Equity Release is a method by which you can create extra cash (to spend or save as you choose) by using the value of your home.
There are basically three types of Equity Release plans:
Lifetime Mortgage Plans
With this plan you agree to take out a loan based on the value of your home. The loan is secured on your home, but there are no monthly repayments to make (any interest due on the loan rolls up each year). The loan is repaid when your home is finally sold (usually when you move into long term residential care or after your death).
Home Reversion Plans
With this plan you agree to sell a certain percentage of your home to a reversion company for a fixed amount. There is no loan to repay, however when the property is sold the reversion company receives the same percentage of the sale proceeds as it originally put in. For example, if the reversion company pays you 30% of the value of the property initially, it will be entitled to 30% of the sale proceeds even if the value of your home has increased. With this plan you retain the right to live in your home for the rest of your lifetime.
Home Income Plans
With this plan you raise money by taking out a loan secured on your home, but part of that loan must be used to buy you an annuity (this gives you a regular guaranteed income for the rest of your life). Part of this annuity income pays the interest on the loan with the rest being cash for you to use as you wish.
To determine which Equity Release plan best suits your circumstances you should seek advice from an Independent Financial Advisor.
Scott Rowe deals only with the legal aspects of the transaction.
You must realise an Equity Release Mortgage is a commitment for the rest of your life. DO NOT use this method to raise money in the short term. There could be alternatives open to you i.e. moving to a cheaper property or selling or letting part of your existing house.
What you should do before taking up the equity release:
- Seek advice from an Independent Financial Adviser. They should carry out a full financial health check for you and determine the best plan for you to adopt, as well as giving advice on all other financial implications of your chosen plan.
- Discuss your Equity Release plan with your family and any other potential future beneficiaries of your estate. They need to be involved right from the start to avoid later misunderstandings, as the value of your estate will be affected by the need to repay the Equity Release once the property is sold.
- Check with the Departments for Work and Pensions, the Citizen’s Advice Bureau and / or your Local Authority on whether taking up the Equity Release will affect any present or future entitlement to any benefits.
- Seek legal advice from Scott Rowe. Do you need to consider making a Will or a Lasting Power of Attorney as well?
What Legal Work is involved?
Scott Rowe will carry out the following work (The list is not exhaustive):
- Obtain your title deeds
- Carry out checks confirming your ownership of the property
- Prepare necessary documents for your signature and advise you on these
- Report to you on your Equity Release Offer and ensure that you understand the details of your Equity Release plan
- Work with the Equity Release Company to fulfil their requirements and arrange a suitable date for the release of funds
It is important that you send the title deeds to us as early as possible so we can commence the legal work for you.
The Equity Release Company has made an offer… what happens next?
A copy of your offer will be sent to us. We will prepare a report and send this to you together with all the documents you need to sign.
We will then call you to discuss the offer and advise you on the risks and rewards.
Once you have returned the signed documents to us, we will check them to make sure everything is in order and then we will agree a completion date with the Equity Release Company for the funds to be released.
What actually happens on the completion date?
You need to do nothing! We will receive the funds from the Equity Release Company and then arrange for those funds to be sent to you (usually by cheque). We will deduct our fees and expenses from the funds before sending the balance to you. The Equity Release Company will retain the title deeds until the loan is repaid.
How long will it be before I receive the cash?
Every case is different, but is usually takes between four and eight weeks from your application being made to the day the money arrives.
It all sounds very simple – is it always so smooth?
We are experienced Legal Advisers and you can be sure that we will do everything we can to make the transaction as quick and painless as possible, but if there are problems we will let you know about them and advise you on how to resolve them. Please remember that you:
- Must keep the property fully insured.
- Must keep the property maintained and to a reasonable standard
- Can usually only charge the property to another lender with the prior consent of the Equity Release Company
- Must keep the Equity Release Company informed of any changes in your personal circumstances.