We’ll see you through
We’ll see you through
Residential Property
Last updated: September 13, 2024
Equity Release has become popular for homeowners looking to release the capital from their home, to decrease their outgoings by not being obligated to make monthly mortgage payments (the interest gets added to the capital) or enjoy the money!
We advise clients every week on equity release – to make sure this is the right option for them and to see if it helps them to achieve what they hoped it would.
Here’s our guide to equity release.
Some background on Equity Release
Equity Release has come a long way in recent years. Originally, it involved homeowners selling their property to a lender, meaning they could live in their home rent free for the rest of their lives. The downside was that once the homeowners passed away, the lender would take ownership of the house, leaving any heirs with no property to inherit.
Today, the system is far more strictly regulated, meaning a better deal for borrowers.
How Equity Release is regulated
Equity Release is now strictly governed by the Equity Release Council https://www.equityreleasecouncil.com/ which ensures high standards are adhered to throughout the industry. A broker or solicitor’s membership of the Council gives peace of mind to clients that they can expect to be treated ethically and fairly. We have been a member since 2019 and are able to help clients through the process at every step of the way.
What is involved in Equity Release?
An Equity Release is really a loan secured against a property. The two main requirements from lenders are that borrowers:
This can free up the equity in a home without the need to sell it, or the funds can be used to pay off the outstanding mortgage if a borrower doesn’t own their home outright – known as a ‘lifetime mortgage’. The key advantage is that borrowers are not obliged to make any payments towards the loan, meaning the interest simply accrues on the outstanding amount.
However, borrowers have the option to tailor the process and can choose to:
Loan options
The scheme also provides flexibility for homeowners to access funds if needed, for example, to buy a new car, go on holiday or help others financially. Usually, borrowers are granted a loan amount but can choose not to draw down the whole amount at once, instead accessing it only as and when needed. The use of the loan is unrestricted and as they need more capital, they can draw down from the original loan.
When does the loan need to be repaid?
There are usually three events which trigger repayment of the Equity Release loan:
Once completed, the charge will be registered against the property in the usual way at HM Land Registry which means that the borrowers retain ownership of the property subject to the charge for the loan.
All Equity Release schemes usually include a No Negative Equity guarantee, meaning that if any outstanding loan exceeds the value of the property at the point of sale, lenders cannot recover more than the sale proceeds.
Equity Release and Inheritance
Once the loan plus any interest accrued has been repaid to the lender, any remaining equity in the property can be left as inheritance. Often, when taking out the scheme, borrowers can choose to protect a percentage of the value of the home for Inheritance, but this does affect how much value can be released.
Deciding whether Equity Release is right for you can seem daunting. We recommend discussing with family and heirs before committing – but do get in touch if you have any questions first.
Talk to us about how we can give you trusted, professional advice and support through the whole process. Find out more about our Residential Property services.
