Considering Equity Release? Make sure you do these 5 things
More people are seeing the benefits of releasing equity from their home with over 26,000 people taking out an Equity Release mortgage in 20231.
Despite this, the idea of Equity Release is still daunting for many. It’s received its fair share of bad press over the years which has led to mistrust. Add to this the amount of Equity Release plans and providers, and there’s no wonder it feels a bit mind-boggling.
If that sounds like you, then let’s make it less scary!
If you’re just starting to consider Equity Release, start by doing these 5 things.
1. Get to know the Equity Release Council
The Equity Release Council is a trade body that exists to protect the rights of Equity Release customers.
Its members include a range of professionals involved in Equity Release such as financial advisers, providers, surveyors and solicitors. These members must adhere to the council’s strict guidelines.
The Equity Release Council provide 5 main reassurances to customers which are:
- You’ll never owe more than your home is worth.
- You have the right to stay in your home.
- You retain the right to sell or move home.
- Interest rates will be capped.
- You’ll be able to make payments on the interest without penalty.
We will delve into these reassurances more in a separate blog, but for now we’d advise taking a look at their website which is rich with information and guidance.
If you do decide to go ahead with an Equity Release mortgage, make sure any professionals you work with are registered with the Equity Release Council.
2. Speak to your family
Releasing equity from your property can benefit your family in lots of ways such as:
- Gifting the deposit for their first home
- Paying for school or university fees
- Covering the cost of private healthcare
- Helping them out of financial difficulty
Involving your family in discussions about your later life plans can be helpful and comforting for everyone involved. It’s especially important if you want them to benefit from your equity.
Here are some of the reasons we recommend talking to your family when you’re considering Equity Release:
- They’re a good sounding board for your plans.
- They will ask questions or raise concerns. This helps identify any knowledge gaps you might have about Equity Release.
- They might be uncomfortable accepting money while you’re still alive. An open discussion about your wishes is so helpful in these situations.
- It’s helpful for family to understand the implications of Equity Release on their inheritance.
- Your family might be able to help with research. We often hear from family members contacting us on behalf of their parents.
3. Chat with an independent financial adviser
If you’re eligible for Equity Release then that means you’re over 55 and own your home. There are a host of financial options available to you depending on your circumstances – and Equity Release is just one of them.
It’s important you take the opportunity to weigh up the benefits of Equity Release against those other financial options.
A financial adviser who is also an equity release specialist will listen to your goals for the future and take the time to thoroughly understand your financial situation.
If you decide to go ahead with Equity Release, your financial adviser will find the best product unique to your circumstances. They’ll also check how Equity Release might affect your state benefits and tax situation and answer all your questions.
As if that wasn’t enough, they’ll manage the application process too which will save you time and stress.
Take a look at our Equity Release services to discover how we can help. If you like what you see, drop us a line to arrange a call. When we chat there’s no obligation to work with us and we won’t charge you for our time if you choose not to proceed.
4. Seek independent legal advice
If you decide that Equity Release is the right thing for you and your family, you must seek independent legal advice. Here’s why:
- You get advice that is completely independent from your provider or financial adviser.
- It ensures you understand the benefits, risks and legal obligations of the Equity Release product you’ll be taking on.
- They will handle all the legal paperwork required.
- They’ll make sure any existing loans or debt secured against your property are paid off first.
Legal advice should always be conducted face to face. This makes sure no one can act on your behalf without your permission.
You can find a legal adviser who is also registered with the Equity Release Council by searching their website.
5. Put in place a Lasting Power of Attorney (LPOA)
A Lasting Power of Attorney allows someone you trust to make decisions about your financial affairs or your health and welfare on your behalf or manage your affairs. This will only happen if you lose the ability to make your own decisions, which is called “loss of mental capacity”.
You should be able to appoint more than one attorney, for your financial affairs and as long as they all agree, only one person may be required to sign any legal documents.
We recommend that you appoint a second person (or more) to act for you. This needs to be someone who would not be a party to a mortgage with you and does not live with you. Many joint owners appoint their spouse or partner, but, if you want to release money in the future, your spouse or partner is not allowed to act for you both if they are either a party to the mortgage or live in the property.
It is important also to ensure that a Lasting Power of Attorney is the document you need. A General Power of Attorney is not the same and cannot be registered by the Office of the Public Guardian.
How can Downton Mortgages & Financial Services help?
Clara Downton is one of only 3 mortgage advisers in the Bishop’s Stortford area registered with the Equity Release Council.
We have more information about Equity Release including our most frequently asked questions, and the services we offer on our website which you can take a look at here.
Other Equity Release content from Downton Mortgages & Financial Services
Blog – How equity release can help you ride the cost of living crisis
Blog – What do you need from a lifetime mortgage
Podcast – Clara joined Kate Forsdike on the PCS Legal podcast to talk about Equity Release which you can listen to here.
Sources we’ve used in this blog
1 Equity Release Council – 2023 Equity Release market statistics
Legal bits we need to tell you
The information contained within was correct at the time of publication but is subject to change (July 2024).
Please note for all mortgage products, terms and conditions apply. This information is a summary only. You will receive full documentation upon application which sets out the terms, conditions and limitations of lending provided.
A Lifetime Mortgage will reduce the value of your estate and may affect your entitlement to means-tested benefits and tax status. The impact of not servicing monthly interest payments on a Lifetime Mortgage is that the outstanding debt can grow rapidly, thus reducing the value of your estate.
For example, if the interest rate was 7% a year, a £50,000 loan would double to £100,000 after 10 years assuming no repayments are made.
This is an example for illustrative purposes only and personalised advice and recommendations should be sought from a qualified professional.
You are strongly advised to register a lasting power of attorney. This will allow your affairs to be managed by somebody else if your mental abilities significantly decline.
Your home may be repossessed if you do not keep up repayments on your mortgage.