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In recent years the housing market within the United Kingdom has experienced dramatic growth, meaning that many home owners now have a significant amount of equity or value tied up in their home.

Unfortunately, many home owners, particularly those in retirement, find their income is becoming increasingly inadequate in keeping up with the rising cost of living. Their retirement income no longer allows them to replace the family car or take off on a nice foreign holiday like they used to do when working and earning a salary.

To bridge that financial gap and achieve their financial objectives they are now turning to the possibility of releasing some of the value in their homes. They are essentially ‘asset’ rich and ‘cash’ poor..

Equity release provides a solution to this problem, by enabling home owners to access these funds by taking out a Lifetime Mortgage on their home.

The clients can take this money in a large lump sum or a smaller lump sum with a reserve or draw-down facility which can be used when needed anytime in the future.

The Lifetime Mortgage is repaid when the homeowner dies or moves into a care home with little prospect of returning home. The beneficiaries of the homeowner’s estate, in most cases their children and grandchildren, can then sell the property and repay the lender the sum borrowed plus any interest accrued over the period. Any surplus left over is shared among the designated beneficiaries.

Some of the Equity Release Frequently Asked Questions posed by clients and our corresponding responses are shown below.

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Equity Release Frequently Asked Questions

What is an Equity Release Lifetime Mortgage?

An Equity Release Lifetime Mortgage is the most common way homeowners over the age of 55 release capital from their home. Once the prospective applicant’s individual circumstances have been fully assessed a suitable Lifetime Mortgage can then be recommended and an application to the lender formally made. A full professional survey, normally free of charge, is carried out on the property to confirm its market value.

The details regarding how much you can borrow, are directly related to the value of the property and the homeowner’s age at the time of the application. If it is a joint application the age of the youngest applicant is used. Some lenders also take into account the health of the applicants as enhanced borrowing can be permitted in some cases.

The loan works in a similar way to a standard mortgage except that there is no obligation by the client to repay the loan but many lenders offer the flexibility to repay up to 10% of the sum borrowed should the client wish to do so. If they elect not to make any payments during the life of the loan interest rolls up annually. The loan is repaid when the clients either die or move into long term care. The house is simply sold and the surplus from the sale goes into the estate of the deceased.

The monies raised from an equity release loan on your home is free of any tax liability on the borrower. Advice should be taken on the impact it may have on inheritance, payment of care home costs and the impact it may have on entitlements to state benefits.

Read in more detail on our What is Equity Release and How Does it Work page.

Who Owns the Property?

Once the appropriate Equity Release scheme has been found for you the lender simply registers an interest in your property similar to a conventional mortgage. You, however, own the property at all times.

What is an Equity Release Calculator?

An equity release calculator is a piece of software that will enable potential customers to get an estimate of how much equity they could release from their property. Not all calculators are identical, but in general, clients will have to answer two main questions:

  • The Estimated Value of The Property
  • The Age Of The Youngest Person With A Stake In The Property

Once the client has entered these details the calculator will provide a figure that they may be able to release and is subject to confirmation of the property value and the clients age(s).

Once the Application has been Agreed, Who Owns The Property?

A Lifetime Mortgage is simply another type of Mortgage. You will ALWAYS retain ownership. The lender simply registers a legal interest as with a conventional mortgage.

Can I Protect some of my Family’s Inheritance with a Lifetime Mortgage?

This is certainly an option, and it is dependent on the value of the property and how much equity you choose to release. Discuss this option with our advisor, as they will be able to advise you properly on your individual situation.

Could my Family be left with any Debt as a Result of a Lifetime Mortgage?

Absolutely not. The Lifetime Mortgage is repaid from the sale proceeds of the house ONLY. It does not extend to the rest of the client’s estate. The ‘no negative equity’ guarantee ensures if there is a shortfall on sale that becomes the Lenders problem and is not passed onto the estate of the deceased.

Should I Talk to my Family before taking out a Lifetime Mortgage?

We fully recommend discussing this with your family. Many people in this situation feel that they are ‘spending’ their children’s inheritance by releasing the equity in their property.

However, in our experience, family members, as you’d expect, are much more concerned about their parent’s welfare into their retirement than any potential inheritance they stand to receive.

Is There Any Risk That My Home Could Be Repossessed?

No there are safeguards in place that would prevent this from ever happening. Provided you maintain the property to an agreed standard, as set out in our agreement, even if the loan amount plus the interest is greater than the value of the home, you will still be able to live there for the rest of your life.

Can My Family Buy The Property Upon My Death?

Upon your death the loan will need to be repaid in full including any accrued interest. Provided your family are prepared to cover those costs, there is no reason why they cannot retain the property upon your death.

How Much Can I Free Up?

The amount of cash you can free up from your property depends on your age, the value of your property and with some lenders any qualifying underlying health issues you may have. Money can be released as a lump sum on its own or as a smaller sum with a reserve or draw-down facility which can be used over time whenever the clients wish.

The money is absolutely tax-free and can be spent on whatever the clients need or desire. Clients with an existing mortgage or secured loan on their property will have to settle this first with the proceeds of the Equity Release loan, but you must first use this to repay in full any existing standard mortgage currently on your property.

The best way to find out how much cash you could receive for your particular circumstances is to use our free Equity Release calculator at the top of this page or speak to one of our fully qualified advisers.

Will I Owe More than my Property is Worth?

No. For your continued peace of mind, all Equity Release lenders offer a ‘no negative equity guarantee’. This means you’ll never owe more than the value of your home and any shortfall cannot be passed on to the rest of your estate for settlement.

What Can Equity Release be Used For?

Once the money has been released to you, the choice on what to spend it on is entirely up to you. There are no restrictions whatsoever (provided it is legal!). So whether you want to go on a round the world trip, buy a new car, get a new kitchen or simply pay off other debts, the choice is entirely yours.

Can I Live in my Home for the Rest of my Life?

Yes you can. This is one of the most important and fundamental features of a Lifetime Mortgage. This protects and ensures that those named on the title remain in the home for the rest of their lives until death or the surviving partner moves into long-term care with no prospect of returning home

How Quickly Will We Receive The Money Once The Application has been Approved?

It is possible to complete the process in 3-4 weeks, but in reality, and mainly as a result of the legal work required, a more accurate average timeframe would be 6-8 weeks.

I Still Have an Outstanding Mortgage Balance, Can I Still Qualify for a Lifetime Mortgage?

Yes you can. This will depend upon your age and how much ‘equity’ or ‘value’ is tied up in your home. All outstanding ‘secured’ loans such as a mortgage, must be cleared first with the equity release proceeds. Any surplus left over will be paid into your bank account. Speak to our friendly customer service team on 0333 360 1958 for more advice specific to your individual situation.

What Happens if my Partner Dies or Moves into Long-term Care?

If one of the homeowner’s passes or moves into long-term without the prospect of returning home the surviving partner can remain in the property for the rest of their life or until they move into long-term care.

Only then can the lender request that the loan is repaid. This process can take up to a year after the surviving partner dies or enters care. Read more on our “What Happens to my Equity Release Plan when I Die?” page.

What Is The Equity Release Council?

The Equity Release Council is a not for profit organisation that is recognised as the industry body for equity release. The concept of the Equity Release Council is to manage and supervise the Equity Release Industry, setting up agreements, rules and regulations that are fair to both the lender and the homeowner. More details including how to contact the Equity Release council can be found at their website.

How Will I Receive the Money?

The money will normally be paid directly into your back account, although it can be paid via cheque should you prefer.

How Will My Property Be Valued?

Your property will be valued by a local independent chartered surveyor. They will be familiar with the local area, and will take into account the sales of similar properties in the vicinity to give both parties a fair market valuation.

Can The Lender Ever Ask For Their Money Back?

No, the terms of the agreement are that the only occasions when the money has to be returned are upon the death of the borrower, or if they move out of the home into long term residential care.

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Why You should always choose a product from a lender approved by the Equity Release Council

Guarantee 1

equity release council logo approved You have the Right to Remain in your Home for as long as you choose

Guarantee 2

equity release council logo approved You will NEVER owe more than the value of your home due to the "no negative equity" guarantee.

Guarantee 3

equity release council logo approved You have the freedom to move to another property without financial penalty (subject to provider criteria)

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