Equity Release — Why choose Garden Stirling Burnet?
Our expert team of solicitors, regulated by The Law Society of Scotland, will provide you with all the specialist and impartial advice you need, ensuring you navigate the Equity Release process with confidence. We offer our services throughout Scotland.
As proud members of the Equity Release Council (ERC), the industry body for the UK equity release sector, we uphold the high service and ethical standards they set for all their members within their code of conduct. These standards, centred around consumer welfare, have helped play a pivotal role in dispelling myths about equity release and educating the public on the potential to access the wealth within their homes.
If you are looking to release equity in your home, get in touch with us today.
What is Equity Release?
Equity Release empowers individuals aged 55 and above, who own and reside in their own UK homes, to unlock equity (cash) tied up in their properties without having to move or sell.
The amount of money you receive depends on your age and how much your home is worth minus any amounts you owe, such as your mortgage.
In today’s market, a variety of products from reputable lenders allows you to release a tax-free lump sum. Some products even allow more than one capital drawdown.
Repayment of the Equity Release loan is usually made after death, although more and more products are now permitting sums to be repaid during your lifetime.
There are two kinds of Equity Release, and both are regulated by the Financial Conduct Authority (FCA):
Lifetime Mortgage – borrowing money against the value of your home
This is like a residential mortgage, however it can only be taken out once. Here, you borrow some of your home’s value at a fixed or capped interest rate.
You can take the money in one lump sum or in smaller chunks as and when required, this is known as a drawdown. If you choose the latter, interest is only charged on the cash you take out and not the full amount.
Compound or ‘rolled-up’ interest will accrue during the lifetime of the mortgage if you don’t make any repayments and will become part of the final sum to be repaid, normally from your estate. Nowadays most Lifetime Mortgage lenders allow you to make repayments, either of the capital or the interest, however there will be a cap on the amount you can overpay by.
Lifetime Mortgages are available to those over 55.
Home Reversion Plans – selling all or part of your property in exchange for money
This transfers full or part ownership of your home to the lender, with them giving you a tax-free lump sum at below market value.
In return, you will retain the right to live in your property until death, or you go into full-time care. When the property is sold, the proceeds are split based on the share that the lender has and the percentage you own. If your property value rises significantly over time, so will the amount the lender receives.
Home Reversion Plans are available to those over 65.
How can you use released Equity?
The beauty of Equity Release lies in its flexibility.
You have no restrictions on how you use the funds, whether it be paying off a debt, making your retirement more comfortable, or helping a family member, the release of capital gives you unparalleled financial flexibility.
What are the advantages and disadvantages of Equity Release?
To help you make an informed decision, we have outlined below some of the advantages and disadvantages associated with Equity Release.
However, with such a critical financial decision, it is vital to seek additional guidance from an experienced financial advisor who can look at your specific circumstances and provide tailored recommendations based on your needs.
Advantages:
Access to Funds: Obtain a tax-free lump sum or smaller regular payments to supplement your income.
Property Value Benefits: Continue to benefit from the value of your property over time.
Property Flexibility: Retain the option to move to a different home in the future, provided this aligns with the terms and conditions of the product you select.
Retain Ownership (Lifetime Mortgage): With a Lifetime Mortgage, retain both residence and homeownership.
Disadvantages:
Reduced Estate Value: Equity Release will lessen the overall value of your estate, impacting the amount you can pass on upon your death.
Home Reversion Ownership: If you select a Home Reversion Plan, then you will lose either all or part ownership of your home.
Impact on Means-Tested Benefits: Receiving either a lump sum or additional income may affect your entitlement to certain benefits such as Pension Credit, Council Tax support, or Jobseeker’s Allowance.
The Process Simplified
Start by consulting a specialist Equity Release financial advisor, affiliated with the Equity Release Council. They will guide you through the products on the market and recommend one based on your specific needs and circumstances. If you lack an advisor, we can recommend a specialist to talk you through the process.
Upon selecting a suitable product, and upon your instruction, our team will thoroughly review the documents and undertake conveyancing. We will ensure that you fully understand the product and any potential risks, giving you the confidence to make an informed decision promptly.
Once you have decided to proceed, we will work quickly to complete all the legal work and secure you the funds as soon as possible.
Equity Release: What You Need to Know – FAQs
Age and product type determine eligibility, with minimum ages varying (55 for lifetime mortgages, 65 for home reversion plans).
The general minimum property value acceptable to lenders is £70,000, with the potential for higher borrowing in certain circumstances. How much you are able to borrow will depend on all of these criteria.
Equity Release may be more expensive than a conventional mortgage. If you take out a lifetime mortgage, you may be charged a higher rate of interest than on a regular mortgage. This means that debt may amass more quickly as interest accrues.
Cash lump sums released from your home enjoy the benefit of being tax-free. However, should you choose to allocate this capital into a savings account or seek regular income through an annuity, you may be subject to taxation or accrued interest. It may also affect your state welfare eligibility and access to benefits.
This means that you should take a strategic and considered approach to financial decisions and their implications.
Both Lifetime Mortgages and Home Reversion Plans are secured against your property.
Lifetime Mortgages have no set date for repayment. The amount you owe each year/month will increase as your loan amount plus interest accumulates, even with a fixed rate of interest.
There is no interest to pay with a Home Reversion Plan because you sell all or part of your home for a tax-free amount or monthly income.
In broad terms, yes. Lenders affiliated with the Equity Release Council are obligated to transfer your lifetime mortgage to another property should those circumstances arise. The eligibility of the new property is contingent upon meeting lending criteria and is subject to its valuation.
Depending on the plan you choose, you may be passing on less to your family in inheritance. It is critical to discuss your thoughts with them, so they are fully informed.
Additionally, you should also consider creating a will and power of attorney to safeguard your interests if you become physically or mentally incapacitated in later years.
Yes, legal advice is essential for independent counsel on the risks, rewards, and obligations associated with Equity Release plans. A solicitor, such as those within our expert team, carries out the necessary conveyancing, allowing the lifetime mortgage lender to secure a charge against the property.
Our appointment follows financial advice and the application for a lifetime mortgage.
While fees are involved in arranging an Equity Release Loan, Garden Stirling Burnet provides transparent fixed fee quotations for all necessary legal work, ensuring clarity and understanding throughout. Financial advisors may charge a fee, and additional costs may include conveyancing expenses, and occasionally surveyors’ fees.
Downsizing if appropriate can be an option. If you can sell your property and move to something smaller, living off the money raised from the sale, then this could be an alternative. However, you will need to incorporate the financial costs of any move into this decision.
Want to know more about Equity Release?
Contact our Equity Release solicitors today on 01620 824 996.
