If you are a UK resident, over the age of 55, and own a homeowner worth more than £70 000, you are probably considering equity release.
Equity release is becoming vastly popular in the UK, with a multitude of information available for you, making it quite overwhelming.
Luckily for you, we are here to assist, with a simple, step-by-step guide on the process of releasing equity tied up into your home and how long it all takes.
Continue reading to find out more!
What You MUST Know
Before you do so, we’ve summed up what you need to know about equity release in this quick video. Check it out!
How Long Does It Take to Release Equity From Your Home?
While this may differ, it usually takes anything from 4 – 12 weeks to release equity from your home. This is for the entire process. It can take more or less, depending on your circumstances, and the type of plan you select.
Equity release does take quite a bit of time due to all the legal work involved so it’s best to not rush your adviser.
The 8 Step Equity Release Process
Taking out an equity release in the 21st Century is a reasonably easy, stress-free process. You will work closely with a financial advisor, to unlock the cash tied up into your home.
Here are the 8 simple steps to unlocking the key to your retirement dreams:
Step 1 – Choosing Your Financial Advisor
When releasing equity from your home, you must do so under the guidance of an independent financial advisor. It would be wise to select someone in your area who specialises in equity release.
Note that your advisor will be an integral part of your equity release journey, consulted at each step of the process, so it’s best to work with someone you trust.
Your financial adviser will review all your circumstances, including:
- Your age, and the age of your spouse if you have one.
- Your lifestyle.
- Your family situation.
- The general health of you and your spouse.
- Other sources of income that you might have.
Their understanding of this information will help give the unbiased professional view you need to have.
They will assist you to discover if equity release is the correct option for you, if so, how much cash you should release, and which product is right for you.
They will also be available to answer all your questions and concerns.
Step 2 – Choosing an Equity Release Plan
When you decide to take out an equity release scheme, your adviser will recommend a plan that’ll suit your individual needs after you’ve considered all the alternatives.
They’ll also provide you with documentation emphasising all associated benefits and risks as well as any fees and expenses affiliated with the plan. That way, you’ll be able to get the best plan with their help.
You will have 2 main types of equity release plans to consider:
The first type of equity release is a lifetime mortgage. This type lets you take out a mortgage on your home if it’s your primary residence. However, you will remain the owner. You’ll have the option to ringfence part of your property for your family to inherit.
You can also make repayments or let the interest increase. Better yet, if there’s any loan amount or any accrued interest, it’ll be paid back when you pass away or need long-term medical care.
Learn more about: The Things You Need to Know About a Lifetime Mortgage
The second type is a home reversion, which means you sell some of your property or your whole property. You can sell it to someone like a home reversion provider, and they’ll pay you a lump sum for it, but they can also pay you in regular payments. It’s your choice.
Find out more about: What are Home Reversion Schemes
In addition, there are several equity release firms to consider. Your financial advisor will help you find what’s best for you. Be sure to have a look at all the terms and conditions of the plan.
Step 3 – Equity Release Application Process
Now that you have selected the right plan for you, your financial advisor will assist you to complete your application. They will then submit it to your plan provider. The FCA regulations state that you can’t do it yourself since it’s strictly an advised process.
The plan provider will then conduct a credit ID and title check, before contacting a surveyor.
You might want to check out: What are the Criteria for Equity Release?
Step 4 – Property Valuation Process
When your plan provider receives the application, they will trigger a valuation process to find out the actual value of your home. The valuation is an essential and integral part of the application process.
The lender caters to the valuation process, and it’s generally carried out within a week of your application.
Once the surveyor is contacted, they will come to do a valuation on your property. This is to establish the following:
- The current market value of your property.
- The sales statistics in your area in the last few months, and for how much those properties were sold.
- The quality of your property, the maintenance standards, and assess if it is sellable.
In most cases, you will be responsible for fitting the bill for this valuation, but it isn’t super costly. In some cases, equity release providers will offer free valuations. You can ask your financial advisor about this.
Step 5 – An Effective Valuation Process
When the chartered surveyor carries out the valuation process, your lender will see that any amendments to the home’s paperwork are complete.
For instance, the equity release company can decide to provide you with a revised illustration, thus forming the offer’s basis, assuming that your estate conforms to the plan provider’s lending criteria.
Step 6 – Accepting the Offer, Settling & Going Ahead with Your Plan
Once you’re given the offer, typically 2 weeks after the valuation, your adviser and your preferred solicitor will receive a copy.
Only then will the solicitor contact you to schedule a face-to-face meeting.
Pro Tip: FCA rules and guidelines state that you must consult a qualified solicitor and not a paralegal.
Step 7 – Instructing Your Solicitor
When the solicitor goes through the required legal and regulatory procedures with you, they’ll start the conveyancing process in conjunction with the plan provider’s chosen solicitor.
Take Note: The process can take up to four weeks, depending on the complexity of your title.
Step 8 – Concluding the Process
Great news! It is finally time to receive your tax-free cash!
When your plan provider’s solicitor is satisfied with all the legal processes carried out by your solicitor, they’ll set a completion date – meaning that the legal fees will be transferred from the lender to your solicitor.
The solicitor will then settle any advice and legal fees directly from the equity release proceeds and the balance transferred into your account.
If you have other secured home equity loan proceeds, you must pay them first, and any charges on your estate removed.
Learn more: Equity Release Costs
A Quick Note on No Negative Equity Guarantee
The ‘no negative equity guarantee’ protects you so that your family doesn’t pay more than the total sale value of your home when you pass away or move into a care facility, even if property prices plummet.
When your lifetime mortgage plan comes to an end, the lender will sell your house and settle the loan amount plus any interest. Any additional income will be given to your family.
Your family can sometimes keep the house, and use other means of income to pay off your mortgage if they are in the financial position to do so.
This law has been set out by the Equity Release Council in order to protect the consumer.
Read more about: The Equity Release Council
Got Questions? Check These First
How Long Does Equity Release Take To Complete?
Your application takes about four to six weeks for the lifetime mortgage option. In comparison, it takes about six to eight weeks for the homer reversion plan – assuming that your estate’s title is clear.
Equity release schemes are an excellent way to turn the equity tied up in your home into something tangible and usable.
However, like other mortgages, it has its risks. Thanks to the Equity Release Council, and the 8 steps mentioned above, you can rest assured that you’ll be protected throughout the process.
Before you decide to release equity from your house, ensure that you speak to your financial adviser, research all equity release alternatives, and see if it’s your most ideal option.