Equity Release Solicitors

Equity release is a loan against the value of your property or the sale of a share of your property. Money will be released to you while you continue living in your home.

Any loan will not be repaid until you leave your home for good or until you die. At that stage, all outstanding costs will need to be repaid to the equity release company. This will generally include the loan, interest over the whole term and administrative costs.

There are two types of equity release:

• Lifetime mortgages
• Home reversion plans

A lifetime mortgage is a loan of up to 60% of the value of the property. You will normally need to be aged at least 55 to apply.

Equity release mortgages may be flexible and allow you to withdraw the money as you need it, rather than in one large lump sum. This will give you the option to keep the loan as small as possible to minimise the interest that will ultimately be payable.

You may be able to pay off the interest each month or the interest can be ‘rolled up’ and added to the total amount to be paid when the lifetime mortgage is paid off. Some policies may allow you to pay off the capital during the lifetime of the mortgage, which can be useful, for example if you receive an inheritance, although you are likely to have to pay early repayment penalties.

Most equity release plans are lifetime mortgages.

A small proportion of equity release products are home reversion plans. You sell a share of your home to the equity release company, generally between 20% and 60%. You will still usually be able to live there for as long as you need, unless the property falls into disrepair.

The lender may require you to be older to take out a home reversion plan, often either 60 or 65. Your estate could lose money if you die within five years of taking one out.

It will be a requirement of the plan that you maintain your home in good order and ensure that nothing happens that affects its value. The lender can inspect the property to check that you are looking after it and could take action if it is not well-maintained.

The equity release market is regulated by the Financial Conduct Authority which has strict codes of conduct that providers must follow.

It is important to take independent financial advice to find out whether equity release is right for your situation. Your solicitor will be able to advise you of the legal risks involved.

You will always need to see a solicitor before entering into an equity release plan because of the implications of signing. Your solicitor will be able to explain the liabilities and responsibilities to you to ensure you fully understand what you will be taking on.

Your solicitor will also need to investigate the title to your property and carry out searches to ensure the property is a sound investment for the equity release company.

Many equity release schemes allow you to sell your house and buy a new one, moving the equity release charge to the new property. The equity release company will need to approve your new home. If it is substantially cheaper than the home they lent against, you may be required to repay some of the lump sum. This could involve the payment of early redemption penalties.

You should note that some properties are not considered acceptable by equity release companies because they cannot be sold on the open market and this includes retirement properties.

After your death, your property will be sold and the equity release plan paid off. This will include the lump sum, interest and any other additional costs. There will also be estate agent’s and legal fees in respect of the sale. Any remaining money will pass to your beneficiaries under the terms of your Will.

If your beneficiaries wish to keep the property and your equity release plan is a lifetime mortgage, they can usually pay off the equity release company either with cash or by taking out a mortgage themselves.

If you have taken out a home reversion scheme, then the lender will require the property to be sold. With this type of equity release, the lender will generally want the property on the market within four weeks of death, meaning it will also need to be cleared very quickly.