Q. How Does Equity Release Work?
A. Equity release schemes are a form of mortgage whereby homeowners over the age of 55 can release equity tied up in their property. The equity released can be spent as the homeowner wishes, ranging from home improvements to helping the children financially. Equity release mortgages have no fixed term and will run for the rest of one's life. The plan is usually repaid from the proceeds of the sale of the house upon death, or the last survivor moving into long term care.
Q. Do I Qualify For An Equity Release Scheme?
A. Eligibility for equity release starts with a minimum age of the youngest homeowner being 55. The property must be valued in excess of £60,000 and be of standard build, or classified as within lenders acceptable criteria. If there is a mortgage on the property then this will need to be repaid before, or on completion of the equity release scheme.
Q. How Do I Find The Right Equity Release Mortgage?
A. Releasing equity from your home is a big decision that will not only affect your life, but also your beneficiaries. Therefore, you should ensure that you receive expert independent equity release advice. By using the Compare Equity Release 'find an adviser' tool you can pinpoint your local adviser that can research the right equity release scheme for your own particular circumstances, then assist in processing your application through to completion and the ultimate release of funds.
Q. What Is the Best Lifetime Mortgage Interest Rate?
A. As with any type of mortgage, equity release interest rates fluctuate and are affected by economic conditions and competition from other lenders. Today's range of lifetime mortgages currently have the lowest interest rates the equity release industry has ever seen. Therefore, if you consider interest rates as the most important feature, then now is a good time to be taking a sub 6% interest rate that will be fixed for the rest of your life.
Q. Does It Matter How I Spend The Equity Release Proceeds?
A. Releasing capital from your property via equity release schemes gives you the freedom to spend the tax free cash as you wish. There are no restrictions on how the proceeds are spent. Your equity release adviser will check that they are for legitimate purposes and taking equity release is best advice, and for all the right reasons. It is also your advisers duty to check whether there are any alternatives that maybe more cost effective than using an equity release plan.
Q. How Much Does Equity Release Cost?
A. In dealing with the whole equity release market, costs will vary between lenders and equity release advisory firms. However, in summary there are four sets of fees. The only upfront cost you should incur is a valuation fee to obtain an estimate of the properties current market value. After this, the remaining costs will be paid upon completion - these include the lenders application fee which can be added or deducted; your equity release broker will usually charge for their service of advice and processing your application; the last fee is for independent legal advice from your solicitor.
Note - always compare deals. Some costs maybe waived or refunded as part of special terms we negotiate with lenders.
Q. How Long Does An Equity Release Application Take?
A. This will depend on whether you have applied for a lifetime mortgage or home reversion plan. Usually, a lifetime mortgage can be completed within 6-8 weeks, whereas a home revesion can be processed in approx 8-10 weeks due to the extra legal work involved. The key to a smooth application usually lies with the choice of solicitor. By selecting a specialist equity release solicitor who is a member of ERSA could assist if speed is of the essence.
Q. Can Equity Release Affect Means Tested Benefits?
A. Lifetime mortgages and home reversion are classed as a release of capital from your property. Therefore, if you're on means tested benefits such as pension credit, savings credit or council tax benefit, then an increase in your savings due to a release of equity, can affect these benefits. There are limits as to how much you can retain in savings before you start to lose your benefits. To avoid this occuring you should contact Compare Equity Release to discuss any potential implications and the best approach to minimise the effect of your equity release on means tested benefits.
Q. Who Owns My Property If I Take A Release Of Equity?
A. The main principle behind the popularity of a lifetime mortgage is that you will retain 100% ownership of your property. The equity release company will register a first legal charge on your property so that once sold, they will be repaid first. This is in contrast to a home reversion plan whereby you are actually selling a percentage of the ownership in the property. Here, you can sell anything upto 100% ownership in your home. Therefore, the greater amount sold, the greater ownership of your property is transferred to the reversion company.
Q. Do Lenders Deliberately Downvalue Properties For Equity Release
A. Equity release company's do have the final say on what they consider the properties true worth. However beforehand, they will appoint a local surveyor who will arrange a time to complete a survey. This person should be independent and will prepare the survey report based on their findings. The lender has no direct say in how much the property is valued at and relies on the judgement of the applicant in conjunction with online property sites such as Zoopla.co.uk.