Professional, friendly and straightforward legal advice about equity release that releases the capital value locked up in your home to top up your income.
What is equity release?
Equity release products are becoming increasingly popular as more people are living longer and face an uncertain financial position in retirement due to falling pension annuities (pension income) and low savings returns. In response, a variety of financial institutions have launched a range of products that fall under the equity release banner. They're all aimed at allowing homeowners to release lump sums of equity/capital tied up in their homes to supplement their income. For some, these schemes appeal because they give an immediate cash boost while allowing you to remain in your home. Some also have the added benefit of reducing potential future inheritance tax liabilities. Equally, some may result in you having nothing to pass on to your loved ones.
How do equity release schemes work?
There are a variety of schemes available but most fall into one of the following two categories:
There are three main types:
- Lifetime roll-up mortgages where no monthly repayment is required and the interest is effectively 'rolled up' or added to the capital borrowing.
- Interest only mortgages where the capital amount outstanding remains the same, but you pay the interest each month.
- Home income plans in which you receive an annuity (i.e. a regular income for life based upon your age) but interest is deducted from the monthly annuity payments.
Home reversion plans
With these you sell part or all of your property to the plan provider in exchange for either a lump sum or a regular income while continuing to live in your property for the rest of your life. Usually, the amount of money you receive through these plans will be considerably less than the market value, no matter what percentage you sell. This is because the plan provider will have to wait some years before getting any money back.
Get your own expert advice
Initially, we recommend you seek financial advice from an experienced Independent Financial Adviser (IFA) when contemplating any of these equity release plans. Most schemes have a variety of restrictive clauses and conditions and it's really important you or your loved one understands them before entering into them legally. If you do wish to proceed, make sure you get your own expert legal advice to ensure your options are fully considered and the scheme chosen is in your best interests, and don't just rely on solicitors suggested by the equity release scheme providers as part of a package.
Playing it safe
You can minimise any risk by dealing only with providers that are members of SHIP (Safe Home Income Plans). This is a trade body set up by providers of equity release plans which has its own stringent code of conduct which is actually much tighter than the Financial Services Authority (FSA) regulations. Some of the benefits of choosing a SHIP member include the right to switch to a suitable alternative plan should your circumstances change without any penalty, a guarantee that you can't lose your home and a guarantee that you won't end up owing more than your home is worth. SHIP members usually also insist that you appoint your own solicitor to advise you independently on the loan conditions before they'll agree to release any money.
How can we help?
If you or a loved one is considering equity release, it's really important that you receive expert legal and financial advice. We have helped many clients with handling the legal aspects of equity release and will make sure you understand all the terms and conditions. Well also spell out all the implications and other considerations for you. It's important to remember for example that if you're presently receiving means-tested state benefits, equity release may reduce or lead to you losing your entitlement to those benefits. Equally, we would always recommend that you involve your family in your decision, as any money you receive will inevitably reduce the inheritance you leave in the event of your death.
We can help you understand what goes on at every stage of the process in equity release. For free, no obligation help and advice, give us a call on 0370 086 2200 or contact us online.