Equity release refers to an area of specialist lending which allows a homeowner to access cash from their property tax-free.

With UK property increasing in value and significantly outstripping wages over the last 30 years, many more homeowners reach retirement both asset rich and cash poor. Equity release is one way which uses the equity in a property to release money as a loan. We’ve seen our customers look to equity release for all kinds of reasons, and each person’s situation is different – hence the need for advice.

People release equity for all kinds of reasons, and we ask each of our customers a series of questions about this. Some of the common motivations for using equity release are listed below. 

• Many use the funds for adapting or improving their home to remain living in the property independently for longer. 

• Paying off debts: Can take the form outstanding mortgages, credit cards or personal loans.
  
• Paying for help around the home, including domiciliary social care.
  
• Purchasing a new car or other ‘large ticket’ item.
  
• Providing financial assistance to children and grandchildren – perhaps with a deposit on a house or to help them through university.
  
• Touring with their rock band (Ok, perhaps not that common!).

You can think of equity release as a reverse mortgage. You are receiving equity in the form of cash of which you have previously paid for, or where the property has increased in value. In most cases, a lump sum will be paid with the option for additional withdrawals if needed. The loan from a lender is paid back at death, or upon entering long term care when the property would be sold. It is also possible on some products to repay the mortgage interest. Homeownership is retained with a ‘lifetime mortgage’, which comprises 99% of equity release cases. We only offer equity release through lifetime mortgages. With these products you retain ownership of the property.

Equity Release is regulated by the FCA, both the products and advice given. The Equity Release Council is the industry body which has a strict code of conduct for equity release products and services. Part of this is a ‘no negative equity’ guarantee, which ensures there is no debt to settle upon death.

The amount of equity you can release is based upon the age of the youngest applicant, property value and the equity in the property. The amount also varies by lender, but we are able to offer a basic calculation. One of our experienced advisers would need to complete a full fact-find to get the most accurate figure.

Still, you can get a rough estimate with our online equity release calculator.

It depends on the complexity of the case, but we aim to complete plans within 6-8 weeks. We communicate issues outside of our control, for example slower property valuations from lenders during the COVID-19 crisis.

If you are a homeowner over 55 you may be eligible for equity release. If it’s a joint application, both applicants need to be over 55. The minimum cash amount released varies by lender but is usually £10,000-£20,000. The minimum property value also varies and is usually around £75,000 to £100,000.

Equity release is not suitable for everyone – which is why you must get good quality advice. Other options may be ideal for you financially – such as downsizing. However, in some cases, equity release has helped many achieve their desired outcome – but everyone’s case is very different. Out team pride themselves on giving you the time to talk to family members, assess options and have time to think about what you wish to do. You’ll not be inundated with mailshots, calls and emails for the end of your time with us. We’ll do what we say we are going to do – and if we don’t – let us know, and we’ll put it right!

The money you have paid into your home with your deposit and mortgage increases the equity – the amount you own with no conditions – in your property. Many may have paid off their mortgage by retirement, but this is not a requirement to be considered for equity release. With equity release – you are ‘releasing’ this equity (value) from your property, where it is being loaned to you. Especially with relatively high property prices in the UK, equity release has been an increasingly popular way for homeowners to leverage their biggest asset – their home, to increase their cash holdings.

Equity release is a complex transaction with many parties involved. Our job is to discuss your options and the products that suit your needs – if there are any! If you wish to proceed, we can then prepare your application. We would then be your contact point when dealing with solicitors and lenders.

Equity release loans, and the accrued interest will be paid upon death or the entrance of long-term care where the property would be sold. Most lifetime mortgages are subject to an early repayment charge – but this varies with the type of loan or what may be needed. Some loans allow interest payments to be serviced either partially or in entirety. Most lifetime mortgages are subject to an early repayment charge – but this varies with the type of loan or what may be needed.

With a lifetime mortgage, it is possible to transfer the debt to the new property, but this is dependent on the lender agreeing to this. If you wish to move and use equity release on the new property, an advisor can help achieve this. It is worth considering your goals before taking out an equity release plan, as you may wish to downsize to a more accessible property earlier.

Most equity release plans are subject to an early repayment charge (ERC) designed to cover the lender’s costs during the loan setup. If you think you are likely to want to pay back the loan early, plans with lower ERCs are sometimes offset by a higher interest rate. We can supply fact sheets for each lender and the products with detailed information and explain the differences.

It is possible to use equity release to pay off debts. Still, it is essential to look at all debt consolidation options and their costs. The most common debt is the remaining mortgage, which will be cleared by the equity release mortgage.

In the US, similar schemes to lifetime mortgages are often called reverse mortgages, but this term is less used in the UK. US law is different to the UK, and the lifetime mortgages we advise on are for UK residents and homeowners only.

Yes, it is possible to utilise the cash lump sum to be used for buying a second property, be it buy to let or a holiday home.

Some forms of Buy to Let Mortgages are not regulated by the Financial Conduct Authority. 

It is possible but usually requires at least 75-80 years to be remaining on the lease. Equity release providers will have different requirements so this is something which is always covered in detail during our fact find, where we ask detailed questions about your home. Leasehold properties may be subject to additional checks, as the provider would need to ensure they would be able to sell the property.

Yes, some products do allow full or partial payments of the interest. It is your preference to make a monthly payment, but these can be flexible depending on the equity release scheme chosen.

Yes, but it depends on how much equity you have in the property, ie, what percentage do you currently own?

When the planholders die, the property in question would usually be sold. Money raised from the sale would be used to pay off the equity release loan after paying the estate agent and solicitor’s fees. In some cases, executor can pay off the loan with other funds in the estate without selling the property. All plans provided by us have a no negative equity guarantee, which means no money will be owed if the debt is more than the property’s sale value.

Suppose you are under state pension age and are on means-tested benefits. To be eligible for Universal Credit, you and your partner must have less than £16,000 in savings, so releasing equity from your property could affect this if you wish for more than this amount. In that case, you should carefully consider how an equity release mortgage will affect you.

You do not pay tax on equity release, but how you spend your money may be taxed. It is worth knowing how savings and investments are taxed if you wish to use funds in this manner. Specialist tax advisers can advise on specific items. The Financial Conduct Authority does not regulate tax advice.

A lifetime mortgage is a type of equity release. Unlike standard mortgages, repayments are not usually necessary with this type of mortgage until the homeowner dies or goes into long-term care.

As with standard mortgages you may be able to switch your lifetime mortgage to take advantage of a lower interest rate and a better deal.

A new plan may:

• Offer a reduced interest rate.
• Save your estate substantial sums.
• Allow additional borrowing.
• Provide increased flexibility.

Contact us – We will help you calculate your borrowing potential.

Downsizing their property is sometimes an option for those looking to release funds. Is it possible? Would a smaller property be easier to maintain? Will downsizing give you the financial freedom you need?

As well as downsizing, those entering retirement also look at options such as moving to be near to relatives or moving to improve their quality of life.

Other solutions which may be preferable are a Retirement Interest Only Mortgage (RIO Mortgage) or using a pension pot to receive funds. Specialist pension advisers can advise on specific items.