There are two main types of equity release:
Lifetime Mortgages and Home Reversion Plans.
- Lifetime Mortgages: Borrowers receive a loan secured against their property, with interest accruing over time. The loan, plus interest, is repaid when the homeowner dies or moves into long-term care.
- Home Reversion Plans: Homeowners sell a portion or all of their property to a provider in exchange for a lump sum or regular payments. They can continue to live in the property rent-free until they die or move into long-term care.
At Price and Kelway, we know that financial planning and making provision for loved ones in years to come is at the forefront of many of our clients’ minds. We balance this with the risks that we know are tied up in equity release products. we’re here to make sure that you are familiar with those risks so that you can make an informed decision.
Some points to think about include:
- Equity release can reduce the value of the borrower’s estate and affect inheritance for beneficiaries.
- The interest accrued on lifetime mortgages can significantly increase the amount owed over time, potentially reducing the equity available to beneficiaries.
- Home reversion plans involve selling a portion of the property, which means the homeowner will no longer own the entirety of their home.
Here’s a breakdown of the process, if you decide to proceed with an
equity release, and how we can assist:
1. Eligibility and Suitability:
- Eligibility for equity release typically depends on factors such as age, property value, and existing mortgage balance. It’s essential when considering equity release to assess whether it’s suitable for your needs and circumstances. You should consider factors such as their financial goals, health, inheritance plans, and potential impact on means-tested benefits.
- Seeking independent financial advice from a qualified adviser specialising in equity release is crucial. Advisers can assess individual circumstances, explain the risks and benefits, and recommend suitable products from the whole market.
2. Property Valuation and Legal Process:
- Before proceeding with equity release, a property valuation is typically required to determine the amount that can be released.
- Once the provider is satisfied as to the value of the property, and has made you an offer, the legal process will commence and, typically, this is where we step in.
- We will consider and advise you upon the documentation received from the equity release provider including the offer and the legal charge to ensure that you are aware of and comfortable with its implications and any bearing it may have on your use and enjoyment of the property moving forwards.
- A key factor will be repayment considerations and whether there is the option to make interest payments to stop the debt from growing which is often the case with lifetime mortgage products. Otherwise, repayment of the loan, plus interest, usually occurs upon the borrower’s death or move into long-term care, at which point the property is sold, and the proceeds are used to repay the debt.
Why use Price and Kelway for your equity release?
Equity release can provide a valuable source of funds for homeowners in later life, but it’s essential to carefully consider the risks and implications before proceeding. Seeking independent financial and legal advice is crucial to ensure that equity release is suitable for individual circumstances and financial goals. Price and Kelway are experienced in this type of work and can provide you with invaluable insight, guidance and advice to assist you in your decision making.
Before proceeding with equity release, individuals should explore alternative options for accessing funds and should ensure that financial advice is obtained from a suitably qualified professional. In addition, borrowers should regularly review their equity release arrangements to ensure they remain suitable for their changing circumstances and financial needs.
