Equity Release may be a good option for homeowners to explore who are aged over 55 and are looking for extra income or a lump sum payment for various reasons such as carrying out repairs to their property, paying off any existing debts or simply to use for day to day expenses.
For many, ‘Equity Release’ is a term that people have heard of, but may not quite understand what it means, therefore, in this blog, we will set out the basics of Equity Release arrangements.
When you enter into an Equity Release mortgage, you are effectively obtaining money from the value of your property, whilst retaining ownership of it. This money is tax-free and can also be used to redeem any existing mortgage you may already have secured over your property. This loan is then usually repaid on the sale of the property, on the death of the borrower or, if the borrower goes into long term residential care.
The majority of people who enter into these arrangements enter into a ‘Lifetime Mortgage’, meaning you have security of tenure for life and do not have to make any repayments during your lifetime, but rather the interest accrues throughout the term of the loan and is added to the amount due when the loan becomes repayable.
Some lenders also offer the option of paying some, or all, of the interest over the period of the loan. That way, the only sum that is to be repaid would be the initial amount of the loan received.
There are, however, often strict rules within the terms and conditions of such mortgage arrangements, some examples being that the property must remain insured throughout the duration of the term and in a good state of repair. Further, if you live with a family member that is over the age of 17, but is not a legal owner of the property, they may be required to provide their consent to the Equity Release mortgage. As the debt will be secured against the property by way of a charge on the title register, it is important that the terms and conditions are complied with, as any breach of the terms may have consequences, such as your property being repossessed.
There are also a number of things to consider before entering into such agreements, for example the effect it may have on any inheritance your heirs and beneficiaries are to receive and your entitlement to any means-tested benefits. It is therefore pivotal that you receive thorough advice from a reputable financial advisor beforehand, who will be able to go through the various products available.
Once you have agreed on a product, you will then be required to instruct a solicitor to represent you. The role of the solicitor is to meet with you in person, to go through the terms off the offer and ensure that you have the requisite understanding of the contract you are entering into. The Lender will also instruct their own solicitor to deal with matters for their client and communications will take place between the two legal representatives.
Once everything has been finalised between the parties, the money will be paid to your solicitor and in turn, transferred to you. The charge will then be registered against your title at the Land Registry until the point it is repaid.
To discuss releasing equity in your home or for any conveyancing advice, please contact us at email: getmoving@ramsdens.co.uk or call us on tel: 0808 168 5643.
The above article is for illustrative purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any part of the information given.