Equity Release

Equity Release is way of extracting or releasing cash (equity) tied up in your home to provide you with a cash lump sum for your retirement by effectively taking out a loan secured on your home.

This loan provides you with cash whilst also allowing you to remain in your home for your retirement, without any upfront monthly repayments. You can take the money you release from your home in one lump sum or in several smaller amounts on which you will pay interest, or as a combination of both. This loan would then be repaid when your property is eventually sold. Equity Release is only available to people over the age of 55.

There are two types of Equity Release:

Lifetime Mortgage: You ‘release’ or borrow a proportion of your home’s value (e.g. £50,000). Interest is then charged on that amount, but you do not have to make monthly repayments as a standard mortgage would require. Instead, the interest is added to the loan and would then fall, due to be repaid upon eventual sale of your property. The interest is compounded or ‘rolled up’ over the period of the loan

Home reversion scheme: An Equity Release company buys a share of your property from you (e.g. 10%) for less than the market value. When you die, or move into long-term care, and the property is sold, the provider gets the same share of whatever your home sells for as repayment. You can take out some lifetime mortgages from the age of 55, but home reversions are available only to people aged 65 or older.

If Equity Release is the right option for you, there can be many benefits including, but not limited to:

· Any money released is tax free.

· Under a Lifetime Mortgage, you can choose to either pay the Equity Release interest rate each month to avoid the debt increasing (Interest Only Lifetime Mortgages) or allow it to be continually added to the amount borrowed (‘Roll Up’ Lifetime Mortgage).

· Under a Home Reversion plan, you can sell some, or all, of your home ownership to provide a lump sum of money without needing to pay any rent back. There is no repayment needed during your lifetime but when the property is sold, usually after your death, the provider receives a portion of the proceeds which corresponds with the share of the house they own.

· It enables you to release equity from your home’s value but enables you to remain at the property for the duration of your lifetime.

· It gives you cash up front.

· Affords you a better quality of life (e.g. money to make home improvements, go on holidays, give inheritance money to children or grandchildren)

· For both types of Equity Release, the loan is generally repaid when the property is sold which typically happens when the homeowner passes away or moves into long-term care.

The timeline of an Equity Release transaction typically takes six to either weeks from the initial enquiry to the final release of funds. This can vary depending on a number of factors outside the remit of our control such as how quickly you can make decisions, the time taken for property valuation, and any additional checks or queries the lender may have.

Typically, Equity Release will follow these steps:

1. Initial consultation

Step 1: You will start by contacting a qualified Equity Release adviser to discuss your needs and how much money you would like to draw down. They will provide an overview of Equity Release options, including lifetime mortgages and home reversion plans, and find the most suitable product for you.

Step 2: The adviser will assess your financial situation, including your goals, property value, and other factors, to determine if Equity Release is suitable for you.

Step 3: They will then suggest an appropriate Equity Release product based on your circumstances, providing you with the details, including the benefits, risks, and costs involved.

2. Decision making

Step 4: After receiving product recommendations, you will have time to think about whether Equity Release is the right choice. You may also wish to speak with your family about your options at this stage.

Step 5: To ensure you fully understand the terms and implications, you are required to seek independent legal advice from a Solicitor. We, as your legal representative, will review the documents and explain the details of the Equity Release plan, including long-term effects, inheritance, and costs.

3. Application and property valuation

Step 6: Once you have made your decision, you will complete the application forms for the chosen Equity Release product. You will need to provide personal information, proof of income, and details about your property. We will also arrange appointments with you at a time and place convenient to you to provide you with the appropriate Equity Release advice and to sign paperwork. This step must be done in person or by way of video call as per lender requirements.

Step 7: The lender will arrange for a professional property valuation. This is necessary to determine the amount you can borrow, as it is usually based on a percentage of the property’s value. The valuation is usually done by a surveyor and can take several days.

4. Approval and offer

Step 8: The lender will review your application, the property valuation, and any other relevant information. They may conduct further checks, such as assessing your health or confirming your eligibility.

Step 9: If the application is approved, the lender will issue a formal offer for Equity Release. This offer outlines the terms of the loan, including interest rates, any upfront costs, and the overall repayment plan.

5. Review

Step 10: After receiving the offer, you will again consult with us as your legal representative to ensure that all terms are clear and that you understand the legal implications.

Step 11: Once you are satisfied with the terms, you will sign the Equity Release contract with your legal representative. We may need to send this to your lender’s Solicitor before a completion date can be agreed.

6. Completion

Step 12: We will handle the completion process, which involves confirming that all legal paperwork is in order to attend to the lender’s stipulations on the matter. The lender will then finalise the transaction by consenting to the release of funds. We will then arrange to have a completion statement drawn up setting out the balance due to you following completion of the Equity Release transaction.

Step 13: We will attend to the registration requirements with HM Land Registry to have the lifetime mortgage documented on the title for the property. This can take some time for HM Land Registry to process but we will send through the updated title document on receipt from HM Land Registry for your information and safe keeping.

You are able to sell your property if you have an Equity Release plan, but there are some important considerations to keep in mind, depending on the option you have chosen:

Lifetime Mortgage:

With a Lifetime Mortgage, you are able to sell your property at any time but beware of early repayment charges. When you sell, the loan (including any accumulated interest) is repaid from the proceeds of the sale. The remaining balance, after the loan is paid off, goes to you or your beneficiaries.

It is important to note, if you are selling your home and planning to buy a new one, some providers allow you to transfer the Equity Release to the new property, but this is subject to approval and conditions attached to the plan at the time of transfer.

Home Reversion Scheme:

Under a Home Reversion Scheme, you would need to sell the entire property, and the provider would receive their share of the sale proceeds, based on how much of the home they own.

The home reversion provider receives their share when the house is sold, and the remaining funds would go to you or your estate.

You should be also be aware that if the property values have dropped, it could affect the amount of equity left after repaying the loan. We would always advise that before selling your property, you check the terms of your Equity Release plan, as some may impose charges for selling early, although this is less common with home reversion plans.

If you are considering selling, it is a good idea to discuss this with your Equity Release provider beforehand to understand the conditions imposed of your plan and any financial penalties.

The Equity Release Council (ERC) sets standards for the Equity Release market in the UK, ensuring that consumers are protected and treated fairly. As proud members of the ERC, we are committed to delivering expert guidance and adhering to the Council’s code of conduct, allowing you confidence as we guide you through the process.

Using a Solicitor who is a member of the Equity Release Council offers several key benefits for homeowners considering Equity Release options. The benefits of working with a Solicitor who is a Council member include, but are not strictly limited, to;

1. Expertise and knowledge of industry standards

Solicitors who are members of the Equity Release Council are trained and up-to-date with the latest regulations and best practices in the Equity Release market. We have the expertise to guide you through the process to ensure you are able to make an informed decision.

2. Consumer protection and adherence to code of practice

Having a Solicitor who is a member of the ERC provides you with additional peace of mind, knowing that we are bound by the Council's code of conduct and that we have a duty to protect your best interests at all times.

Independent legal advice is required when taking out Equity Release, and a Solicitor who is a member of the ERC is specially trained to ensure that you fully understand the product you are entering into. It also ensures that you understand the long-term implications, such as the effect on your estate and potential inheritance for your loved ones.

3. Access to regulated products

Solicitors who are members of the ERC will ensure that the Equity Release products they offer or recommend come from providers who adhere to the Council’s standards.

4. Protection against scams

Members of the Equity Release Council follow strict guidelines designed to protect consumers against scams or fraudulent activity. We can help ensure you do not fall victim to high-risk, unregulated schemes.

5. Transparent fees

As an ERC Member, we operate transparently when it comes to our legal fees, which can give you confidence that you are not being overcharged for services.

6. Access to a regulated and trusted network

The Equity Release Council also works with various stakeholders, including financial advisers, lenders, and other Solicitors, to maintain high industry standards. By choosing an ERC member Solicitor, you gain access to a network of regulated professionals committed to delivering quality services.