Equity Release Frequently Asked Questions – moneyfacts.co.uk

Equity release is a big decision. So be sure you get all of your questions answered before entering into a plan, either by using our FAQ page, or by speaking to a financial adviser.

If you’re looking for an explanation for a confusing term, check our equity release jargon buster.

You may be eligible for an equity release plan if you:

  • Are aged 55 or over
  • Own your own home

Equity release is only available on your main residence, which must be in the UK.

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Yes, there are alternatives. You could move to smaller home, or even move to a cheaper area to release the money you need. You might be able to take out a loan or mortgage to raise the cash as well.

There are other alternatives too, such as staying in work a little longer, as well as making sure that you shop around for the best pension annuity and making sure you are receiving all the state benefits you are entitled to.

Weigh up your options carefully, and seek financial advice if you are unsure which route will be best for you.

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Maybe. Some state benefits are means-tested, so releasing a lump sum from your home may affect what you’re entitled to. Our equity release advice service (provided by Just Retirement Solutions Limited) contains a comprehensive state benefit check, so you can make an informed decision based on your own personal circumstances.

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

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All providers that are members of the Equity Release Council, have to allow you to move if you want to, without charging a penalty - subject to the new property meeting the lender’s acceptable property criteria.

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It depends on whether the equity release plan is taken out in joint names. If it is a joint plan, then your home will only be sold when you have both died. But if you take out the plan in just your name, then your home would have to be sold and your partner move (unless they could raise the funds to repay what you owe).

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It depends on the plan you choose and if the plan is in joint names or just one name. If the plan is in your sole name and you have to go into permanent residential care, your home may have to be sold and the amount you released repaid.

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Yes you can still 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 may offer 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.

Our 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.

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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 isn’t charged until the money is released.

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Yes, you can do what you want with the money: a holiday of a lifetime, purchasing an annuity, it’s up to you.

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The amount you are able to release will depend on:

  • Your age
  • Your home’s value

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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Most lifetime mortgage plans carry a “no negative equity guarantee”, which means that you’ll never owe more than your home is worth.

The other type of equity release plan, Home Reversion, is based on you selling a percentage of your property to the equity release provider. So instead of you being charged interest, the provider is banking on the value of your property increasing in value so that their stake is worth more. However, as a percentage of your property’s total value, it never increases.

Our equity release advice service only uses providers that are members of the Equity Release Council. Council members guarantee that you will never owe more than the value of your home.

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Yes. There will generally be arrangement fees, legal fees, valuation fees as well as any financial advice fees to pay. 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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Even if your equity release provider owns all of your home, you are not renting in the traditional sense. You are still responsible for insuring the property, as well as for any maintenance that needs to be done. You also will not pay any rent.

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

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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. Reversion 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.

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What next?

Call Just Retirement Solutions on 01737 233462. Lines are open 9am to 5pm, Monday to Friday (except Bank Holidays). Calls are charged at local rates and may be recorded or monitored.

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Equity Release Jargon Buster

If you decide to take out a plan, there will be a fee by Just Retirement Solutions Limited of £749 for advice and arranging a recommended equity release plan. You will only be charged if you decide to take out a plan. Their advice service carries no obligation.

Equity release may not right be for everyone. If may affect your entitlement to state benefits and will reduce the value of your estate.

Equity release may involve a lifetime mortgage or a home reversion plan. To understand the features and risks, ask for a personalised illustration.