Research shows that almost a quarter of the UK population will be eligible for lifetime mortgages by 2010.  This is likely to increase to around 40% by 2020.

The Council of Mortgage Lenders (CML) estimates this market to be worth between £50 and £100million, which shows that this is no longer a niche market but is very much part of the mortgage industry.  Why then do few solicitors take the responsibility to ensure that clients undertaking such a scheme receive the correct legal advice?

At Forshaws Davies Ridgway, we appreciate that an Equity Release transaction involves specialist legal knowledge and must be handled with even more care and precision than any other type of mortgage registration.  Not only is the client directly affected by such a transaction but also the family, friends and estate beneficiaries of the client can all be affected and must be considered.

Why consider an equity release scheme?

There are many reasons why you may think about an Equity Release;
Your Home is your most valuable possession and investment.  Although this may make you asset rich you may not have a great deal of cash or income.  You may have paid off your mortgage but now be retired and surviving on a relatively low income.
You may have been retired for some time and you may feel that your income and savings do not meet all of your financial needs.  Your day to day living costs may be more expensive than previously whilst your income has stayed the same or reduced.
You may want to obtain a cash lump sum fro repairs to your home or to treat yourself or the family.

Turning the value of your home into cash may help you in any of these situations.

What types of equity release schemes are there?

There are various equity release products and Forshaws Davies Ridgway would always recommend clients received independent financial advice before committing to any such product. 

There are two primary types of equity release scheme:

Lifetime Mortgage
For this type of scheme you borrow money from the Lender and give the Lender a mortgage against your property.  You retain ownership of the property.  Depending on the Lifetime Mortgage product you choose you may not have to pay anything until the property is eventually sold.  If the value of your property increases then your beneficiaries will stand to benefit.

Reversion schemes
For this type of scheme you sell your entire home, or a proportion of it, to an investment company.  Whilst you no longer own the entire property you continue to live there as a tenant for the rest of your life, either rent free or for a nominal rent.  When the property is sold on your death the investment company will receive a proportionate share of the proceeds based on the sale price at that moment.  If the value of your property increases your beneficiaries will only benefit proportionally to what percentage you owned.

YOU MUST REALISE THE RISKS OF AN EQUITY RELEASE SCHEME AND APPRECIATE THAT ONCE THIS EQUITY IS SPENT IT IS GONE. 

AN EQUITY RELEASE SCHEME IS NOT ALWAYS THE BEST WAY TO SOLVE FINANCIAL PROBLEMS.

For further information please contact...

Tim Jordan at our Stockton Heath Office
Vicki Coulthurst at our Warrington Office