Our equity release solicitors’ guide to understanding equity release mortgages.
The facts around equity release mortgages and how they can benefit property owners aged 55 or above.
One of our recent clients owned a residential home and two Buy to Let properties. However, she was facing a £500,000 judgement debt against her from the high court, which put her at risk of losing her home. Our solicitors recommended that she used the services of Starck Uberoi Mortgages to release equity from her property if she was reluctant to sell her home.
She managed to complete an equity release against her property to pay off the £500,000 debt. As a result, she wasn’t forced into selling her Buy to Let properties which allowed her to keep that rental income. The client was delighted with the outcome as it meant she could keep all of her properties and could avoid having to declare bankruptcy. Our mortgage advisors and solicitors communicated effectively to ensure the court deadlines in securing all funds were all met.
No one should have to worry about finances during their retirement. For many property owners aged 55 or above, equity release can be an effective solution to give your finances a much-needed boost to your finances. At Starck Uberoi, we can shed some light on the facts of equity release mortgages and help you understand the different options available.
What is an equity release mortgage?
Equity release mortgages convert the value of a property into a tax-free lump sum (still subject to mortgage conditions) which the owner can borrow from while still living in the property until they die or go into long-term care. When this happens, the lender will sell your property and use the money to pay back the loan and interest accrued. The remainder of the money from the sale will be left to your estate.
The most popular type of equity release mortgage is a lifetime mortgage. Lifetime mortgages let you to borrow up to around 60% of your property’s value, whilst allowing you to live there without having to make monthly payments. How much you can borrow depends on your age, lifestyle, health and the value of your property, with older homeowners of higher value properties being able to borrow the most. There is no time frame in which you have to pay back the loan, and the interest rate will remain fixed unless you borrow additional money (any changes in interest rates will only count for the additional money borrowed).
Is an equity release mortgage right for me?
The benefits of an equity release mortgage include:
- You can use the money to pay off existing debts, including an outstanding traditional mortgage that has reached the end of its term
- The money can supplement your income and boost your retirement lifestyle
- It may give you the ability to make improvements to your home
- You can use it to help your family, for example by helping your children onto the property ladder
- It can help you afford something you’ve wanted for a long time, such as a dream holiday
- Releasing equity from your property can reduce the amount you might have to pay in inheritance tax.
However, there are some downsides of equity release to be aware of. The amount you owe can build up to (but never exceed) the value of your property, though you can choose to pay off some of the interest as you go. Plus, having your money in your bank account rather than sunk into your property may impact what benefits you receive. For advice on whether equity release is right for you, call us on 020 8840 6640.
The myths surrounding equity release
- “Taking out an equity release mortgage means you can’t leave an inheritance.”– By taking out an equity release mortgage, it is true that you cannot leave your property to your loved ones, but you can leave some money to them. When the plan ends (usually at death or when you go into long-term care), the equity release provider sells the property and takes the proceeds from the sale, but the remainder either returns to you or goes to your estate.
- “An equity release loan means you’re trapped in the same property for the rest of your life.”– You can still get an equity release mortgage and move to another property afterwards. Your plan can be transferred to another suitable property, though do be aware that it is vital that you check whether your plan can be transferred to the new property before you buy it. Otherwise you may have to repay your loan, which incurs costly early repayment fees.
- “You need to have an income to get an equity release mortgage.”– You do not need an income because equity release acts as a loan within itself. Equity release usually depends on the value of the property rather than personal income to determine how much equity can be released. However, most people have some sort of pension which acts as a sort of income.
- “You can be forced out of your home if you take an equity release mortgage”– With a lifetime mortgage, you retain ownership of your home until you go into long-term care or die, after which the property is sold and the money is used to pay back the loan and interest. This means you cannot be forced out of your home, regardless of how much you borrow or owe.
How to get an equity release mortgage
If you decide an equity release mortgage is right for you, our experienced team of mortgage brokers and equity release solicitors can address any concerns you have about the process. Our top priority is ensuring you get the plan which is right for you; therefore, we will explain the benefits and risks of equity release and take into account any future financial decisions you may have to make before recommending anything to you. Our joint venture means that our mortgage advisors and equity release solicitors can then work together to find a suitable plan to fit your needs.
To begin with, we will collect basic information to determine how much equity can be released from the property. Our associated lenders will then process your application and arrange a house valuation to confirm the value of the equity in your property. Afterwards, they will send a loan offer which we will check for you and our solicitors will finalise the legal documents. Then the lender will release the tax-free sum to our solicitor who will forward them to you. They will ensure the transaction has been completed smoothly and register it at land registry. You can expect to receive your loan in around three weeks; however, if there are delays, it may take longer.
Our mortgage advisors and equity release solicitors will support you in this process from start to completion.
How Starck Uberoi can help
If you are 55 or over and think equity release may be the right choice for you, Starck Uberoi will be there to support you every step of the way. Our experienced London based mortgage team work with our committed equity release solicitors to ensure you get the deal which is best for you.
For more information, please visit our mortgage or conveyancing pages, or to book an appointment please call 020 8840 6640. Our offices are based in Brentford, Ealing, Chiswick, Canterbury and London Victoria. For an appointment at any of our offices, email us at solicitor@starckuberoi.co.uk or call 0208 840 6640.
Further Reading
- Fast Conveyancing
- New rules regarding stamp duty have been bought in for transfer of equity between spouses
- Our ‘One-stop-shop’ approach, combining mortgage and solicitors’ services under one roof.
