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What is an Equity Release?
An equity release is a special type of loan designed to run for the rest of your life. The lump sum or regular income that you receive is secured against your home. The amount you owe to the lender is usually paid back from the sale of your home following your death or moving into long term care. If you own your home jointly, the loan would need to be repaid after the death or moving into long term care of the last owner.
There might be various reasons for wanting to release equity in your home for example, if you have an interest only mortgage with an institutional mortgage lender which is coming to the end of its term and you are unable to repay the capital owing; you wish to remain in your home for your lifetime and wish to “future proof” it and/or refurbish certain areas of your home; following inheritance tax advice; for investment; or quite simply that you wish to spend it as you cannot take it with you when you go!
Your equity release lender will require you to have independent legal advice from a solicitor to explain the terms and implications of the equity release contract you are entering into.
What is the process of an Equity Release?
Once you have discussed with your financial adviser the appropriate lifetime mortgage product for you, the equity release process involves the following steps:
- Instruct a reliable conveyancer – Get in touch today for more information about transfers of equity and how we can help you by contacting Sharon Lewis on 023 9266 0261 or via our website www.biscoes-law.co.uk
- ID Checks and compliance – This can be completed at one of our offices or when you attend your solicitor for the legal advice.
- Review the Mortgage Offer – We will check the mortgage offer for any special instructions/requirements of the lender in addition to the contents of the mortgage offer.
- Meet with you to provide the independent legal advice – This is usually at one of our local offices however home visits can be arranged in certain circumstances. Once you are happy with the advice you have been given you will sign all the documents required by your lender.
- Liaise with lender’s solicitors – This is where we send all the signed paperwork to the lender’s solicitors and ask for a completion date. The lender’s solicitors will review all the paperwork and proceed once they are satisfied.
- Completion – This will take place on the date set by the lender’s solicitors. They will send us the net mortgage advance to forward onto you.
- Register the Mortgage Deed at the Land Registry – The lender’s solicitors will normally apply to the Land Registry to register the mortgage and to send us updated title deeds to forward to you following registration.
Other aspects to consider
Adult occupiers – If there are adult occupiers (that do not own the property and will not be a party to the equity release mortgage) living at the property, the lender will require them to sign a Deed of Consent to postpone any interest they have in the property behind that of the lender and to confirm that they will immediately vacate the property if the lender repossesses it. This relates to current occupiers and any future adult occupiers of the property (even if they are live in carers).
Moving Home – If you decide that you wish to, or will wish to, move home in the future you will be able to do so on the basis that the equity release mortgage is either ported to your new property (if the lender is happy to do so) or paid off from the proceeds of sale. You must bear in mind that the equity remaining in the property may not be sufficient to be able to move to another home in the future.
Interest Payments – Unlike a standard mortgage, there is not normally any obligation to make interest payments during the lifetime of the mortgage. Compound interest is payable (paying interest on the interest that accrues). Your financial adviser will go through the options with you taking into account your circumstances and requirements.
No negative equity guarantee - The lifetime mortgage usually includes a “no negative equity guarantee” which means that should the property be sold for less than the amount owed, then neither you nor your estate will have to pay back more than the net proceeds of sale. There are, of course, exceptions to this which would be explained in our meeting.
Repair, Maintenance and Insurance – You are required to keep your home in a good state of repair and maintenance and insured for the full reinstatement value (which should be reviewed on an annual basis). Failing to do so could lead to the lender repossessing the property or carrying out the works themselves (and adding the costs to the loan).
Tax and state benefits – Taking out a lifetime mortgage may affect your tax and welfare benefits position, either now or in the future. Should you be concerned over the potential impacts you should seek further information from HM Revenue & Customs or a tax expert and/or the Benefits Agency.
How long does a transfer of equity take?
We estimate that the process will take between 4 and 6 weeks from receipt of the mortgage offer. Timescales will depend upon the additional requirements/conditions of the lender or if there are any title issues to resolve.
Biscoes is proud to be a member of the Equity Release Council which exists to promote high standards of conduct and practice in the provision of and advice on equity release which has consumer safeguards at its heart.
Get in touch today for more information about Equity Release and how we can help you by contacting us on 023 9266 0261 or via our website www.biscoes-law.co.uk