Equity Release Plans

We offer face-to-face advice on Equity Release arrangements at our Tamworth office. We can also offer a remote service across the UK. We provide "whole of market" advice and are not limited to just one or two lenders. We survey the market, to make sure we find the best deal for your needs. We are also committed to making sure you understand both the pros and the cons of Equity Release before you decide whether to proceed. Read on for more information or visit the FAQ section at the bottom of the page.

What is Equity Release?


When most people refer to Equity Release Plans, they are thinking of something known as a Lifetime Mortgage. With this arrangement,  you take out a mortgage secured on your residential property, while retaining ownership. This is by far the most popular way to release equity. Other, less popular ways to release equity are considered in the FAQ section below but here we will concentrate on the mainstream Lifetime Mortgage style of Equity Release.


Equity Release Plans may allow you to ring-fence some of the value of your property as an inheritance for your family. You can choose to make repayments or let the interest roll-up. The loan amount and any accrued interest is paid back when you die or when you move into long-term care. We offer independent financial advice on Equity Release via Lifetime Mortgages.

How does Equity Release via Lifetime Mortgage work?

 

As with a conventional mortgage, a lifetime mortgage is when you borrow money secured against your home. The home still belongs to you. Interest is charged on what you have borrowed, which you either pay or, more typically, is added on to the total loan amount. When you die or move out, the home is sold and the money from the sale is used to pay off the loan. Anything left goes to your beneficiaries.

You may be worried that if there is not enough money left from the sale to pay off the loan, your beneficiaries would have to repay any extra above the value of your home from your estate. However, we only recommend Equity Release arrangements that offer a no-negative-equity guarantee. With this guarantee the lender promises that you (or your beneficiaries) will never have to pay back more than the value of your home – even if the debt has become larger than this.

 

Types of Equity Release Lifetime Mortgages

 

There are different types with different costs. You can choose from:


  • A roll-up mortgage. You get a lump sum or are paid a regular amount and are charged interest which is added to the loan. This means you don’t have to make any regular payments. The amount you originally borrowed, including the rolled-up interest, is normally repaid when your home is eventually sold.
  • A fixed-repayment lifetime mortgage. You get a lump sum, but don't have to pay any interest. Instead, the lump sum to eventually be repaid is agreed in advance and is higher than the lump sum raised. When the home is sold, you have to pay the lender the higher amount.
  • An interest-only mortgage. You get a lump sum and pay a monthly interest on the loan, which can be fixed or variable, rather than allowing the interest to roll up. The amount you originally borrowed is normally repaid when your home is eventually sold.


Key Protections

Dealing through an equity release provider who is registered with the Equity Release Council (ERC) offers important protections:


  • You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.
  • You have the right to move to another property as long as certain criteria are met, such as new property being acceptable to your product provider as continuing security for your equity release loan.
  • The product must have a no negative equity guarantee. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan, plus interest, to your provider, neither you nor your estate will have to pay any more.
  • For lifetime mortgages, customers must have the right to make voluntary penalty-free repayments, subject to lender criteria.


Please Note: ERC members can only tell you that a product meets these standards if it meets all of them. If you are offered or are considering a product that does not meet all the standards, the product literature must explain which standards are not met and give an illustration of the types of risk that this might pose for you.

Do you need a lump sum or income?

 

When taking out a lifetime mortgage, you can choose to borrow a lump sum at the start or an initial lower loan amount with the option of a drawdown facility. The flexible or drawdown facility is suitable if you want to take regular or occasional small amounts, perhaps to top up your income, rather than one big loan, as it means you only pay interest on the money you actually need.


Under Age 55?


While "releasing equity" is a general term to describe accessing value tied up in property, Equity Release Plans are specialist arrangements for people aged over 55. For those under age 55 or able to afford to keep up repayments on a mortgage, releasing equity by means of a more traditional remortgage may be a better option. See our Mortgages page or Contact Us for advice.


Is it right for you?

 

It depends on your age and circumstances. Here are some factors to consider:


  • You will need to be 55 or older to apply for most Equity Release Plans.
  • With a roll-up mortgage the total amount you owe can grow quickly. Eventually this might mean that you owe more than the value of your home, unless you have a no-negative-equity guarantee. Make sure your mortgage includes such a guarantee.
  • A fixed-repayment mortgage becomes a better deal if you live much longer than the lender thinks you will. But if the home is sold much earlier than you planned, you might get a worse deal.
  • It will affect what you leave as an inheritance
  • It may affect your tax position and entitlement to means-tested benefits
  • Lenders will expect you to keep your home in good condition. You may need to set aside some money to do this. If this could be a problem, an equity release scheme may not be suitable for you.


These aspects will all be covered in our discussions with you and in our eventual written recommendation. Equity Release Plans can be very useful but are not appropriate for everyone. By getting to know you and your circumstances well, we will be able to make a recommendation that is appropriate to your needs.

 

What does it cost?

 

We will make sure you are aware of all the costs before you make any commitment. You may have to pay:


  • an arrangement fee to the lender for the product
  • legal fees and valuation fees
  • you will need to maintain buildings insurance


This is an area where good advice is essential and can help you to make a decision which meets your needs and protects your interests. We have many years of experience advising in this area.

 

Please contact us for further information.

 

IMPORTANT INFORMATION: This information relates to a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.


Details of our service and charges can be found in our Disclosure Document.


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Frequently asked question graphic

EQUITY RELEASE FAQ

Here are some of the most frequently asked questions about equity release and our services. If you have a question not covered here, please feel free to contact us.

  • Why should I use a Specialist Equity Release Adviser?

    An adviser will help you to find the most suitable provider, scheme and interest rate for your needs and provide you with assistance throughout the whole process. More than that, a good adviser will tell you truthfully about the potential downsides of Equity Release, whether it is suitable for your circustances and whether there are alternatives you should consider instead. You will likely have a face to face meeting where you will be able to discuss your individual requirements and be provided with answers to your questions. 


    An independent or whole of market adviser is able to research the whole of the market to provide you with a recommendation that suits your needs. The adviser will also act as an intermediary between you and the lender and will prepare and collate all necessary paperwork.

  • How much can I borrow?

    The amount you can borrow will depend on a number of things, including your age, whether it is a single or joint application and whether you want to roll-up the interest or pay part of it from your income. If rolling-up the interest, a 55-year-old might typically be able to borrow about 25% of the value of their home, whereas someone aged 85 might be able to borrow 50% or more of their home's value. Couples may find they can borrow slightly less whereas those with health conditions may find they can borrow more. There is such a range and variation of schemes that it is vital to take impartial advice from a whole-of-market adviser.

  • What fees might I have to pay?

    Usually you will need to pay legal fees for a solicitor to do work on your behalf. Typically, these fees are in the region of £650-£750. Depending on the scheme you apply for, there may be an application fee or a property valuation fee but these might be considered optional because increasingly there are many other schemes which will dispense with these up-front fees in exchange for a slightly higher interest rate. Depending on your chosen adviser, there may be an advice fee, although most Equity Release lenders pay a commisssion to the adviser which may off-set the advice fee in whole or in part. This covers most of the fees that might be charged as part of the setting-up process and these should be explained to you in detail by your adviser - as should any fees applicable on taking additional advances or repaying the arrangement early.

  • What happens if I die or have to go into residential care after taking out an equity release arrangement?

    Generally, equity release arrangements need to be repaid on death. In the case of joint plans, that will be the death of the last applicant. Often the loan is repaid by selling the property and using part of the proceeds to repay the outstanding balance. However, it may also be possible to repay the loan from other available resources in order to avaoid selling the property.


    The loan will also need to be repaid if the applicants are no longer able to live there because they require residential care. Again this may be accomplished by selling the property unless there are alternative resources available.


    Lenders and schemes will have slightly varying terms around these points and it is important to get tailored advice for your needs.

  • What is a Home Reversion Plan?

    Home reversion plans are a rarely used alternative to the more popular "Lifetime Mortgage" style of Equity Release. 


    With a Home Reversion Plan you sell part or all of your home to a home reversion provider in return for a lump sum or regular payments. You have the right to continue living in the property until you die, rent free, but you have to agree to maintain and insure it. You can ring-fence a percentage of your property for later use, possibly for inheritance. The percentage you retain will always remain the same regardless of the change in property values, unless you decide to take further cash releases. At the end of the plan your property is sold and the sale proceeds are shared according to the remaining proportions of ownership. 


    Because of the limited demand and small pool of providers, we do not currently offer advice on Home Reversion Plans. However, if we believe that your needs would be better met by such a product, we will recommend an adviser who affers this service. Further information on Home Reversion Plans is also available from the government-backed  Money Helper website.

  • Can I release Equity before age 55?

    Equity Release Schemes are generally only available to those over 55. If you need to release equity before age 55, there may be other alternatives available, including more traditional mortgage arrangements or a personal loan. Please feel free to contact us for advice or visit our Mortgages page for more information.

  • Can I use Equity Release to pay off my Interest-Only Mortgage

    Yes, you can pay off your interest-only mortgage using an Equity Release Plan. Of course, the amount you can borrow will depend on your age and the value of your house so someone with a large interest-only mortgage in relation to the value of their house may not find this a workable solution. But for many people with an interest-only mortgage reaching the end of its term, Equity Release will be worth considering.

  • How can Equity Release be used?

    Equity Release can be used for a variety of purposes. Examples might include:

    • Paying off an interest-only mortgage
    • Making home improvements or modifications
    • To give money to family members

    Often, Equity Release is mentioned as a way to fund a holiday or buy a car. While these are perfectly possible, you would need to consider carefully whether long-term borrowing through Equity Release is the best way to fund shorter-term projects like these. We can help you to see the pros and cons of using Equity Release.


    Equity Release can also be used to refinance unsecured borrowings which are becoming burdensome but again, the long-term nature of Equity Release means this is an area in which you should take advice before going ahead.