A law firm for life

In 2018, figures released by the Equity Release Council showed that lending in the equity release market totalled an unprecedented £3.49bn with 46,000 new equity release customers. Our solicitor, Kirsty McDonald, considers whether equity release is the right option for you.

Most individuals and couples find that their savings are tied up in their biggest asset – their home.  Those over 55 years of age can raise finance with the assistance of equity release borrowing which provides funds to enable individuals to spend as required such as on holidays of a lifetime, to upgrade their homes or provide their beneficiaries with their inheritance whilst they are alive to watch them enjoy it.

The most predominant type of equity release mortgages utilised by individuals is the “lifetime mortgages” which generally run for the remainder of the individual’s life.

Those interested in raising finance with a lifetime mortgage should be aware of the following-

  • A “lifetime mortgage” has the effect that the lender will provide a lump sum payment and in return, you grant a Security in favour of the lender over your home. The title to your home would remain in your name.
  • Most lenders have a minimum value of property they will offer this product for and it is important that you have an idea of the value of your property before approaching some lenders.
  • The amount you owe is usually paid back from the proceeds of the sale of the property following your death. Any sums left over would then pass to your beneficiaries in terms of your Will.
  • If you were to move home at any time in the future, you would require the consent of the lender – they may allow you to transfer the equity release mortgage to the new property. Any sale of your current home would require the consent of your lender.
  • If you require to go into long-term care, the sums due to the lender would need to be repaid upon the sale of the property.
  • The interest rate for the initial advance is normally a fixed interest rate. Interest is payable on the whole sum available to you regardless of whether you utilise the full amount or not. Individuals should be aware that interest can build up quickly.
  • You will not make any monthly repayments during the lifetime of the mortgage.
  • The offer of an equity release mortgage is normally based on your anticipated life-span (this tends to be based on 15-20 years) however you can continue to reside in the property once the anticipated period has passed and the “mortgage” would continue to run on.
  • If you were to repay the mortgage in full before the end of the term, the lender might charge an early repayment fee.
  • There is normally a “no negative equity guarantee”. If when your property is sold, the market value is less than the sums owing to the lender you do not have to pay any more than the sale proceeds.
  • An equity release mortgage may affect your ability to claim social security benefits and your tax position.
  • You will be required to continue to repair and maintain your property through the duration of the mortgage.
  • You cannot obtain another mortgage from another lending institution without the consent of the equity release lender.
  • If any other person requires to reside in the property with you for any reason whatsoever, you will need the consent of the lender.

We recommend that prior to entering into an equity release mortgage that you discuss matters with your family and intended beneficiary under your Will as this will ultimately affect your estate upon your death.

Get in Touch

If you want to learn more about equity release, get in touch today.   You can contact us on 01292 438530 (Ayr Office), 01465 754294 (Girvan Office), or via our online contact form.  Our friendly and dedicated team are here to help you.

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