What is a Home Equity Release Loan?
Equity release is a way of releasing the monetary value tied up in your property without the need to move. You can continue to live in your home for as long necessary. With equity release, you can either borrow against the value of your home or sell all or part of it for a regular income, a one-off sum, or the facility to get at equity as and when you like or a flexible combination.
Can I release equity if I have not yet paid my mortgage?
If you still have an outstanding mortgage on your property you will need to pay it off in full, however you can do this by either using some of the money from the equity you release or from other funds you may have. Once your mortgage is paid the rest of the money you release can be spent in any way you like.
What types of equity release are there?
How do I go about setting up an equity release plan?
Is equity release right for me?
What impact will it have on my family?
FAQS about Home Equity Loans
Taking out an equity release plan could leave your family with little or nothing to inherit from your property when you die. You and your family need to feel comfortable with this possible outcome. You may be considering releasing equity from your home to help younger family members get on to the property ladder or pay for school fees etc. In which case the implications of releasing the equity now and not having it to release later need to be considered. It may be worth including your family in any discussions you have with your financial adviser or your solicitor.
If you are married, in a civil partnership or living with someone as a partner and you are both eligible by age, you can take out a joint equity release plan. Your spouse or partner will then have the right to live in the property for as long as they wish, should you pass away or move into long-term care. If you have a friend or tenant living in your home the provider will want to make sure that they have no rights to continue to live there when you move out or pass away.
If you repay a Lifetime Mortgage early you may be liable for extra charges called Early Redemption Charges. These can be quite expensive. Most equity release plans are intended as long term options. You ensure you inform your adviser at the time of taking out the plan if you think you might want to repay your loan early. There are products available with specific periods of early repayment penalties, some products which have no such penalties and some products which have early redemption penalties that stretch for a pre-determined time such as 5 to 10 years. If you have a Home Reversion Plan and want to pay off the loan early you may have to sell the property to pay off the outstanding due amount. You may find that you have too little money to purchase another property. However Equity Release Council Home Reversion Plans are portable to new acceptable properties and you may find that this is the best option for you.
If your plan is in joint names, then your partner will be able to continue to live in the property under the same terms. If it is in your name only, then unless the mortgage can be paid in full the property will have to be sold and your partner will have to find somewhere else to live. It is normally a requirement that the plans are written in joint names from the outset to ensure that both parties have security of tenure. In the case of re-marriage or co-habitation after a plan has been taken, you must inform your provider. It may not be possible to add your new partner to the plan, in which case they will not have security of tenure.