Questions and Answers

Q What is the difference between a Lifetime Mortgage and a Home Reversion Scheme?

A Lifetime Mortgage is where you take out a loan secured on your home but where you retain full ownership of the property; a Home Reversion Scheme requires you to sell all or part of your home and therefore give up part or all of the ownership.

Q Whichever scheme I choose will my partner and I be able to live in our home for the rest of our lives?

Yes. This is fundamental to all schemes or should be. If it is not guaranteed then the scheme is in our view, not suitable.

Q Are there any restrictions on how we spend the money we release?

No. You are entirely free to spend the money in any way you wish.

Q How much money can I release?

That depends on the value of your home, the lender’s policy in respect of how much can be loaned in relation to the value and your age.

Q What is the youngest age I can seek Equity Release Quotes?

Most lenders require you [and your partner] to be not younger than 60. However there are a few lenders who will offer an Equity Release scheme to people as young as 55.

Q What happens if property values fall and the house is worth less than I have borrowed – will I or my family have to make up the difference?

No. We as equity release advisers only recommend lenders who offer a ‘No Negative Equity Guarantee’. This means that if the value of the property becomes less than the loan, the shortfall is accepted by the lender and you or your family having nothing to pay.

Q Will I be able to move home if I wish?

This will depend on the nature of the scheme. Some lenders include a portability option though this should be carefully considered because the change may be to a lower value property and the amount borrowed may be affected. We recommend that if this is expected careful consideration should be given to the choice of lender. We will help in the regard.

Q What is SHIP?

Safe Home Income Plans [SHIP]. Basically lenders who are members of SHIP agree to follow a code of practice that ensures their plans are fair and safe. We recommend dealing only with lenders who have signed up to SHIP.

Q Would any State benefits be affected by the release of equity?

Yes they may be. A number of state benefits are means tested and these could be reduced or simply not available to you because of the release of funds as distinct from being part of your property. If you are receiving social security benefits of any kind you should check to ensure that releasing a lump sum from your home will not adversely affect these benefits. We can help advise you in this matter.

Q Are there any penalties if I wanted to redeem the loan early?

There could be depending on when you wished to redeem. Virtually all recognised lenders impose an early redemption penalty arrangement where redemption is within 5 years, although some are more restrictive than others. If you think that you may wish to redeem within five years, then careful examination of the lender’s policy should be carried out. On the whole Equity Release should not be thought of for short term objectives although there are specific cases where it can be appropriate.

Q Are there any fees to be paid when taking up an Equity Release scheme?

Yes. You should be prepared to pay solicitors’ fees for dealing with the legal work, an arrangement fee charged by both the lender and adviser as well as a valuation fee which the lender will require in order to be satisfied as to the value of your home. In some cases part of these costs can be added to the loan.

Q What happens if either my partner or I die?

Provided you entered into the Equity Release arrangement jointly the surviving partner should be entitled to remain in the property for the rest of his or her life.

Q What happens when the surviving partner dies?

If your arrangement were a Lifetime Mortgage the property will be sold and the mortgage debt repaid to the lender. Any surplus will be paid to your estate and dealt with according to your will[s]. If the arrangement were a Home Reversion scheme then whatever proportion was sold to the provider at the outset will revert to that provider.

Q What if I need more money at a later time?

Most Equity Release advisers will recommend schemes that will allow further advances if the property value increases over subsequent years. With Home Reversion schemes this will depend on how much of the property has been sold at the outset.

Q What about my family – should I consult them?

It is highly recommended that you involve the family when you are considering Equity Release quote. It is important to ensure that any product chosen meets your needs if you want your family to inherit. We shall be happy to help.

Q Is Equity Release the best solution: might there be a more suitable alternative?

Yes there may be: raising cash from savings could be one alternative; downsizing to a smaller lower cost house may be another

 

There may be many more questions you might wish to ask and and we will be happy to answer them all for you.

Call us on 0845 013 4561 or email us at john.land@honnisterpartners.com

Equity Release Consultants is a trading name of Honister Partners Ltd. Honister Partners Ltd is an appointed representative of Sage Financial Services Ltd which is authorised and regulated by the Financial Services Authority. Sage Financial Services Ltd is entered on the FSA register (www.fsa.gov.uk/register) under reference 150452. Honister Partners Ltd Registered Office: 1 Nicholas Road, London, W11 4AN. Registered in England and Wales No. 06923303. The information and content of this site is directed at UK consumers only & is subject to the UK regulatory regime.