Equity release – the questions we’re frequently asked

Figures from the Equity Release Council show that those aged over 55 are relying more than ever before on the wealth tied up in their houses. Whilst downsizing to a smaller property might be the answer for some, moving home can be a stressful and costly process, and there’s a widespread shortage of available properties designed with the needs of retirees in mind.

Releasing equity from your property is a major decision, and we have the experience and knowledge necessary to give you the in-depth advice you need. Here are some of the questions we’re frequently asked by people considering this type of mortgage transaction.

When can I take out an equity release loan?

Most plans are generally only available to those aged over 55.

How will equity release affect my estate?

When you raise money through equity release, the loan is granted against the security of your property. The scheme provider is generally repaid when you die or move into long-term care, and this usually involves selling your home to repay the loan and the accrued interest. This means your family won’t inherit the property, although if there is money left over from the sale, this can be passed on to your beneficiaries.

Will my family end up inheriting a debt?

Most equity release plans now come with a guarantee against negative equity. In other words, the lender guarantees that your beneficiaries will not have to repay more than the value of your home, even if the debt grows beyond this amount.

Will my name still appear on the property deeds?

With equity release, you will still be the legal owner of your home, and your name will still appear on the deeds, but the lender will place a charge on the property title.

What happens if I want to downsize?

Using equity release doesn’t mean that you can’t move if you want to. Most plans give you the right to move to a suitable alternative property, provided that you and the property both still meet the lender’s requirements. This means that downsizing, rightsizing and even upsizing are possible.

What happens if my partner or I need long-term care?

Your plan will generally be unaffected if one of you moves into long-term care. If you both move into care, then in most cases the plan will come to an end, and the lender will exercise their right to sell the property to repay the loan.

Will my entitlement to state benefits be affected?

Taking an equity release loan could reduce any means-tested benefits you receive. We recommend you take specialist advice, to calculate the likely affect before you agree to take out a loan.

Will equity release reduce my inheritance tax bill (IHT)?

With equity release, the amount you borrow is secured against your property using a mortgage. As releasing equity is likely to reduce the size of your estate, we’ll also recommend that you discuss your intentions with your family and anyone who might benefit from your estate. We recommend you seek specialist advice on how equity release might impact your inheritance tax liability and affect your entitlement to certain state benefits. We’ll also explain what would happen if you needed to go into residential care.

Will I need a new Will?

Not necessarily. However, if you have left sums of money in your will that are based on the value of your property, then it may be advisable to review the terms of your Will. Everyone’s circumstances are different, and our specialist Wills department will be able to advise you accordingly.

If you’d like to know more about our equity release service, then please do get in contact. You’ll find us experienced, knowledgeable and approachable.

Debbie Barnett, an Associate in our Residential Property team, can be contacted on 0203 871 0079 or by email.