence in exchange for a lump sum or a lifetime of return.

Q: How Does an Equity Release Loan Work?

A: Equity release is, in a nutshell, a mode of unlocking the value of your property and turning it into a lump sum. You can do this via several policies which allow you to access – or ‘unlock’ – the equity attached up in your residence if you are over 55.

Q: What Percentage Can You Get On Equity Release?

A: Typically you would to get between 20% and 60% of the market value of your home, according to Key Retirement, the UK’s largest equity release provider, the average is around 35%.

Q: Is Releasing Equity a Great Idea?

A: Equity release could be an excellent idea if you wanting to access the value of your home, without worrying about repayments. However, it may not be such an great idea if you do not like the idea of your family’s inheritance being affected.

Q: What are the Advantages of Equity Release?

A: It enables property owners to access the equity of their residence without having to sell it, move or downsize to smaller residence. The value can be unlocked either as a one or in a series of remunerations (drawdowns), with the understanding that it will be repaid at a later date.

Q: What’s the Downside to Equity Release?

A: It involves accessing funds against the value of your residence, (with home reversion schemes – selling all, or segment of your property) and may work out to be way more pricey in the long run than downsizing to a smaller one. It may also alter your entitlement to state privileges and grants.

Q: Can I Sell My House If I Have Equity Release?

A: Equity Release schemes are becoming increasingly flexible, so it’s worth considering a plan that offers downsizing protection.

Q: Can You Settle Back Equity Release?

A: Many schemes levy an early repayment charge if you end your agreement early but it is possible to get an Equity Release plan without these charges, but not all providers offer this option.

Q: Is There an Alternative to Equity Release?

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

Q: How Long Does the Equity Release Process Take?

A: Requesting for an equity release can usually take somewhere between 4 to 6 week for a lifetime plan and about 6 to 8 week for the home reversion plan, assuming the title is clear.

Q: Do You Have to Settle Annuity On Equity Release?

A: Unlike for lifetime, a home reversion plan is not a mortgage. Instead, the equity release organisation benefits from their share when it is sold after your death.

Q: How Do I Know If I Have Equity in My Residence?

A: To calculate it, and you can do so this way:

  • Firstly, find out your home’s current market value.
  • Then subtract your outstanding mortgage balance from the amount to find out how much equity is in your home.

Q: How Much Is It to Release Equity from Your Residence?

A: If you unlock £50,000 now from your property that’s worth £250,000 and the scheme runs for a decade and half, you will owe £123,000. If we then assume that prices increase at 5pc a year, the value will be £528,000 in a decade and half.

Q: What are the Criteria for Equity Release?

A: For you to qualify for equity release are, primarily:

  • You have to be at least 55
  • You have to own property valued at least £70,000

Q: Is Equity Release Worth Considering?

A: The most prevalent form of equity release is the lifetime plan, which enables you to access the nontaxed equity accumulated in your home. However, equity release doesn’t suit everyone. If you are an older proprietor looking to boost your finances relatively quickly without investing first, there are other options worth considering.

Q: What’s the Average Annuity Charged on Equity Release?

A: Equity release have “rolled up” fee, defined as, interest compounds and the overall pledge increase rapidly. For example, a proprietor unlocking £100,000 of equity from their £250,000 home at 5.22pc would have be charged £5,200 in the first year.

Q: How’s Interest Computed on Equity Release?

A: The lifetime ones are charged on set compound interest. It’s often computed daily but added on either every month or annually.

Q: Does Equity Release Require Credit Checks?

A: For most schemes repayments are not required, so many do not undertake any form of checks.

Q: Can You Settle a Lifetime Mortgage?

A: 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.

Q: Do I Need a Solicitor for Equity Release?

A: Home owners considering a ‘lifetime plan’ to free equity from their property in retirement will be needed to have a face-to-face discussion with a representative before taking it out, under rules from the Equity Release Council.

Q: Do Banks Offer Equity Release?

A: Most high street banks like TSB, Barclays, Natwest and Santander do not offer equity release products but the recent range of equity release plans give you the most diverse range of options and competitive offers this financial sector has ever seen.

Q: Can I Use an Equity Release Plan to Settle Mortgage?

A: If you have accumulated equity in your residence, but you still have a balance, you may do so.

Q: Do You Need Good Credit Score for Equity Release?

A: You may be able to qualify for a HELOC if you have a score of between 660 and 700. However, your provider will charge higher premium, and the equity release firm may demand that and other financial factors—like your overall arrears —are in extra great shape.

A: The principal aim of equity release is to enable you to convert some of the value built into your land, and as such, it’s possible to do this even when you have outstanding pledge on the residence. However, the terms would need to be on a lifetime basis, and not on arranged-term, as it previously was.

Q: Can I Sell If I Have Lifetime Mortgage?

A: If you have a lifetime one, you borrow money against the value of your property and then reimburse this, plus annuity, at the end of the term. If you want to move, your lender should be able to transfer the arrears to your recently acquired abode.

Q: How Do I Build Equity in My Residence?

A: There are seven to build equity and some of these include, but are not limited to:

  • It would be great if you made a big down-payment
  • Your equity represents how much of your dwelling you own so focus on paying off your pledge
  • Remunerate more than you need to
  • Refinance to a shorter term
  • Renovate the interior of your habitation
  • Wait for the value to rise
  • Add curb appeal

Q: What is Considered an Excellent Equity?

A: It is the market value of a proprietor’s unencumbered ownership in their actual property, that is, the difference between the fair value and the outstanding balance of all liens. In economics, however, it is known as the real property value.

Q: Can I Sell My House and Still Live In It?

A: Yes, you can. With a reversion, you can deal in all or fraction of your residence in return for a one, income every month, or both. Your abode, or the fraction of it you merchandise, now belongs to the reversion firm. However, you are permitted to carry on residing rent-uncharged in it until you breathe your last or move out permanently.

Q: Can I Use the Equity in My Residence to Buy Another Residence?

A: Yes, you can use your equity from one residence to purchase another property, and there are many perks to doing so. If you live in an unwavering dwelling and are interested in buying a rental residence, it may make sense to use the equity in your principal residence toward the down payments on an investment property.

Q: Is It Smart to Settle Your Estate?

A: According to most financial experts, paying off in advance actually comes with an expense to your bottom line. For investments to make more sense than settling a pledge prematurely, the annualised return periodically would only need to make more than the pledge oker.

Q: Is It A Nice Idea to Settle A Mortgage in advance?

A: By paying off in advance, you will be cutting back on the additional oker expense that you would incur in your remunerations. The accumulation can be significant and will grow with the prepayment amount. The lower your oker stipulation are, the less you stand to profit.

Q: How Can I Settle in 7 years?

A: Here’s how:

  • Comprehend how a mortgage functions. In most situations, your remunerations remain the same, but the balance you owe decreases
  • Get excited to remunerate your lease. You have to be on a mission.
  • Do the math
  • Make it happen

Q: How Much Interest Do I Settle On Equity Release?

A: On top of the set-up fee, you also need to consider the usury stipulation. Lifetime one deals are usually between 5% and 6% – and it can be fixed for the life of your pledge.

Q: Is Equity Release a Bad Idea?

A: Equity release can be the smartest decision you’ve ever made if you are looking to unlock levy exempt tied up in your estate to expend it on whatever you need, without worrying about repayments. However, it may not be such a fantastic idea if you do not like the idea of your family’s inheritance being impacted.

Equity release is one of the best financial decisions you can make to maintain your lifestyle after retirement. However, it can also be quite challenging to understand it. So, if you did not find the answers you’re searching for, do not worry. You can click here for more information on how much equity you can release and chat with an expert as a perk.

How much money could you release?

An equity release allows you to access the value of your home, tax-free without having to sell up, so that you can have money to spend on whatever you want or need.

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