Equity Release Solicitors

Under this arrangement, you continue to live in your home for as long as you want to.

With lifetime mortgages, there is no requirement to make interest or capital repayments until your home is sold, when the initial loan and accrued interest are repaid from the sale proceeds. Most schemes allow voluntary repayments before a sale, subject to lender criteria.

Home reversion schemes are far less popular than lifetime mortgages as a way of releasing equity from your home as legal ownership transfers to a home reversion company. You are then granted a lease of the property, giving you the right to continue living in your home.

This can sound complicated, however, with the right legal advice, home reversion schemes can be as straight forward as equity release.

• Benefit from increased value: With a home reversion you have sold your home or a proportion of it. This means that you or your beneficiaries will not benefit from any increase in the property’s value over time (or only on the portion you have retained). On the other hand, with a lifetime mortgage, you still own your home, and any increase in its value will benefit you or your beneficiaries. Any additional value can be used to help pay off the mortgage.
• Interest: Under a home reversion scheme, no interest accumulates as you have received less than the market value. With a lifetime mortgage, interest ‘rolls up’ and is added to the total amount repayable unless you choose to pay it monthly.
• Age to apply: For a lifetime mortgage, you (or both of you for a joint mortgage) must be at least 55. For a home reversion plan, you (or both of you for a joint plan) must be at least 65.

• Alternatives. Is there a more efficient way of raising the required capital? See ‘Other options to equity release’ below.
• How much can you borrow? You can normally expect to receive around 60% of your home’s value for a lifetime mortgage or between 20% and 60% of the value for a home reversion, with your age and health being significant factors.
• Interest rates. The rate you pay must be fixed, or if it is variable, there should be an upper limit for the life of the loan.
• Lifetime occupation. Always check that you can continue to live in the property for life, or until such time as you may move into long-term residential care.
• Moving home. With a lifetime mortgage scheme, you still have the option to move home, but the longer the scheme goes on, the less equity you will have to achieve this.
• Negative equity. You should check that there is a ‘no negative equity’ guarantee. Avoid any scheme where, if the total debt is more than the value of your home, your estate will be responsible for the shortfall.
• Lump sum vs smaller payments. With a lifetime mortgage, you may have a choice between a lump sum, smaller sums as and when you need them, or a combination of the two. An advantage to taking smaller sums is that less interest will accrue, but you should check whether there is a minimum amount you need to pay.
• Means tested benefits*. If you receive (or might qualify for in the future) means-tested benefits, a capital drawdown from equity release may affect your eligibility. Common examples of such benefits are pension credit, council tax reduction, and cold weather payment.
• Tax*. Will the extra income/capital affect your tax position?
• Ringfence. Check whether you can ringfence an agreed portion of your property for your family to inherit.
• Your age. The usual age requirements for each type of scheme are set out above. With a lifetime mortgage, you should bear in mind that the younger you are at the scheme’s inception, the greater the repayment is likely to be.
• Inheritance. What is your attitude towards inheritance? Should you first discuss things with your family?
• Hidden costs. Are there any hidden costs, eg survey fees, legal fees or an arrangement fee?
• Early repayment charges. There will normally be an early repayment charge if you repay your lifetime mortgage before you die or go into care.

* As legal specialists, are unable to provide advice on tax or state benefits.

Some people choose equity release to fund home improvements, including changes to facilitate disabled living or the advancing limitations of age. If that is the case, it is wise to first investigate whether grants are available to fund or subsidise the work. If so, that may negate the need for equity release.

Downsizing may be an appropriate alternative to free up some capital, but that comes with its own costs, which must also be taken into consideration. These will include conveyancing fees, estate agent’s commission, surveyor’s costs, stamp duty, and the cost of removals.

Typically, the greater part of the cost is the fee of the equity release advisor/financial advisor/broker. This can vary dramatically, particularly as some base their fee on a percentage of the amount you borrow, so it pays to shop around.