Equity Release

Are you looking to release capital from your home and would like to be guided through the process by experienced equity release solicitors?

Equity release is a very good way of helping Britain’s growing elderly population to cope with life’s financial challenges without having to leave the property they love.

But it’s not for everyone so it’s important to make sure that it’s right for you. Equity release becoming an increasingly popular option for the over 55s to release capital from their home. Homeowners may wish to consolidate existing debt, carry out home improvements, provide financial help to their children or grandchildren, or simply improve their own lifestyle.

However, as with all secured loans, borrowers should consider their options carefully and seek the advice of an independent financial adviser or broker.

If you would like to discuss your circumstances or requirements with one of our experienced equity release solicitors please call us on 0330 127 1934, email enquiries@tr1propertylawyers.co.uk or complete our Free Online Enquiry Form to arrange an initial consultation.

What is Equity Release?

Equity release allows you, as a homeowner, to release some of the equity that is tied up in your house to generate a lump sum payment or an income stream once you are over the age of 55.

To benefit from equity release, the property you own must be based in the UK and be your main dwelling. In all cases, your property will need to be in a “reasonable to good” state and only some types of property will be eligible for equity release.

The amount of money you can borrow is based on the value of your property. The equity release lenders will also be taking a view on how long you are likely to live and how much your property will be worth when you die or move to a care home. The property should also be worth more than a certain stated value, although this will change depending on the type of property you own and what condition it is in.

Never forget that equity release is a loan which must be repaid. The more you borrow and the longer you leave it before paying any interest, the more you will have to repay in the long run. That may mean you’ll have significantly less to leave your children and grandchildren as an inheritance.

How Does Equity Release Work?

With equity release, you are able to retain your home and continue to live in it for a set amount of time (usually agreed until death or when you move into long term care) while receiving either one payment close to the value of your property, or several payments over the course of many years.

There are two types of commonly used equity release plans:

Lifetime mortgage equity release
Home reversion equity release

Lifetime mortgages are more popular than home reversion plans. Lenders loan up to 60 per cent of the value of the property.

You can withdraw money in small amounts or lump sums. Check with the provider to see if there is a minimum amount you can withdraw. Don’t borrow more than you need. Remember that eventually you will have to pay back every penny of capital and interest.

Generally, you don’t have to make any loan repayments while you’re still alive – but the downside of this is that the interest compounds. So your debts can soon mount up.

Some lifetime mortgages allow you to repay some or all of the interest as you go. A few let you pay off the capital as well. This is a great option if you suddenly receive an unexpected windfall.

Lifetime mortgages can be more costly than normal mortgages for two reasons:

The interest rates are higher
Interest compounds if you don’t pay it off at regular intervals.

Pros and Cons of Home Reversion Plans

Home reversion plans are rare now, representing only a small percentage of the equity release sector.

They allow you to sell off part of your home – usually 20 to 60 per cent of the market value – but you can still live there until you die or move into long-term care.

Some providers stipulate that you must be aged 60 or 65 before you can borrow.

You must keep your home fully maintained and not ignore anything that could affect its value. Your lender will inspect the property from time to time to ensure you’re keeping to your end of the agreement.

Think very hard before you opt for a home reversion plan. They’re not for everyone. You need to live for at least five or six years after taking one out or you could end up losing money on the deal.

How Is The Money Paid Out To Me?

You can either take the money as a lump sum or draw it down as you need it.

Often it’s better to draw down the money – usually quarterly – otherwise you could face some large interest bills right from the start. And they will only get bigger as they compound up.

Many people opt for a combination of the two. They will take out a small lump sum early on to pay off their debts or refurbish their house and then draw down quarterly to supplement their income.

Remember that if you use an equity release loan to pay off small debts (such as credit card bills), you are turning unsecured debt into a loan that is secured against your home. You will be paying a lower interest rate but the debt is now secured against your property!

What Happens If I Spend It All At Once?

Your estate will still be liable for the money you have borrowed but only when you die (or go into care). But you could suffer the consequences long before then.

Never forget that you borrowed money against the value of your home – and on a legally enforceable promise to the lender that you would keep that property in good repair.

If you fail to carry out the necessary maintenance on your property, the lender can take possession of your home to prevent their investment from falling further into disrepair. You could lose your home.

In the worst case scenario, you could end up with no home, no money and large debts.

Will Equity Release Affect My Benefits And Care Home Funding?

Yes. If you borrow money in excess of the thresholds for benefits and/or care home funding then your payments would stop.

Do I need a solicitor for equity release?

When pursuing equity release, you will need independent legal advice. This can be provided by specialist equity release solicitors and is a requirement of the equity release process.

You can discuss your best options about instructing a legal professional with your financial adviser at the beginning of the equity release process.

At TR1 Property Lawyers, our experienced team of equity release solicitors regularly represent homeowners taking out Lifetime Mortgages. We are familiar with lenders’ usual requirements, so can identify any possible issues early on in the transaction.

How long does equity release take?

It usually takes just under 10 weeks. That is three or four weeks to secure a loan offer from a lender plus a further six weeks to complete the legal work.

This timescale can sometimes be considerably shorter. We have dealt with equity release mortgages that have been completed within a couple of weeks of being issued.

However, if the title to your property is not in order, or if it is still unregistered land, the procedures could take a little longer.

How We Can Help?

We have a specialist team of equity release solicitors who regularly act for homeowners taking out Lifetime Mortgages.

We are familiar with lenders’ usual requirements, so can pre-empt any possible issues early on in the transaction. This helps to avoid any delays or difficulties further down the line.

The legal process always involves a face-to-face or virtual meeting between the lawyer and the homeowners. The purpose of this meeting is for the lawyer to advise you on the legal process, and to witness signatures to the security documentation. We are always willing to meet homeowners either at a convenient office location (pre booked appointments), or at their home.

Our expert equity release solicitors can deal with the legal aspect of the equity release process in an efficient and professional manner. We are independently regulated by the Solicitors Regulation Authority and our accreditation through the Law Society’s Conveyancing Quality Scheme attests to our skill and expertise in this area of law.

Once you make an initial enquiry, one of our experienced equity release solicitors will arrange an initial consultation with you, free of charge, to explain the legal process to you.

Once we understand your circumstances better, we can provide you with a clearer understanding of how we can help you.

Equity Release Interest Rates

Interest rates for equity release are higher than those for normal mortgages. This is because – for most plans – you will not be making any monthly repayments.

So, the plan provider must wait many years before they see any return on the money they lend you. Also, the legal protections they must set up to safeguard their investment in you are more complex. This costs them more – so they pass on these charges to you the borrower.

How Much Does It Cost?

Aside from the interest you will be paying, there are also other charges:

An application or administration fee charged by the equity release plan provider
A fee payable to the financial adviser who arranges the plan
A fee for the surveyor who will check your property for the plan provider (usually paid by the equity release provider but not always)
Your legal fees – to carry out the legal work on your equity release mortgage (it can cost more if the property is leasehold because the process is more complicated)

Get in Touch

To obtain a free quote call 0330 127 1934, email enquiries@tr1propertylawyers.co.uk or complete our Free Online Enquiry Form to arrange an initial consultation and let one of our experienced equity release solicitors explain your legal rights and options.