Equity Release Frequently Asked Questions (FAQs)

We are hear to answer all of your equity release FAQs.

Many of you will have heard of this concept, but perhaps you have discounted it as too risky or too costly.

We are here to explain exactly what equity release involves and to help you decide whether it is something that could benefit you and your family.

Essentially, releasing equity is a way of unlocking the value that is retained in your property by borrowing money from an equity release provider.

Depending on the scheme you choose, this may involve paying a fixed interest rate or variable interest rates.

Please call our 24-Hour Helpline: 0330 058 1579

When is the Loan Repayment Due & What Happens if I Move to a Care Home?

You are not obliged to pay back the loan while you are alive as the money is given to the lender when your property is sold after you die or when you move into a care home.

Sometimes, all of your money goes to the lender, and other times, it is split between the provider and the people you have left a portion of your house to in your will.

Equity Release FAQs

If you decide to release equity, there are two options available to you: lifetime mortgages and home reversion. We will explain these in detail below to help you understand the nuances of each one.

Who is Eligible for Equity Release?

To release equity, it is a requirement that you are 55 years old or above, given that equity release was intended to help older people with financial costs that they perhaps did not anticipate when they were younger.

You must also be a homeowner who is living in the UK, and your location will affect the amount of money you can receive, but you will need to speak to a financial adviser to learn more about this.

Finally, your property must be worth at least £70,000 to be considered a candidate. Sometimes, your credit score and income will be taken into account, but it is possible to avoid this by opting for schemes that do not warrant affordability and credit checks.

Please call our 24-Hour Helpline: 0330 058 1579

Benefits of Equity Release

The most important advantage of equity release is that it allows you to access money that would otherwise by locked into your property.

Unfortunately, many people struggle to keep up with the costs of living in retirement, and the irony is that they are living in a home that is of great value. This is particularly true in recent times, as house prices are soaring along with the cost of living.

With equity release, people over the age of 55 do not have to worry about being trapped in this situation.

They can take out a loan and only repay the amount that they want to, and they can trust that the loan will be settled when they pass away and their house is sold.

This is hugely reassuring for many people, and it means they are able to enjoy the rest of their life rather than being burdened with financial difficulty.

Another benefit of equity release is that borrowers can choose exactly what to spend their tax-free cash on.

If you have something specific in mind, such as home renovations or family holidays, you can receive a lump sum of cash and use this exactly as you please. For some people, they have been waiting their whole life to purchase something specific, and equity release helps them to finally do this.

Finally, if you are not intending on leaving inheritance to anyone and there is no one who would receive your inheritance if you died, this is a much better alternative to leaving the money to be inherited by the Crown.

This way, you can enjoy the money you worked hard for without feeling guilty about having nothing left to pass on.

Please call our 24-Hour Helpline: 0330 058 1579

Drawbacks of Equity Release

One downside of equity release is that it can be unpredictable. If you opt for a home reversion and the value of your property reduces, you will end up in more debt and you may not be able to cover the costs of the loan.

However, with other plans, there is a No Negative Equity Guarantee, so this won’t be a concern.

If you want to leave your money to your loved ones, it isn’t always the best idea to opt for equity release as there are risks involved that will impact the amount of money your family secures.

Yet, you could protect the inheritance by keeping some of your home separate for your loved ones through a home reversion.

Finally, the process of securing equity release itself involves various costs, from paying an equity release advisor to paying legal fees and valuation fees.

Not everyone is prepared to embark on this often costly and time-consuming journey, so make sure you are ready for a challenge if you want to eventually reap the benefits of releasing equity.

Please call our 24-Hour Helpline: 0330 058 1579

Option 1: Take Out a Lifetime Mortgage to Release Equity

This is the most popular type of equity release plan so it is the easiest and most accessible option for most people.

It involves lending money from a provider that is paid off through the sale of your home when you die or move into long-term care (e.g. a care facility).

The debt is rolled up over time, as well as the rate of interest.

With this scheme, you will remain the rightful owner of your property, but generally only if you agree to stay there for the rest of your life.

Option 2: Home Reversion

Home reversion is less common, but it is still beneficial for many people. You sell a fixed share of your property to an equity release provider, and in return you receive a one-off payment of tax-free cash. This amount is lower than the total value of your home.

The eligibility criteria is different for home reversions – they require borrowers to be at least 65 years old.

Please call our 24-Hour Helpline: 0330 058 1579

Which Equity Release Scheme is Best?

We cannot claim that there is a single equity release scheme that is superior to all the plans available. This is because it is dependent on what you want out of equity release, and what you can offer to the lender.

However, we can offer equity release advice through encouraging you to consider certain questions when you are looking at a scheme. You should bear in mind the following questions:

What interest rate would I be happy to pay? Would I rather receive a one-off payment or monthly payments? Is my credit rating good?

Would I be willing to start to pay back the interest? Is there a chance I will want to pay back some of the loan early? Do I have an existing mortgage or an outstanding mortgage?

Asking yourself these questions will help you to choose the scheme that is right for you. However, you should also consult a financial adviser, and you can do this by calling us or requesting that we call you.

Please call our 24-Hour Helpline: 0330 058 1579

Can You Tell Me the Amount of Equity I Could Release?

Again, we cannot state exactly how much money you could release from your property. However, for a general idea, have a look at our equity release calculator, which does not take your personal details. To get a more accurate idea, request a quote from us.

Will Equity Release Affect My State Benefits?

Releasing equity from your home can affect your benefits, so you need to ask a financial adviser for a personalised illustration before you take out a loan so that you can see whether your preferred plan will remove your eligibility for means-tested benefits.

Can I Get Equity Release With a Bad Credit Score?

It is definitely possible to take out a lifetime mortgage or ask for a home reversion if you have a bad credit score. Speak to us and we will find a plan that authorises this. However, you may not be entitled to choose certain plans as providers sometimes want to check your credit rating before proceeding.

Please call our 24-Hour Helpline: 0330 058 1579

Can I Pay off My Mortgage Early With Equity Release?

Yes, with some schemes, there is the option to pay off your mortgage early. Perhaps the easiest way to do this is through the Voluntary Repayment Plan, as this actively encourages you to pay back some of the loan when you can, so there is no early repayment charge.

However, again, this is dependent on the plan you select, so make sure you read the fine print before signing off on anything.

Can I Move House Under this Scheme?

The answer to this commonly asked question is usually no, as the provider usually wants you to be living in the property permanently after taking out an equity release loan. However, some plans will allow this.

Please call our 24-Hour Helpline: 0330 058 1579

Equity Release Advice Regarding What to Spend Your Equity Release Loan On

This decision is a personal one. Some people need the money from equity release immediately for something like a home renovation or to pay off debt, whereas others prefer consistent monthly payments if they are trying to pay their bills, care for a family member, or spend money on things they enjoy as and when they prefer.

Can I Still Leave an Inheritance to My Family?

Yes, though equity release is likely to decrease the amount of money that will be passed on to your family, you can sometimes protect the funds to ensure some of your earnings go to your family.

The best way to do this is through a home reversion, though certain life mortgage plans will also allow you to do this.

What is the Catch With Equity Release?

It goes without saying that this decision can be risky as you are taking out a loan, and by definition, this involves risks. If the interest rate is not fixed, you are also trusting that it will not rise too much, which it could.

As for the debt that will be rolled up, the unpredictable property market can be detrimental as your house may decrease in value unexpectedly.

Please call our 24-Hour Helpline: 0330 058 1579

What are the Alternatives to Taking Out Equity Release?

The main alternative to responsible equity release is downsizing. For some people, this works very well as they do not have to deal with the stress that often comes with taking out a loan and paying for the additional costs.

It also means they have more money to pass on to their family if this is something they want to do.

Having said that, moving to a smaller house is not for everyone. It’s difficult to find an accessible house in a good location for a good price, and for this reason, many people would prefer to opt for the release of equity.

What’s more, some people are not fit to move house in their old age, and even people on the younger end of the scale may not want to deal with the stress of moving.

Please call our 24-Hour Helpline: 0330 058 1579

We Can Help You Decide On The Right Plan & Answer Your Equity Release FAQs

You should seek out an equity release adviser or firm that is a member of the equity release council (ERC) and is regulated by the financial conduct (FCA) to ensure the process is as smooth and safe as possible.

All firms have an obligation to offer you advice, so do not worry about not being able to find someone to help you.

While you are already here, why not give us a call to see how you could unlock the value of your property? We work in many areas of the UK, from Cornwall to Fife, helping people from all backgrounds.