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Equity Release - Frequently Asked Questions

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Equity Release – what’s the deal?

Equity Release is one of the fastest growing forms of lending in the UK, but why is using your house to fund your lifestyle becoming so popular?

If you’re over 55 and own your home you could take advantage of a Lifetime Mortgage, more commonly known as Equity Release. Equity Release schemes give you access to tax free lump sums which can be used for a wide variety of purposes such as those much needed holidays, home improvements or family gifts. And the best part of it all is that you are able to remain living in the property until you die or move into long term residential care.

It seems that it is an increasingly popular idea to free up some cash without the hassle of moving home or downsizing, but is it right for you? If you’re considering Equity Release as an option, the following frequently asked questions may be informative:

  1. How does it work?

    The amount you may be able to borrow depends on your age and the value of your home. Unlike regular mortgages, there are no repayments to be made, monthly or otherwise, unless you choose to do so. The lump sum and accrued interest is usually paid back from the proceeds of selling your home.

  2. Is there a chance my family will inherit a debt after I’ve passed away?

    Generally speaking, when a person dies their debts are paid from any money or other assets they leave behind. Beneficiaries inherit whatever is left after debts and expenses are paid. However, Equity Release products are commonly available with ‘no negative equity’ guarantees. This would mean the lender would only be able claim against the property subject to the Equity Release mortgage. This aspect of Equity Release is an indicator of the importance of taking advice from a reliable financial advisor.

  3. What can I spend Equity Release proceeds on?

    In short, anything you like! The cash lump sums are often used for home improvements, buying a new car, travelling, and helping family members get on the property ladder with house deposit contributions.

  4. Will I be able to remain in my home all my life and what if I decide to move?  

    You are able to stay in your home as long as you want or need to. If you move in to long-term care or with your family, your home would need to be sold at that stage in order to repay the loan.

    If you decide to sell your home and purchase another property it may be possible to transfer Equity Release mortgage to the new property. If you purchase a lower value property the lender may require you to repay part of the loan. It is important to check these conditions before entering into an Equity Release mortgage.

  5. Do I need a specialist solicitor to deal with my Equity Release?

    Equity release is a niche area of law and it is imperative that you receive good quality legal advice from a qualified lawyer who has experience within this area. This is a big financial decision and specialist advice is vital so that you may make an informed decision.

  6. What other factors should I consider?

    There are a number of things to consider when contemplating Equity Release. It may be good practice to discuss with any beneficiaries or close relatives on the basis that any potential beneficiaries may receive a smaller inheritance as a result of the repayment of any Equity Release mortgage.

    You should consider all your options – Is Equity Release the right option for you or would downsizing, a traditional loan or pension release be better for you in your circumstances?

    You should also consider the impact on your tax and any benefits you may receive. It is advisable to speak with your Financial Advisor about this issue as everyone’s circumstances are different.

    If any of your questions remain unanswered and would like to speak to a solicitor who is an expert in Equity Release call Chris Williams today on 01928 739300 or email him - chris.williams@fdrlaw.co.uk and he will be happy to advise and assist you in making the right decisions for your future.