Will I still own my own home?
Yes, if you take out a lifetime mortgage, you will still own your own home – even if the loan is a large percentage of the value, you'll still own it, the difference being that you may not be able to pass on much of it once interest has accrued.
Can you sell your house and still live in it?
If you were to opt for a home reversion scheme, then yes, it could be entirely possible to sell your property and continue to live in it under a lease arrangement.
Can equity release be transferred?
If you want to move home and transfer your equity release debt to the new property, most providers should be able to accommodate. Indeed, equity release plans that comply with the Equity Release Council's standards allow you to move to a "suitable alternative property", but bear in mind that some properties won't be eligible – such as those in retirement complexes – and if you're moving to a smaller property, you may have to repay part of what you borrowed/released.
Can equity release be repaid before death?
Yes, but generally only if the property is sold and you move into long-term residential care. In this case, the property will be sold and the loan repaid, plus any accrued interest. Some providers will take the same view if you move in with relatives for the same reason, but in other cases, the 'lifetime' nature of the mortgage means you'll pay hefty early repayment charges if you want to pay it off (exact rules will depend on your particular lender, so make sure to discuss these questions with them thoroughly before releasing equity).
Is equity release taxable?
The cash lump sum released from your home is tax-free. However, if you decide to place this money in a savings account, secure a regular income through an annuity or make an investment, tax may then be payable on any interest, income or gains you receive.
Will equity release affect inheritance?
Yes, in that it will reduce it. Depending on how much you release, and the type of plan you hold, your children or beneficiaries may not receive any financial legacy from the value of your property, so it's important to discuss this with anyone who stands to benefit from your inheritance.
What about inheritance tax?
Because you'll be passing on less of your asset to your beneficiaries, they'll be required to pay less inheritance tax. Even if you use the money you release to give to loved ones, it won't be counted in your inheritance tax bill, as long as you live for seven years after you gifted the money.
Will equity release impact my spouse or partner?
If you take equity release in your sole name (either because you meet someone after taking it out, or because your partner is younger), sometimes it may mean that your spouse or partner has to move out of the home when the plan ends. Check the situation regarding this before entering into any agreement.
Does equity release affect tax credits, benefits or pension entitlement?
If you're currently eligible for certain tax credits or benefits, bear in mind that taking out equity release may affect that eligibility. This is because many of those benefits are means-tested, and if you suddenly have a large amount of savings (through the lump sum arrangement) or extra income (through drawdown) your entitlements could change accordingly. However, your state pension typically won't be affected, as this is an entitlement for everyone over state pension age, depending on your National Insurance record.
How does equity release interest work?
Whichever option you go for, you typically won't make any regular repayments during the life of the loan. Rather, interest is charged which increases the amount you owe, much in the same way as with a traditional mortgage but without the repayments (some lifetime mortgages now require monthly repayments to be made during the term of the loan, but these are less common).
Interest is 'rolled up' or accrued during your lifetime and is typically repaid at the end of the loan, unless you make other arrangements with your lender. The mortgage is repaid when you die, or when you sell the home to move into permanent residential care; the sale proceeds will be used to repay the lender, plus any interest due.