Taking out equity release is a big decision and our customers ask their advisers lots of important questions. So, we asked our advisers, what are the common questions you’re asked? Here, we’ve compiled them and the answers in an easy to follow format.
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Equity release is the generic term for financial products that allows you to borrow against the value of your home. There are then 2 main types of equity release plans – a lifetime mortgage or home reversion.
Lifetime mortgages are the most popular type of equity release plan and account for over 99% of all equity release plans taken out.
Home reversion plans were the forerunner to today’s equity release plans and work very differently. With these schemes, you sell part, or all of your property in return for a tax-free lump sum, a regular income, or both.
This depends on factors such as your age, your health, the value of your property, loan size and the features of the plan you choose. These combine to determine the interest rate the lender will offer you.
The closer you are to the maximum loan size available (the higher the loan to value – or LTV) and the more specialist the features offered by a plan, then typically the interest rate of the plan will be higher.
Hence, there is no ‘one rate fits all’ and why the interest rate you pay on your plan may be very different to that quoted on our website.
This depends on the age of the youngest person on the title deeds & also if your property meets the lenders’ criteria, plus your location for certain companies.
For lifetime mortgages the minimum age is 55, for a home reversion plan the minimum age is 60 and the minimum property value acceptable is currently £70,000.
Lenders use external, independent surveyors. They will visit your property at a convenient time to assess its condition, before comparing your property with others in your area that have sold recently.
Most lenders use E-Surv or Countrywide. They have a standard questionnaire provided by the lender to complete and any essential repairs and further comments will be noted on the valuation report.
The main objective of the valuation is to check that nothing will affect the future saleability of your property, for example, being near a commercial property.
You can change your mind at any time during the application process. Therefore, until the date of completion, you are able to withdraw at any time.
The money you receive is tax-free, being a release of capital from your home.
However, any monies left on deposit or in other forms of investments, could become taxable.
If you are gifting monies from the proceeds of equity release, this can have implications on your estate planning and your Equity Release Supermarket adviser will discuss these with you.
It usually takes 4 weeks from valuation to completion, but our advisers have cases that have completed in as little as 18 days! Timescales are dependent upon your deeds, property type, lender, solicitor and adviser all working together.
Your Equity Release Supermarket adviser will also keep you up to speed on the progress of your application and you can also use our exclusive case tracking facility which enables you to track the progress of your case online – 24/7 - whenever you want to.
No. Lenders do not consider your income when assessing what they will lend you.
If you have an adverse credit history - other than bankruptcy, this wouldn’t stop you from taking out equity release, but may reduce the number of available lenders.
Yes, you can. But the mortgage must be repaid first either at, or prior to completion of the equity release scheme. The mortgage can be repaid using your own funds, or with the money you release.
Yes, you can and there are a small number of specialist lifetime mortgages available.
No. This isn’t possible. You’d have to repay the equity release, as you wouldn’t be living in your main residence.
Yes, a lifetime mortgage can be used to cover the shortfall, but the property must meet the lender’s criteria.
Some lenders will accept an application upon arrival back to the UK and some will require you to be resident for a certain period of time prior to either application or completion, typically 3 - 6 months.
Most lenders won’t accept properties with spray foam insulation applied to the loft. This is because it can affect the timbers and once applied any damage cannot be seen.
A ‘soft’ foam manufactured by ‘Icynene’ can be acceptable as long as the works are guaranteed, and a supporting BBA certification is available. There are currently two lenders who would consider this product; hence your choice is restricted in respect of loan amount and interest rate.
Other spray foam applications are unlikely to be acceptable. The solution is to remove the insulation and replace this with a standard product and make good any damage caused – before a lender will consider your application.
If the property land contains an invasive species of plant such as Japanese Knotweed, Himalayan Balsam etc., or if a neighbour’s property contains one, then it is unlikely, but not impossible that a provider will consider lending to you.
There are lenders who accept Japanese Knotweed if the infestation is more than 7 metres away from the boundary of the property. Some providers will consider lending once a suitable management plan is in place with the benefit of a long-term guarantee issued by a member of the Property Care Association Invasive Weed Control Group.
Yes. Most lenders will accept a property with flat roofing up to 25% of the total roof area. Any area greater than this (up to 100%) will be considered, but the choice of lenders is limited. The type of roofing material, its age and the property value can also be deciding factors.
Possibly. This may depend if the annex is separate to the main property, or if it has its own access. Additionally, consideration is given as to whether it’s on the same council tax and utilities bill and if the annex is occupied by a family member, lodger or tenant.
Lenders have become more lenient over recent years with regards to annexes, as parents sometimes build them to accommodate children, or even let out.
Speak to your Equity Release Supermarket adviser as some lenders look into this on an individual, case by case basis.
Equity release will reduce the value of your estate that you leave for your beneficiaries.
By how much is determined by the type of equity release plan, how much you borrow, how long the plan runs for if you choose to make any interest and/or capital repayments.
Some lifetime mortgages now come with an Inheritance Protection Guarantee – which safeguards a percentage of the final sale value of your property – guaranteeing that this percentage is passed to your beneficiaries.
You can also choose from a range of plans that can help minimise the amount of interest repaid –
Whatever the final value of your estate, your beneficiaries will never be out of pocket because all the lifetime mortgages we advise on come with a no negative equity guarantee.
Yes. All lifetime mortgages enable you to retain full ownership of your home and 100% of any increase in your property’s value.
With a home reversion scheme, the percentage ownership will depend on how much of the property is sold to the home reversion company. You will also have the right to remain in the property, usually rent free, for the rest of your life.
Possibly, with certain means-tested benefits such as pension credit, savings credit and council tax support. This is because savings limits are imposed by the Department of Work and Pensions (DWP), local authorities and the amount of money you release may take your ‘savings’ above the eligibility thresholds.
If you are claiming any of these benefits, our aim is to protect them through the advice process and plan we recommend to you.
Other occupiers (aged 17 or over) living in, or moving into, your property may be required to sign a waiver form - waiving any right to occupy the property in favour of the lender. If they do not sign the waiver form, the lender may not lend to you.
They must also obtain independent legal advice before a waiver form is signed and they must pay any fees incurred. Remember, any other occupier will have no right to remain in the property after you die or move into long term care and must then leave the property.
Possibly. It would depend if they occupy part of the main property, or a separate part for their use only. Lenders will even ask about access to the rooms & whether locks are present. Plans are available if you have a tenant living in a self-contained part of the property - as long as there is a suitable tenancy agreement in place and any necessary waiver form is signed (as mentioned above).
This can cause problems for lenders. It is possible to arrange equity release, but the choice of lenders is restricted. The party not on the title deeds would need to sign a ‘waiver of occupation’ and take independent legal advice.
This is because should the property owner predecease the other party, there is a usual 12 months period before the loan has to be repaid, normally through the sale of the property. Therefore, the other partner needs to understand the risk of this happening and the consequences for their future, as they will have to vacate the property once it is sold.
Unfortunately not. As you are a joint applicant you could not sign on their behalf as this would be seen as a conflict of interest.
You can still apply, but you would need another person who is either currently named as a joint Power of Attorney (POA), or you would need for them to be added as a POA.
This can be another family member or friend who can be trusted to make decisions on behalf of your partner.
Possibly. However, it must be carefully considered. Lenders have different criteria on this, but there are lenders that would consider it, subject to the spouse age under 55 coming off the deeds. The spouse aged under 55 (the minimum age for lifetime mortgage) would need to have independent legal advice and sign a waiver as part of the process for this, which would incur extra legal costs.
This would only be recommended under exceptional circumstances as the spouse could end up with no home, should their partner die.
This varies by lender. Some impose a maximum age limit of 90, whilst others have no upper age limit.
However, it is the decision of Equity Release Supermarket to recommend a plan to you and if we consider that you are not making a decision that is in your best interests, then we will not allow you to proceed with your application – whatever your age.
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With a lifetime mortgage the property remains 100% in your name. When the last one of you leaves the property, it is the responsibility of either your executors or whoever is dealing with your affairs to sell the property – and the lender typically gives the executor 12 months in which to do this.
They will be able to choose how and with which estate agent the property is marketed and also agree the price that the property is marketed for. When selling, it is also the executors responsibility to agree the sale price and get the best price for the property.
It’s in everyone interest to sell the property sooner rather than later as interest will continue to accumulate until the loan is repaid.
If your family want to keep the property and have the funds available to repay your plan, then they may be able to do so, however they should take legal advice first to ensure they have the power to do so. Normally, the property is sold in order to repay the lender.
The lender will only need to be involved if the value of the property is less than the amount outstanding on the lifetime mortgage. If the no negative equity comes into play the lender will want to make sure the property is being sold for a reasonable price.
Equity Release Supermarket doesn’t charge for your initial consultation with your local adviser and if you decide to go ahead, there are four main costs involved in setting up a lifetime mortgage:
It is typically around £1,900 to set up an equity release plan, and you can either deduct this amount from the amount you borrow (e.g. £50,000 less £1,900), add this on to the loan amount (e.g. £50,000 plus £1,900) or pay the set up costs out of your own funds. You just need to be aware that you would be paying interest on the set-up costs if you took them out of the proceeds, or add them onto the loan amount.
Firstly, not all lenders sell directly.
If the lender does have their own sales team, you are limiting your options as typically lenders only sell their own plans. In such a scenario, you and they, will not know if that’s the best plan for you, as they do research the whole of the market – it may not have the best interest rate, or features you specifically require for the future.
You may therefore find that the first lender you speak to may not be able to help and you have spent a lot of time trying to find a solution.
As we are whole of market, expert advisers, we have access to all the plans offered by every lender in the marketplace and can find the blend of interest rate and features to find the right plan for you – which could save you many thousands of pounds over the lifetime of your plan.
Possibly. This will depend on the terms of your existing lifetime mortgage.
Firstly, if it’s a drawdown lifetime mortgage, has all the reserve been utilised? If not, then it would make sense to access the existing drawdown facility if the terms/rates are still favourable.
If the reserve has been maxed out, or there was no reserve facility set up, then we would consider two options for you; apply for additional borrowing on your existing plan, or undertake a review to see whether it’s financially viable to switch plan as better rates or features are now available.
With additional borrowing on your existing plan, lenders use a combination of current age, new property valuation and loan-to-value table, to help determine whether any extra funds can be released. The lender may impose a minimum loan and there would usually be set-up costs involved which vary by lender.
If no additional funds are available on your existing plan, or, following analysis by your Equity Release Supermarket adviser it’s prudent to switch plans, then we can provide advice as to the alternative equity release plans from the whole of the market that could assist you.
Yes, you can, but you must transfer your existing lifetime mortgage to your new property, or consider repaying the loan. (Repayment is covered in a separate FAQ below)
Transferring the lifetime mortgage is known as ‘porting’. All lenders that are members of the Equity Release Council must permit this. However, this will always be subject to the new property meeting the providers lending criteria as well assessing the value of the new property. For example, some lenders won’t let you transfer your plan to a retirement property.
No lender charges a penalty if you port your scheme to a new property, although you usually need to pay a valuation fee and possibly admin fee, as well as your usual legal fees when moving to a new house.
Should the property you are moving to be of lower value, and the amount outstanding on your current plan is too high to port the whole balance, then you may need to make a part-repayment upon porting. However, this would come out of the equity that you would be raising by downsizing anyway.
Lenders consider each case on an individual basis and so if you are considering moving, it’s worth speaking to your Equity Release Supermarket adviser first.
Possibly. This depends on your type of lifetime mortgage, its current balance and whether any early repayment charges apply. Your adviser would conduct a ‘switch plans analysis’ to see whether it would be beneficial to transfer, or remain, by researching the whole of the market.
Why not use our switch plan calculator to find out more?
Yes, you can but if you decide to repay the loan early, then early repayment charges can be incurred – as high as 25% of the amount borrowed.
So, if you wish to repay your lifetime mortgage early, your lender will prepare a redemption statement. This will illustrate your final balance and may include any potential early repayment charges (ERCs) and closing administration fee.
In today’s market, there are ways of mitigating these penalties with the correct advice and discussion around your future plans.
For instance, we now have plans available that don’t charge ERCs whatsoever in the event of moving home after day 1 from commencement of the plan. This is by including the day 1 ‘downsizing protection’ option.
Additionally, where equity release plans traditional had variable ERCs, plans are now more aligned to the residential mortgage market and come with fixed ERCs that run for a set period of time. For example, the penalties could run over an 8-year period - 5% for 5 years and 3% for 3 years, with no penalty thereafter.
Finally, lenders can offer joint plans that would waive an early repayment charge should a homeowner repay their lifetime mortgage within a 3-year window of the death or moving into long-term care of their partner.
Your Equity Release Supermarket adviser will explain the impact of ERCs if you are considering repaying your plan early.
This would have no impact on your equity release plan, as the property belongs entirely to you. You may need your potential future partner/husband/wife to sign a waiver for the lender, but your plan is as flexible as your circumstances are.
You could also, with the lender’s permission, add your partner onto the existing equity release plan as long as they met the lenders terms - including age requirements and amending the deeds.
Firstly, the provider will require the new home to meet their lending criteria, and the lender will also need to review and accept the remaining term of the lease and service charges.
The lender may charge you an application fee to transfer your loan and you will have to pay for a valuation report on the new property.
If the property has a lower value than your original property and you released a maximum loan in the first instance, then you may have a part payment to pay back. If you have a drawdown cash reserve facility this could be reduced or removed as a consequence.
Yes. To take out any type of equity release plan, you must speak to a suitably qualified financial adviser. This is a mandatory, legal requirement of the Financial Conduct Authority (FCA).
Only financial advisers with specialist qualifications can offer equity release advice.
Only financial advisers with specialist qualifications can offer equity release advice.
The Equity Release Council - the industry’s trade body - lists all the advisers that are registered with them and are suitably qualified.
All Equity Release Supermarket advisers hold the necessary equity release qualifications and are members of the Equity Release Council and regulated by the Financial Conduct Authority – No 584063.