Tag Archives: Equity Release Mortgage

If I Release Equity, who is responsible for the maintenance of the house?

Equity release schemes can offer an important option to people who are looking to increase their cash flow and at the same time retain their home. If you are considering a home equity release, it is important to understand exactly what it entails and seek professional advice regarding the different policies available.

General information about equity release plans is widely available on the internet. There are many equity release FAQs available online, and this can give you a basic idea of what equity release means, as well as the associated benefits and risks. However, it is necessary to take advice from an independent financial expert about the specifics.

An independent financial adviser who has specialist knowledge about equity release plans and home equity release will have up to date information about different products and providers, as well as about which product is suitable for your particular situation. Another important factor is that an independent advisor has no affiliations to equity release providers and can therefore give far more impartial advice.

An equity release mortgage is a loan taken against the value of the house. Both home reversion loans, as well as lifetime mortgage equity release loans, need to be repaid to the lender once the house is sold. However, the house can only be sold after the owner has died or moved out and into permanent care. In case of joint applicants, this is done after the second applicant has died or moved into care.

When it comes to ownership, there is one key difference between lifetime mortgages and home reversion equity release plans. Home reversion involves selling part of the house and lifetime mortgage involves taking a loan against the house. As such, in home reversion the ownership of the house is transferred to the lender, and in lifetime mortgage, full ownership remains with the borrower. In both cases, the applicant is fully responsible for the maintenance and upkeep of the house.

There are many equity release providers and increased competition in the market has resulted in more competition and better rates for customers. Also, improved and more flexible home equity release products are now available compared to mortgages available until a few years back. You can compare different equity release products on websites such as equity release supermarket.

When does the Equity Release Lender require their money back?

It is all very well to own a real estate property, but when it comes to day to day life, what is required is cold, hard cash flow! One way of turning a home into cash is to sell the property and move into another place. Another option is to get an equity release mortgage on the property. Equity release schemes allow you to free up some of the value built up on the property without the need to sell or move out.

One of the main attractions of equity release is the fact that it allows you to continue living in the same house, while giving you the flexibility to use up a portion of the equity built up on the property as cash. This is essentially a loan, which is repaid to the equity release provider once the house is sold. So when is the house sold? Equity release schemes work in such a way that the property cannot be sold until the owner has either died or moved into permanent care. Once this happens, the house is sold and the money recovered.

A common concern is that an equity release mortgage can run up huge debts that can even turn into negative equity on the house. This means that once the house is sold, if the sale price of the house is lower than the amount owed, this needs to be paid as well. While this may have been a potential risk with some equity release schemes in the past, most modern equity release plans come with a no negative equity guarantee.

An equity release mortgage is designed to last over a long period of time, however, this is not to say that the loan cannot be repaid earlier if chosen. Many equity release schemes, however, have early repayment charges which apply if the loan is paid ahead of the contract term. These charges are meant to protect the lender from losses incurred due to early repayment.

Whether it is a lifetime mortgage or a home reversion plan, most equity release schemes have certain guarantees that ensure that the owner can continue to live in the property for as long as they live, and that the property cannot be sold until then. However, an equity release mortgage is a big thing and has serious implications. It’s important to seek expert unbiased advice to find out whether it is the right option for you.

Which solicitors can process my Equity Release Application?

The decision to take out an equity release mortgage is not a small one. It has major implications on your life, and as such, the decision should be taken with careful consideration, and with the help of expert advice. Fortunately, as the equity release market has matured over time, it has also become safer for consumers with independent regulatory bodies committed to maintain high safe practice standards.

Safe Home Income Plans is an independent trade body that aims to ensure transparency and consumer safety in the context of equity release plans. SHIP approved equity release providers adhere to certain rules that are designed to maintain transparent communication to consumers, as well as safety measures such as the no negative equity guarantee.

There are certain procedures that need to be followed while applying for an equity release mortgage on your house. Procedures include valuation and completing the application process as per required terms, which can be done by professional solicitors. There are solicitors that specialise in equity release schemes, and can therefore ensure that everything goes smoothly.

The role of a solicitor in the process of getting an equity release is not just to guide you through the paperwork, but more importantly, to guide you through the potential risks and rewards of equity release in your specific context. A solicitor who is an expert in equity release will have up to date knowledge about different options suitable for your particular circumstances. It is therefore vital to find an expert solicitor who knows the equity release market.

Some specialist solicitors firms have formed an independent charter known as the equity release solicitors’ alliance or ERSA. The objective behind this alliance is to uphold the importance of expert and specialist advice within the field of equity release mortgages and also to increase awareness of the public regarding this. If you require guidance about equity release in general or about specific equity release schemes and their suitability, it is necessary to take advice from an expert in the field.

While there may be a lot of information available on various platforms, such as the internet, when it comes to financial products such as an equity release mortgage, it is important to seek information from genuinely impartial sources. An independent financial adviser or solicitor can give fair and unbiased advice about a product, unlike any party affiliated with a particular provider or company.

Can I top-up my Equity Release Mortgage?

An equity release scheme works out to be the best option for many people who own a valuable property, and need additional cash but do not wish to sell the property. Equity release is fast becoming popular as a way to add to your income during retirement. Interest rates are very competitive today, and the market has some of the most flexible equity release schemes on offer. As such, this may be a good time to explore the option of an equity release loan on your property.

For those who already have an equity release scheme in place, it may still be a good idea to shop around for alternate equity release schemes for two possible reasons. One, it may be possible to get a more competitive mortgage and make significant savings by switching, and two, because you may have exhausted your existing loan and may need an additional loan.

Some lenders do offer top up loans on existing equity release plans. If you have had your existing equity release mortgage in place for more than five years, you may be eligible to apply for a top up. There are independent advisers who can give you advice on equity release top up loans, and alternate schemes.

Some equity release lenders charge early repayment penalties if you repay the loan earlier than a certain period of time. These penalties, if any, vary with each equity release scheme but may be quite high. However, more competitive terms of modern equity release schemes may mean that in spite of an ERC you could still stand to make savings by swapping your existing mortgage for a new one.

If you have had an equity release scheme and are considering shopping around for an alternate scheme, it may be advisable to seek the guidance of an independent financial expert. Independent advice is invaluable in matters such as financial loans, and many financial advisers also handle the entire process of dealing with your existing lender and setting up the new loan.

The internet has some good resources for equity release information and comparison. You can find companies that offer financial advice and information and there are equity release calculator tools available online which may help you get a rough idea of how much additional loan you are eligible to get. Online comparison sites are also useful for equity release comparison and to find the best equity release scheme available now.

What happens to my equity release if I want to move house?

As property prices have soared in the past two decades, home owners have seen an unprecedented rise in the value of their homes. As the cost of living increases, it is not at all surprising that the concept of releasing equity from your home to supplement your income during retirement has caught on furiously. Home equity release is essentially a loan that you can take against the value of your home, while continuing to stay in your property. This loan is recovered after the property is sold.

Home equity release plans are designed for older people, especially pensioners, who own a home but do not have sufficient cash flow to maintain a comfortable lifestyle or perhaps require additional money for a particular goal. The loan can be secured as a lump sum or more commonly in monthly installments. Home equity release is available in two main types of loans, home reversion plans, and lifetime mortgages.

There are no shortage of equity release schemes available on the market. There are many different companies offering different types of equity release loans, all promising to provide the optimum solution between keeping your property and increasing your income. As equity release becomes more and more popular, more flexible products are introduced to meet this growing demand.

One of the most common questions asked when it comes to home equity release is whether you can continue to live in the house for as long as you wish. The answer is yes, as most equity release loans are recovered only after the house can be sold. This can only be done after the owner has died or moved into long term care. However, it is absolutely necessary to understand all the terms and conditions of the equity release mortgage before going ahead with it.

While equity release mortgages work beautifully for thousands of pensioners who require an additional income, it also has its own drawbacks which could make it a wrong option for some. Once you have taken a home equity release loan, it is very difficult to back out due to the complicated terms of the contract. It is therefore vital to seek independent financial advice before signing an equity release loan contract.

You can get equity release explained by the financial expert who can guide you on which type of mortgage will suit you best. Independent advisers can give objective and fair advice on the pros and cons of different home equity release schemes for your particular circumstances. A lot of information is also available on financial resources on the internet, as well as on comparison sites which allow you to compare equity release plans.

How Much Does it Cost To Set Up an Equity Release Mortgage?

As with any type of mortgage application, there are fixed costs attributed with the setting up of the scheme. These are mandatory expenditures which are necessary in ensuring the equity release deals are legally watertight.

Firstly, before any legal work starts we need a professional assessment of the property to ensure it is adequate lending & to ascertain the properties true market value, assuming a reasonably quick sale. There is a cost to employing the services of a surveyor to prepare a valuation report on behalf of the equity release company. The fees borne on valuation depend on the properties market value & can range on a £250,000 property from a FREE valuation upto over £400. This valuation fee is paid on application, usually by cheque & payable to the lender concerned.

Secondly, the lender themselves will charge their own application fee & is usually deducted from the loan on completion. However, some lenders such as Just Retirement will actually allow you to add this to the loan. Please bear in mind, if this is the case you will pay compounded interest on this small charge too, for the rest of your life. To mitigate this, some applicants will deduct this from the equity release mortgage application. Again application fees can vary & range from no fee at all, upto £695 with LV=.

Thirdly, you will need the services of a solicitor to carry out the legal work & checks on your behalf. This must be a separate lawyer to that of the equity release provider as laid down by the SHIP rules. Some solicitors have formed ERSA (Equity Release Solicitors Alliance) & they themselves have set standards for equity release solicitors to meet. Practices such as Goldsmith Williams & Equilaw adopt these virtues.

Currently, companies such as Equity Release Supermarket have a fixed fee of £395+VAT & disbursements with a no completion, no fee, arrangement with both legal firms.

The solicitor is also responsible for checking title, obtaining signed documentation from the application & the liaising with the lenders solicitor to a satisfactory completion. The final job of the solicitor is to sign a SHIP certificate to confirm they have met the standards required & the client is fully aware of the contract they are entering into.

Finally, your independent equity release adviser will usually charge an advice fee upon completion. Some brokerages will try and charge you upfront for their service. Don’t. As with any service provided or goods bought, you should only pay upon successful completion.

Costs for equity release advisers can vary. The better brokers will assess the situation as they will receive commission from the lender they have placed your business with. Therefore, sometimes in lieu of commissions received this can be offset & sometimes even waived should commissions be sufficient in their own right. Nevertheless, fees can rise from £395 upto unfavourable rates of £1500 which should be avoided as the same service can be offered by companies such as Equity Release Supermarket who are more experienced & on a fixed cost basis of £695 for their recognised quality of client service.