Equity Release Solicitors Romford, Upminster, Brentwood
What is an Equity Release Mortgage? Equity Release Process Explained.
Equity release mortgages allow you to release funds from your property whilst continuing to reside there. An equity release mortgage allows you to release a lump sum so you can improve your property, pay off your debts or take a holiday. Equity release requires specialist legal advice and financial advice. There are two types of equity release options a Life Time Mortgage or a Home Reversion.
Importance of Independent Legal Advice in Equity Release
Mullis and Peake LLP Solicitors are members of the Equity Release Council (ERC). The Equity Release Council is the industry body for the equity release sector and it represents not only the providers, but the financial advisers, lawyers, intermediaries and surveyors who work in the sector.
One of the main objectives of the ERC is to ensure that the products available are safe and accessible to consumers and that there are safeguards and guarantees in place to provide protection.
In addition, all members of the ERC must abide by the overarching principles of the Council which are to:
- Ensure that their actions promote public confidence in equity release as a potential retirement solution
- Act at all times in utmost good faith
- Communicate high expectations for equity release outcomes in all our dealings
- Ensure conflicts of interest are managed fairly and reduced to the lowest practical level
- Exercise due skill, care and diligence in all that they we do and uphold the standards set out by our professional bodies at all times
- Always act with the best interests of our clients being paramount, treating customers fairly in all our actions
Legal and Financial Implications of Equity Release
Many clients turn to equity release mortgages because they do not qualify for traditional mortgages usually as they are not in full time employment or are retired. An equity release mortgage generally does not have monthly repayments but rather the monies have to be repaid by the borrower on death when the property is sold or when the borrower moves into long term care.
Benefits and Risks of Property Equity Release
The benefits of equity release are that the tax-free cash allows you to remain in your home and offers a no negative equity guarantees. The risks of equity release are that it can reduce the value of your estate and can impact means-tested benefits, it also accumulates interest..
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Home Reversion Plan
In its basic form, all or part of your home is sold to a private company known as a ‘reversion company’ or group of individual investors, and in return you will receive a cash lump sum, an income or both. You can remain in the house rent-free, for a nominal monthly rent, for the rest of your life. When the property is sold, usually after your death or when you move into alternative accommodation, the reversioner receives the proceeds of sale, depending on what share of the property you have sold.
Lifetime Mortgages
With a lifetime mortgage you borrow against the value of your home releasing a loan which can be used to provide an income, a lump sum, or both. The loan does not have to be repaid until you die or move to alternative accommodation. Interest, usually at a fixed rate, is compounded monthly and ‘rolled up’ and added to the outstanding loan or you have chosen to make monthly interest payments for the duration of the term.
When do you need an equity release solicitor?
It is a good idea to get an equity release solicitor as they can ensure you receive independent legal advice about the obligations and risks of an equity release plan.
Who Is Equity Release For?
Equity release is for those that are over the age of 55 years old. It is for those that are property rich but cash poor as it would free up some equity (cash) tied up in your home. This cash could be used for everyday living, home improvements, holidays or anything you wish to use it for.
Pros And Cons Of Lifetime Mortgages
Pros of a lifetime equity release mortgage are:
- You can continue to live in your home.
- You have protection with the ‘no-negative equity guarantee’.
- Lump sum or a drawdown facilities are available on a lifetime mortgage plan.
- Allows you to access tax-free cash to spend on the lifestyle you want.
- Some have the option of no regular payments.
Cons of a lifetime equity release mortgage are:
- The value of your estate will decrease resulting in reduced inheritance
- Your entitlement to certain state benefits may be affected.
- There may be financial penalties if you wish to repay or end the mortgage plan early.
- A Lifetime mortgage loan amount increases with compounded interest.
Pros And Cons Of Home Reversion Plans
Pros of a home reversion plan
- You’ll receive money to pay for your care and living costs.
- You get to stay in your own home for the rest of your life, or until you have to move permanently into care.
- Equity-release schemes can help to reduce your Inheritance Tax liability.
- You can sell only part of your property, leaving the rest towards your inheritance.
- You won’t have to go through the process of moving home.
- The equity released on your main property is tax free.
Cons of a home reversion plan
- You’ll receive considerably less than the full market value for your property.
- You’re no longer the sole owner of your home.
- It might affect your entitlement to benefits
- The inheritance you pass on to your beneficiaries will be substantially reduced and won’t include your home itself.
- If you end a plan early, you would need to buy back the share you sold at full market value which could be a lot more than you sold it for.
- A home reversion scheme could also be poor value if you die shortly after taking it out
- Plans can be inflexible if your circumstances change
- Lenders will expect you to keep your home in good condition
How much equity can I release from my home?
The amount you can release from the value of your home depends on a number of factors including:
- Your age
- The value of your property
- Your health (some lenders offer larger sums to those with certain health or lifestyle conditions)
- The amount of any outstanding mortgage or debt you have
Most lifetime mortgage equity release tends to be for between £10,000 – £100,000.
Services also offered in Residential Property
Frequently asked questions
It is essential that you receive independent legal advice as part of any equity release.
We provide:
- Detailed analysis of the equity lease mortgage offer
- Advice on other alternatives
- An explanation of equity release consequences
- A face to face discussion
We rely upon you giving us complete and timely instructions and also to provide us with all the necessary and relevant documents. We correspond with a number of institutions, all of whom may respond with greater or lesser efficiency. Delays by third parties such as these can mean that time scales will vary. We would expect that a simple matter would be completed within one month following receipt of the papers from the lender whilst more complex matters will take longer. If you require your matter to be expedited (completed within 14 days of receipt of the papers from the lender) we do offer an Expedition Service and an expedition fee will be charged. We will endeavour to provide up to date information as to timing throughout the course of the matter.
Equity release is a way to unlock the value of your home. If you're aged 55 or over you can take out cash, tax-free.
Those that require additional cash, have their own home and are aged 55 and over.
Mullis & Peake have a specialist team in residential property ready to help you. Contact us online today or call us on 01708 784000.
Alternatively, request a call back to have one of our team contact you at a time that suits.
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Paul qualified as a solicitor in 2010 and specialises in Residential Property matters.
