Equity Release Frequently Asked Questions – moneyfacts.co.uk
 

Equity Release FAQ

To help you learn more about equity release, take a look at some frequently asked questions:

If you want to find an explanation for a confusing term, take a look at our jargon buster.

Am I eligible for equity release?

Are there alternatives to an equity release plan?

Will equity release affect my state benefit entitlement?

Does the cash I release from my home get taxed?

Can I move home if I want to?

Would my partner have to move when I die?

What happens if I have to go into care?

Can I leave an inheritance?

What about if I don’t need all of the money right now?

Can I do what I want with the money?

How much can I release?

Can I end up owing more than the value of my home?

Are there any fees to pay?

Does equity release mean that I’m renting my home?

What are the risks of an equity release plan?

What happens if I die soon after taking out equity release?

Why should I trust Moneyfacts and Just Retirement Solutions Limited?


Am I eligible for equity release?

To be eligible for equity release:

  • You must be aged 55 and over (age of youngest applicant if a couple)^
  • Own your own home of standard construction in the UK
  • Your property is worth at least £70,000^

^Minimum age, property value and eligibility varies between product providers.

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Are there alternatives to an equity release plan?

Yes, there are alternatives. For example you could:

You should consider all of your options carefully and seek specialist advice to ensure that you choose the best option for you.

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Will equity release affect my state benefit entitlement?

Maybe. Some state benefits are means-tested, so releasing a lump sum of cash from your home may affect what you are entitled to. The Moneyfacts Equity Release Advice Service, provided by Just Retirement Solutions Limited, contains a comprehensive state benefit check – so you can be sure you’re claiming everything you’re entitled to and find out whether releasing equity is right for you.

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Does the cash I release from my home get taxed?

The cash lump sum released from your home is tax-free. However, if you decide to place this money in a savings account, purchase an annuity, or make an investment, tax may then be payable on any interest, income or gains you receive.

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Can I move home if I want to?

Any product recommended to you by the Moneyfacts Equity Release Advice Service, provided by Just Retirement Solutions Limited, will allow you to move home if you want to, without charging a penalty – subject to the new property meeting the lender’s acceptable property criteria.

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Would my partner have to move when I die?

Normally, where the borrower has a spouse or partner, the product is taken out in joint names from the outset to make sure that both individuals have the right to remain in the property until they die or move out.

If the product is taken out in your name only, then unless the mortgage can be repaid in full, the property will have to be sold and your partner find somewhere else to live.

If you marry after you’ve taken out equity release, or if someone comes to live with you as your partner, you need to tell your provider. It may not be possible to add your new spouse or partner to your existing equity release product. In this case they may not have the right to continue living in your property if you die or move into permanent long-term care.

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What happens if I have to go into care?

It depends on the plan you choose and if it is in joint names or just one name. If the plan is in your sole name and you have to move into permanent residential long-term care, your home may have to be sold and the amount you released, plus the interest accrued must be repaid. If it is in joint names and only one of you moves into permanent long-term care then the other home owner has the right to remain living in your home.

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Can I leave an inheritance?

Yes you can leave an inheritance and release equity from your home. There are two types of equity release plan, and you have the option of leaving an inheritance on both:

  • Lifetime Mortgages are secured against your home and may offer the option of an Inheritance Protection Guarantee which allows you to preserve a portion of your home’s value as an inheritance.
  • Home Reversion Plans work by you selling part, or all of your home. So by selling part of your home, the remainder can be used to provide an inheritance for your loved ones.

It’s important that you involve anybody who you’d like to leave an inheritance to when arranging an equity release plan.

The Moneyfacts Equity Release Advice Service, provided by Just Retirement Solutions Limited, actively encourages you to have close family or friends present at consultations to make sure everybody with a vested interest is aware of how equity release will affect any inheritance you wish to leave. Although you can still leave a legacy to your loved ones, equity release will reduce the value of your estate.

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What about if I don’t need all of the money right now?

Some lifetime mortgage providers offer what is known as a ‘drawdown’ option. This means that you only release the money you need from your home, when you need it. The advantage of this is that interest is only charged on the amount you release. Remember, a lifetime mortgage is secured against your home.

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Can I do what I want with the money?

Yes, you can spend the money on almost anything you want – a holiday of a lifetime, giving gifts to family, purchasing an annuity, it’s up to you.

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How much can I release?

The amount you are able to release will depend on:

  • Your age
  • Your home's value

Some medical conditions could mean that you qualify for an enhanced lifetime mortgage, which could mean you can release more money from your home. There are also other things that will affect the amount you can release, such as whether you want a joint plan with a spouse or partner, or whether you want to leave an inheritance.

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Can I end up owing more than the value of my home?

Most lifetime mortgages carry a ‘no negative equity guarantee’ and, although the loan is secured against your home, it means that you’ll never owe more than your home is worth. With a lifetime mortgage, although there are usually no regular payments to make and nothing to pay back until the end of the plan, the amount you owe will continue to grow. Interest is applied on the amount borrowed and on the interest already accrued over the long-term.

The Moneyfacts Equity Release Advice Service, provided by equity release specialists Just Retirement Solutions Limited, only recommends products that will never let you or your estate owe more than the value of your house.

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Are there any fees to pay?

Yes. There will generally be advice and arrangement fees, legal fees and valuation fees. While some of these may be able to be added to the amount you release, others may have to be paid upfront.

Remember that by adding fees to the amount of equity you release, the greater the proportion of your home that will be owed to the plan provider (or the less money you will be able to release).

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Does equity release mean that I’m renting my home?

No. with both types of equity release, you remain responsible for insuring the property and maintaining it, even if you take out a home reversion plan and sell 100% of your property.

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What are the risks of an equity release plan?

There are different risks depending on the plan that you take. See our Home Reversion and Lifetime Mortgage pages for more information.

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What happens if I die soon after taking out an equity release?

This will depend on the type of plan that you take out:

  • Home Reversion Plan- Your home will be sold, with the percentage that you agreed to sell to the provider being repaid. These plans work by the provider buying its stake at under market value, so if you die in the early years it could end up that you sold part, or your whole home, cheaply.
  • Lifetime mortgage - Your home will be sold, with the amount you borrowed plus any interest being repaid to the lifetime mortgage provider. If you die soon after you take out your plan you won’t have accrued much interest, so the amount repaid will be close to the amount you originally released. Although a lifetime mortgage is secured against your home, the Moneyfacts Equity Release Advice Service, provided by equity release specialists Just Retirement Solutions Limited, will only recommend products that will never let you or your estate owe more than the value of your house.

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Why should I trust Moneyfacts & Just Retirement Solutions?

The Moneyfacts Equity Release Advice Service is provided by retirement expert Just Retirement Solutions Limited.

Just Retirement Solutions has helped retirees release an average of £41,988* from their homes. With equity release you can stay in the home you love, and whilst the value of your estate will go down, it is possible to leave behind a legacy for your loved ones.

Their expert team can answer your questions, guide you through the process and they’ll only recommend equity release if it is right for your circumstances. Their advice is always quality checked and they only recommend plans where neither you nor your loved ones will ever owe more than the value of your home.

As equity release can affect your entitlement to benefits, everyone receives a full state benefits review. In 2015 over half of the people that Just Retirement Solutions spoke to were eligible to claim benefits, with new claims worth up to £6,890 a year**.

Taking out an equity release plan is an important decision, so you’re welcome to invite friends and family to take part in your appointment. And remember, you’re absolutely under no obligation to buy and you’ll only be charged an advice and arrangement fee of £749 if you purchase a product that Just Retirement Solutions recommends.

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What's next?

To book your no-obligation appointment where you can find out more about equity release and how much you could release from your home, call Just Retirement Solutions on 01737 233 462. Lines are open 9am to 5pm, Monday to Friday (except bank holidays). Calls may be monitored or recorded, and call charges may apply.

* Average initial release value taken by unique Moneyfacts customer, between 2007 – July 2016.

** Based on a sample of 196 Just Retirement Solutions customers between 1/1/2015 and 31/12/2015.

 
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