Equity release is the option to convert the financial value of your home into a payment which you can immediately access. This can be done whether you own your home outright, or are still paying back your mortgage.
There are a handful of options for how this money will be paid out to you:
While this sounds like a great way to quickly find funds, it must also be stated that these kinds of payouts come with high-interest rates. These will typically sit around 2% to 4%, but will change depending on your exact circumstances. You can use the tool found here to work out what your specific rates would be.
There are two ways you can choose to release equity from your home: an equity release mortgage, or an equity release home reversion.
This is the most common way people take out equity release. It’s called a lifetime mortgage because you generally don’t have to make repayments until you pass away – although some lenders will give you the option to m
Any interest acquired in this time is added onto the loan itself, which needs to be paid back in full (either by your own savings or your next of kin) when you die. Here are some other important things to know about a lifetime mortgage:
This isn’t as popular an option as a lifetime mortgage, but can still be handy if you want to quickly release money. This will see you sell some (or even all) of your home to a home reversion provider. The value you get for your home will only be around 20-60% of the current market value.
Things to consider include:
lease, and what you have planned for the future.
If you’re interested in pursuing the option of an equity release, there are three key steps you need to follow in order to carry out the process in full.
Speak to a professional
Before starting the process of releasing equity from your home, it’s advised you speak to a
financial advisor first. They will be able to
guide you through every aspect in detail, and work out if you are a good candidate for equity
release or not.
If you are, you’ll be presented with recommendations as to how you might be able to proceed.
It’s important you fully understand the
repercussions of what taking out equity means, so be sure to work out how much interest you
might have to pay over time.
Have your property valued
Assuming you are happy with the recommendation you’ve been given by the advisor, you will need to submit your application to the lender of your choice. It’s highly advised you turn to a solicitor at this point (preferably one who specialises in equity release) to give you independent legal advice.
Once the lender has received your application, they’ll arrange for your home to be valued. When they have a figure they’re happy with, they’ll send an offer for your solicitor and yourself to look over. Go over this in detail and make sure you’re happy with everything included in it.
Receiving payments from the lender
Once everything has been agreed on, the lender will release the full sum to your solicitor. They will pay any debt you have against your home with the funds, then release the rest to you. This money is now yours to use however you so wish. The amount given to you in one hit will depend on how you agreed to be paid by the lender – as a lump sum, a series of smaller payments, or a combination of both.
Equity release can take anything between three and eight weeks to complete if there are no complications. More complex cases can take longer.
While releasing equity provides you with money in-hand to be spent however you like, it would be wrong to say there aren’t major factors which need to be taken into account first. After all, nothing is ever as easy as being given money for free. Let’s take a closer look at both the pros and cons of equity release.
While the process itself is intended to provide you with disposable income in the long term, you will need to front some costs first to be able to access that money. Let’s break down the areas where you’re likely to face charges.
Surveyor’s valuation
As we discussed, your house will need to be valued in order for a lender to be able to make you an offer. This is what forms the basis of how much you’re going to be given (along with factors like your age and health), so it cannot be avoided.
Solicitor’s fees
Having a solicitor to talk you through the process and provide valuable insight is something of a must when releasing equity. And while prices offer incredible value for the quality of service provided, it is still another cost which needs to be factored into your budget.
Lender’s application
The final cost to think about is the charge a lender might force you to pay in order to process your application. This will vary greatly depending on who you’re dealing with. Prices can range from free of charge, up to hundreds of pounds. In total, Key Advice estimates that the average cost of equity release fees sit at around £1,850. This is a healthy number, so be sure to factor it into your figures when you think about applying.
At Manak Solicitors, we understand that releasing equity is a significant decision. Our conveyancing solicitors will ensure you fully comprehend the equity release process, communicate with you using plain English, and find a solution that suits your situation. We pride ourselves on being:
With locations in Sevenoaks, Orpington, Gravesend and London, we are positioned to serve Kent, London, and the wider South East. Get in touch with your preferred office today for further details, including information on our competitive pricing.
Are there any alternatives to equity release?
Yes, equity release is not the only option. It is worth considering the following before you make a decision.
How much equity can I release?
The amount of equity you can release depends on the way you choose to release it. If you take out a lifetime mortgage, you probably won’t be able to borrow more than 60% of the total value of your property. If you choose home reversion, you’ll receive between 20-60% of the total value of your property. The older you are, the higher the percentage is likely to be.
Can I sell my house if I have equity release?
Yes. If you bought your equity release plan from a member of the Equity Release Council (ERC), your lender will approve your move to a suitable property, and transfer your policy to it. How this works depends on the type of equity release you have:
Properties which are not normally considered suitable include specialist retirement homes, studios, basement flats, mobile homes, house boats, guest houses, B&Bs, and farms.
Equity release products are safe. They are regulated by the Financial Conduct Authority (FCA) and Equity Release Council (ERC). However, equity release is a big decision and should not be made lightly. As with any other financial commitment, there are risks you need to understand before you proceed.
Hopefully, you’ll now have a clearer picture of what equity release is and how it works. Remember
not to rush into your decision, as it
can have a big impact on your finances heading forwards.
If you do decide to apply, make sure to turn to Manak Solicitors for any help with your
application. We are experts in the field of
property law, and will be able to guide you safely along every step of the process. Get in touch
today.
There are a lot of factors to consider with equity release, which is why it’s so important to
use a tried and tested solicitor to talk you
through your exact case. Ultimately, together you need to decide whether the value of equity
release outweighs the potential
downsides.
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Manak Solicitors is a trading name of Manak Lawyers Limited registered at Companies’ House in England & Wales Company Number: 09877015
Manak Lawyers Limited is authorised and regulated by the Solicitors Regulation Authority under SRA No. 627738, 628462 & 648124
Manak Lawyers Limited does not accept service by fax or email
Manak Solicitors is a trading name of Manak Lawyers Limited registered at Companies’ House in England & Wales Company Number: 09877015
Manak Lawyers Limited is authorised and regulated by the Solicitors Regulation Authority under SRA No. 627738, 628462 & 648124
Manak Lawyers Limited does not accept service by fax or email
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