Equity Release

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What is Equity Release?

Equity release allows you to generate funds against your home without the need to give up ownership right away. This type of funding options is particular suited to individuals over the age of 55.

Equity release payments typically come in the form of regular payments over the period of several years, or a single lump sum payment. The amount of the total payment and the value of the equity depend on several factors. These include the condition, size, and market value of your property.

Your property must meet specific criteria to be eligible for equity release. It must be:

  • Your main residence
  • In a reasonably good state
  • Based in the UK
  • Valued above a certain amount
  • Owned by you

You may need to meet other requirements to be eligible for equity release. The experienced equity release solicitors at the London-based Adam Bernard’s can help you determine whether or not you are eligible for this funding route.

You will also need independent legal advice (ILA) when applying for equity release. Our independent legal advice solicitors can help you meet this requirement and expedite the process.

You will typically have the option of choosing from two types of equity release plans when seeking this form of funding. These include home reversion equity and lifetime mortgage equity. Here is a look at these.

Lifetime Mortgage Equity Release

This type of equity release involves securing a loan against your home. You continue to reside at your home and retain full ownership until you die or decide to move into a long-term care facility.

You will incur fixed interest payments against the loan you secure with your home as the equity release security. You can decide to either pay the interest on an ongoing basis, or allow the interest to add up. Once your home is put up for sale upon your death or after you move to a care facility, the interest and the mortgage are redeemed from the proceeds of the sale.

Lifetime mortgage is the most common type of equity release. The Equity Release Council regulates all contracts that fall under this category.

If you are not sure whether this option is right for you, you may consult our equity release solicitors. If required by your lender, our independent legal advice solicitors can also provide you with ILA to complete the formalities of the equity release agreement.

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Home Reversion Equity Release

The key feature of the home reversion equity release is that you raise funds in this case by selling all or a part of your property. You can seek this type of equity release as a sole owner or along with your partner as the joint owner of the property.

You will be allowed to continue residing in your home until you decide to move to a residential care facility, or you pass away. If the equity is raised along with your partner as the joint owner of the property, the property can be released to the lender only after the last surviving owner has passed away or moved to a care facility.

You must be at least 65 or above to utilize the home reversion equity release. If you are applying for this category jointly with a partner, both partners must meet the age threshold requirements to apply.

Our equity release solicitors can advise you on which type of funding option is best suited for you and your partner. After you have decided upon the type of equity release that is right for you, our independent legal advice solicitors can apprise you of all the risks, benefits, and implications of your decision.

Benefits of Equity Release

Equity release offers several benefits for people aged 55 and above. In the case of the home reversion equity release, these benefits apply to individuals aged 65 and above.

Some of the key benefits of equity release include:

  • Untaxed money. This is the most immediate and obvious benefit of equity release. You are able to raise funds on your property without the need to move out of it. The payment can be in the form of a single lump-sum payment that you may use for investment or other purposes. It can also be as multiple small, ongoing payments to supplement your monthly income.
  • Retained ownership. Normally you would need to move out of your home to sell it and raise money from your property. A key benefit of equity release, in the case of life mortgage, is that you continue to live at your property and own it. The ownership is transferred only after you die or move to a care facility.
  • Transferable equity. Depending on the circumstances of your equity release, you may be able to transfer it to another property. For instance, if you decide that your current dwelling isn’t suitable for you, and that you need a new home, you can move to your new property and have the equity release transferred to it. Such flexibility means that you are not tied to the property.
  • Benefit from increase in property value. As you continue to be the owner of the property you live in, you can continue to benefit from any increase in its market value. This is in contrast to a straightforward sale where you are no longer the owner and have no right to benefit from the increase in the property’s value.

These benefits make equity release a viable option for people aged 55 and above. However, if you have any dependents living with you, they may need to take independent legal advice before the equity release can be confirmed.

Our independent legal advice solicitors can help your dependents fully understand the implications of equity release. You can also consult our equity release solicitors for other issues related to the process.

Downsides of Equity Release

Although equity release offers many benefits, it also has several downsides. These include the following:

  • Your property is no longer a part of your estate. This means that the size of the estate that will be inherited by your family members or legal heirs is reduced.
  • Your dependents will not have a place to live once you pass away or move to a care facility. This is why equity release may not be the best option if you have dependents living with you. If you still want to continue, your dependents will need to receive ILA from reputable commercial property solicitors.
  • A part or whole of your home is owned by a reversion company if you take out a home reversion equity release. This means that you are no longer the legal owner, even though you continue to live at your home. Commercial conveyancing solicitors can help you understand whether or not you should choose this type of equity release.
  • The money you raise through equity release can impact your ability to access certain benefits for which your means are reviewed. Any increase in your means may reduce your entitlement to these benefits. You may also have to pay higher costs for home-based care you receive from your local council.

Due to these notable disadvantages, it is critically important that you consult commercial property solicitors when pursuing equity release. Our commercial conveyancing solicitors can review your circumstances to advise if this is the best path for you.

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