Thursday, 6 October 2011

What is equity release?

Equity release is a term that refers to various ways in which mainly older homeowners can use their homes to generate income or lump sums, either with a mortgage repayable on death, or by selling the property (or part of the property) but continue to live in it during their lifetime.

If anybody thinking about entering into a scheme of this type it is most important to seek advice from a solicitor who has experience in dealing with these transactions.

A good solicitor will warn you about certain aspects of these arrangements which are as follows:

Maintenance and repair

You will continue to be responsible for maintaining and repairing the property and therefore you should ensure that you have sufficient reserves to meet your obligations.

Some arrangements place an obligation on you to seek the consent of the lender before carrying out any alterations or making any additions.

All adult owners and occupiers in these arrangements have to be part of the loan agreement. If they are not and you were for example to die then the other adults in the property would have to move out.

Moving home

Most of these arrangements will allow you to move home providing the new home that you are moving into will act as sufficient security for the loan. If you were to move to a property which didn’t act as sufficient security you may have to repay all or part of the existing loan before you could move.

Welfare benefits

Receiving a large amount of money from an equity release could affect your entitlement to means tested welfare benefits and services both now and in the future. One area is of particular importance and that concerns possible financial support towards the cost of the care services.


There could be tax implications and it is important that you should seek advice from an accountant or tax specialist about these. Some arrangements can be structured in such a way as to reduce or eliminate liability to inheritance tax.


Releasing equity from the property will of course diminish the value of your estate and the amount your beneficiaries will inherit upon your death. It is always important therefore to discuss the issues with your beneficiaries to ensure that they fully understand the implications to avoid any misunderstanding in the future.

There are a lot of credible schemes out there that operate in this field but equally there are a number of less desirable schemes and it is for this reason as I say at the beginning it is important to seek expert advice from a solicitor on these arrangements before making a final decision.

Any questions please feel free to email me.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at

Dont let romance blind you when buying a home!

I have acted for many first time homebuyers and as you would expect many of these clients have had to make significant financial sacrifices to save money for a deposit.  For many of these clients their heads are very much in the clouds. The romance of living and owning a home together for the very first time makes it difficult to discuss and provide advice on the financial implications of what is clearly a major life changing decision.

In a number of these cases advice has to be given because one partner may be putting more money into the transaction than the other. It is not uncommon for the deposit to be as much as 30% of the purchase price and for this to be funded by savings accumulated before the couple met. This is not of course an arrangement confined to the first time buyers.  There are also clients who are for example looking to buy a property with a new partner following death, separation or divorce.

The common thread is that at this point in time the relationship may be at an early stage and the buyers are only really concerned about the immediate future, and not what might lie ahead.

In general, couples purchasing a home instruct me that they wish to purchase the property as “joint tenants”. The significance of this is that if one of the partners were to die then the share of the profit in the property would automatically pass to the other partner, even if the deceased partner makes a different provision in his or her will.  A Court would not be able to interfere in that arrangement even if the deceased partner had contributed more towards the purchase of the property when it was originally purchased.

Even though it is often an unpalatable exercise I always advise my clients that they should think about whether it would still be their wish for their share to pass to the other in the event of death or separation.  More than often they shrug their shoulders and I am greeted with a perplexed look.

There are times however when I am instructed to set up the way in which the property is bought so as to provide for the equity (money left over after the mortgage and fees are paid) in the property once it is sold, to be divided on an unequal and predetermined basis.

If one party for example put 2/3 of the money forward for the deposit and the other the remaining 1/3 then they might instruct me to ensure that the property is held in such a way so as to provide that 70% of the equity/profit in the property goes to one, and 30% of it goes towards the other.

There are also three or four other different ways in which unequal contributions can be recorded and it is therefore important that if you are in this situation and seeking advice that you ask your solicitor to explain these options to you. The way in which the division of the proceeds is expressed at the outset can have quite a substantial bearing on the financial outcome in the event of a future sale.

Even though your solicitor may try and persuade you to look beyond the romance of owning your first home together you may still decide even though unequal contributions are made, for the property to be held jointly. This is understandable. There is however a half way house in that you can instruct your solicitor to record that you are holding the property as joint tenants but that if anything happens in the future, and one of you decides that you want to serve notice to say to the other to say this arrangement should no longer apply, that the net process should then be divided in accordance with shares predetermined at the point of purchase.

I am happy as ever to answer any questions you might have about this or any aspect of property transactions. Please feel free to email me at my email address shown below.

Morgan Jones and Pett are solicitors who provide legal advice and services to clients based in England and Wales and who can be contacted on 01603877000 or via email at