Why choose equity release?

Equity release is a way that homeowners can tap into their property wealth. However, a great deal of consideration needs to be taken first.

Decades of home ownership and rising house prices mean that lots of older people, in particular, have built up significant property wealth. But they can’t use it to pay the bills.

All of this explains the growing popularity of equity release.

What is equity release?

Equity release lets homeowners turn the value of their property into cash. It is a loan secured on your home (a mortgage, in other words), which lets you take the cash as a lump sum or in instalments. Known as a ‘lifetime mortgage’, you can make repayments, but most people simply let the interest roll up. You only repay the amount borrowed and any accrued interest when you die or move into long-term care.

Releasing capital

There are lots of reasons why people choose a lifetime mortgage, and one of these is to release some capital to help adult children use it as a deposit on their own home. Another might be to continue living in your home while tapping into some of that equity. But it can also be for building improvements, to pay off debts, and to fund school or university fees for grandchildren. Or, it can simply be used to supplement pension income and ensure a decent standard of living.

Get in touch with our conveyancing solicitors in Bristol

To speak to our specialist equity release solicitors in Bristol, contact us on 0117 322 6608 or complete our online enquiry form.

How much can I borrow using equity release?

Individual lenders have their own criteria, but you can normally borrow up to 60% of the value of your property. How much depends on your age and the value of your property.

The minimum age for a lifetime mortgage is usually 55, but the younger you are, the more it is likely to cost you in the long run. If you don’t make any interest payments during the term of the mortgage, the lender will usually apply a higher interest rate.

Do I need to repay a lifetime mortgage?

With a lifetime mortgage, you have the right to live in your home for the rest of your life, or until you need to move into long-term care. If you are a couple, no repayment is required until the surviving partner living in the home either dies or goes into permanent long-term care.

You may be able to transfer the mortgage to a new property if you decide to move. And there’s no risk of negative equity. At the end of the contract, when the property is sold, even if there is not enough left to repay the lender in full, your estate will not be asked for more money.

Are there alternatives to equity release?

While equity release may seem like the answer to several financial puzzles, it should not be undertaken without a great deal of thought and consideration. Equity release is an expensive choice, with high penalties for early redemption. It will reduce the value of your estate and could even leave nothing for your family to inherit.

Before deciding on a lifetime mortgage, our conveyancing solicitors recommend considering alternatives. Perhaps your grown-up children would be happy to help you out financially now, in the knowledge that they will inherit a debt-free property on your death? Can you draw on other savings or investments? Downsize to a smaller house? Or even find new sources of income; perhaps let out a room in your big house?

How do I apply for equity release?

Equity release is a highly regulated financial product, provided by a handful of specialist companies. In addition to arrangement fees, you should also budget for expert financial and legal advice. Unlike general mortgages, it is compulsory for potential equity release borrowers to take advice. All advisers recommending equity release schemes must have a specialist qualification.

From the legal point of view, the equity release process is actually fairly simple, but the focus should always be on making sure that you and your next of kin clearly understand exactly what you are doing and its implications.

It’s a big commitment and hard to undo if you change your mind.

How we can help

For advice on equity release, including legal timescales and costs, contact our specialist remortgaging solicitors in Bristol and South Gloucestershire on 0117 325 2929 or complete our online contact form.