What is equity release?

For homeowners, equity release lending is becoming more popular than ever for those who want to unlock some cash from their property. But what is it and why are more people choosing to go down this route?

Equity release allows individuals aged 55 and over to release money from the property they live in without having to make monthly repayments. It works well for those who don’t wish to downsize but would like some more cash, perhaps for retirement, as it can supplement your pension income. In addition, equity release provides a ‘living inheritance’ for members of your family if you wish to give them some money or maybe pay for school or university fees.

Using your home as security, you may be able to qualify for a loan with a low interest rate which can either be taken in small amounts over time or as a lump sum or perhaps a combination of the two. The amount you can borrow will depend on how much your property is worth.

There are two options for equity release. The first is a lifetime mortgage designed so that you do not make monthly payments. The interest builds up and the sum you owe will be paid off when you die or move into a residential care home. If there are two people party to the mortgage, this only applies when the survivor dies or moves into a care home. You retain the ownership of your property.

The second option is called a home reversion. This allows you access to all or part of the value of your property while retaining the right to continue living in your property. The home reversion provider will purchase all or part of your property, taking into account your age and your health and will provide you with a tax free lump sum (or regular payments) on the basis of a lifetime lease guaranteeing you the right to stay in your property rent free.

If you are actively considering equity release or have received an offer from an authorised provider, we have the expertise to give you independent legal advice to ensure you fully understand the long term nature of an equity release agreement and proceed with full knowledge of the pros and cons, as well as explaining your legal obligations to the equity release provider.

For further information please contact Linda Crawford, a senior solicitor within our residential property team, on 01473 611211 or email [email protected] 

Suffolk Property Solicitors – for more information on our range of legal services, please contact us.