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.
Tax
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.
Beneficiaries
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 davidpett@m-j-p.co.uk
