Q How do I know if I qualify for an equity release scheme?
You will usually qualify for an equity release plan if you:
Q What is the difference between a lifetime mortgage and a Home Reversion Scheme?
A lifetime mortgage is where you take out a loan secured on your home but where you retain full ownership of the property; a home reversion scheme requires you to sell all or part of your home and therefore give up part or all of the ownership.
Q Can I apply for equity release if my property has an outstanding mortgage?
Yes, it is possible to arrange an initial cash lump sum to be used to repay the outstanding mortgage on the property and/or any other debt you wish to repay. This will inevitably reduce the total sum that can subsequently be accessed.
Q Can I use equity release to purchase a property?
Yes, providers generally allow equity release for a purchase.
Q Whichever scheme I choose, will my partner and I be able to live in our home for the rest of our lives?
Yes, as long as the recommended provider is a member of the Equity Release Council. All ERC members guarantee that you’ll be able to remain living in your home for as long as you want or need to. Thompson Jenner Financial Services was the first independent financial services advisory firm based in Devon to have been accepted as members of the Equity Release Council. As members, we are committed to using providers who sign up to the Code of Conduct, ensuring that you receive the same safeguards and guarantees.
Q Are there any restrictions on how we spend the money we release?
No. You are entirely free to spend the money in any way you wish.
Q How much money can I release?
That depends on the value of your home, the lender’s policy in respect of how much can be loaned in relation to the value and your age and possibly your state of health. Some medical conditions may allow you to borrow a higher sum with certain providers.
Q What happens if property values fall and the house is worth less than I have borrowed? Will my family or I have to make up the difference?
No. We as equity release advisers only recommend lenders who offer a ‘No Negative Equity Guarantee’. This means that if the value of the property becomes less than the loan, the shortfall is accepted by the lender and you or your family having nothing to pay.
Q Who pays for repairs to the house?
With both lifetime mortgages and home reversion schemes, the responsibility for maintenance of the house still lies with you. You will also still have to pay all your bills e.g. utilities, insurance and Council Tax.
Q Will I be able to move home if I wish?
This will depend on the nature of the scheme. All Equity Release Council members include a portability option though this should be carefully considered because the change may be to a lower value property and the amount borrowed may be affected. We recommend that if this is expected careful consideration should be given to the choice of lender. We can help with this.
Q What is the Equity Release Council?
The Equity Release Council is the industry body for the equity release sector. Born from an expansion of the remit of SHIP (formerly Safe Home Income Plans) the Equity Release Council represents the providers who work in the equity release sector.
Q Would any state benefits be affected by the release of equity?
Yes, they may be. A number of state benefits are means tested, and these could be reduced or simply not available to you because of the release of funds as distinct from being part of your property. If you are receiving social security benefits of any kind, you should check to ensure that releasing a lump sum from your home will not adversely affect these benefits. We can help advise you in this matter.
Q Are there any penalties if I wanted to redeem the loan early?
There could be depending on when you wished to redeem. Virtually all recognised lenders impose an early redemption penalty arrangement where redemption is within five years, although some are more restrictive than others. If you think that you may wish to redeem within five years, then careful examination of the lender’s policy should be carried out. On the whole, equity release should not be thought of for short term objectives although there are specific cases where it can be appropriate. Some lenders allow penalty-free overpayments up to 10% of the amount borrowed per annum.
Q Are there any fees to be paid when taking up an equity release scheme?
Yes. You should be prepared to pay solicitors’ fees for dealing with the legal work, an arrangement fee charged by both the lender and adviser as well as a valuation fee which the lender will require in order to be satisfied as to the value of your home. In some cases, part of these costs can be added to the loan. Lenders do sometimes waive valuation and arrangement fees.
Q What is the tax position?
Any lump sum you receive will be tax-free. If you arrange for the capital sum to go directly into an annuity or savings account, the income derived will be subject to income tax and would be taken into consideration when calculating entitlement to means-tested benefits. Also, whatever type of arrangement you undertake, you will continue to be responsible for paying any council tax. We can help you understand what you will have to pay and any implications.
Q What about inheritance tax?
Equity release plans will reduce the value of your overall estate for inheritance tax if some, or all, of the money, is spent, enabling you to benefit from the equity in your property whilst you are alive. You should discuss any concerns you may have about your estate with your family or a specialist adviser. We can advise on this.
Q What happens if either my partner or I die?
Provided you entered into the equity release arrangement jointly the surviving partner should be entitled to remain in the property for the rest of his or her life.
Q What happens when the surviving partner dies?
If your arrangement were a lifetime mortgage, the property will be sold and the mortgage debt repaid to the lender. Usually, your executors will be given 6-12 months to sell the property. Any surplus will be paid to your estate and dealt with according to your will[s]. If the arrangement were a home reversion scheme then whatever proportion was sold to the provider at the outset will revert to that provider.
Q What if I need more money at a later time?
Most equity release advisers will recommend schemes that will allow further advances if the property value increases over subsequent years. With home reversion schemes this will depend on how much of the property has been sold at the outset.
Q What about my family – should I consult them before deciding?
It is highly recommended that you involve the family when you are considering equity release quote. It is important to ensure that any product chosen meets your needs if you want your family to inherit. We shall be happy to help.
Q Will I have to change my will?
Releasing equity from your home will have a financial impact on your estate, so it would be prudent to take it into account in your will as the amount of any gift, legacy or donations you intended to make, could be affected.
Q Will my children or grandchildren be left with debts?
If house prices fall significantly, your children or grandchildren may not inherit anything, however, if the property is worth less than it was when the mortgage was taken out, they will not be liable for any shortfall.
Q What happens if my equity release provider folds?
If your equity release company folds after your plan is completed then it will inevitably be passed onto a new provider; your new provider will be legally bound by the terms and conditions of the original loan, so you won’t ever be forced to repay the loan.
Should you have any queries or require more information on Equity Release, please contact our specialist Equity Release Adviser Philip Dalley on 01392 258553. Appointments to get Devon financial advice can be made at either of our offices in Exeter or Exmouth during office hours. However, if it is more convenient, an appointment can be made either at your home address or business premises.
YOUR HOME IS AT RISK IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT. Written quotations are available on request. Loans are subject to status.
Thompson Jenner Financial Services Ltd is authorised and regulated by the Financial Conduct Authority.
