Equity Release: What Do I Need to Know?

Equity Release lending is becoming more popular than ever for a number of reasons.  What is it and why are more people choosing to go down this route?

What is Equity Release?

Equity Release is a way of getting cash from the value of your home whilst enabling you to continue living in it and it can be without having to make monthly payments.  It is available to homeowners over the age of 55 and works well for those who want to stay in their home rather than move/downsize but would like some more cash.

Using your house as collateral, you may be able to qualify for a loan which is designed to last the rest of your life and which can be taken in small amounts over a period of time or as a lump sum or a combination of both.

Why take out Equity release?

There are a variety of reasons.  People are living longer and it is a way to fund their lifestyles.  It can supplement pension income or provide a gift for a family member such as paying for school fees.  People use the money to pay for home improvements, holidays, a new car or paying off an existing mortgage.

What Types of Equity Release are there?

There are two options for equity release:

1. Lifetime Mortgage – this is where you retain the ownership of your property. You do not need to make monthly payments; instead, the interest is built up and the sum you owe will be paid off when you die or move into long term care.  It is possible to make monthly payments if you prefer with this type of plan.
2. Home Reversion Plan – this involves selling all or part of your property to a provider company. In return, the company will pay you a tax-free lump sum or agree a regular income for you or a combination of both.  Plus you will be able to continue living in your property as a tenant but free of rent for the rest of your life.  When the property is sold, the net sale proceeds are divided, and the provider will take its share.  Usually it’s not the market rate so your estate could be much reduced. Coole Bevis do not help with Home Reversion plans.

What Should You Consider?

• Your age – generally you need to be at least 55 years of age
• Your family – you should let your family know of your plans to avoid disappointment in the future.  Equity Release will reduce the value of your estate.  Also, if you have family members living with you, they may not be able to continue living at the property if you die or move into residential care
• Your property – it needs to be over a certain value and in reasonable condition
• Your benefits – an Equity Release mortgage may affect your entitlement to state benefits, if you claim any.

Equity Release can often be complex and difficult to navigate so we recommend that you always seek advice from a regulated professional. The Equity Release Council is an independent trade body representing the sector and is a good place to start when looking for a qualified adviser.

Coole Bevis are specialist legal advisers for Equity Release and we are a member of the Equity Release Council. Please contact Carol Blakey, Head of Residential Property if you would like to seek advice in this area.