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Equity Release FAQs

Is Equity Advice Line a member of SHIP?

Equity Advice Line is not a member of SHIP as membership only applies to the equity release lenders and providers. Equity Advice Line is an independent equity release specialist dealing with the whole of the equity release market. At Equity Advice Line we only recommend plans from SHIP Members or from companies offering the same standards and guarantees.

What type of equity release schemes are there?

There are two main types of equity release schemes available:-

Lifetime Mortgages - with these equity release schemes you retain full ownership of the property, there are no repayments with most of these schemes and the interest is added or ' rolled up' onto the loan and the full amount is paid back when you die or move into long term care. The house is sold and any equity left once the lifetime mortgage is repaid is returned to you or your estate. The interest is compounded on a roll-up lifetime mortgage, so you pay interest on interest and the debt can increase quite quickly over the years however any possible house price increases will be your own. With the Lifetime Mortgage you can take a lump sum or have a Drawdown Lifetime Mortgage where you take an initial amount at the beginning and then have a cash facility for which you can drawdown as and when you need it.

There are interest only Lifetime Mortgages where you pay interest on the loan each month and the lump sum you originally borrowed is repaid when your home is eventually sold. With these schemes you will need to be able to afford the interest payments out of your pension or other income.

Home Reversion Plans - this is where you sell all or part of the property to the home reversion provider and you give up all or part of the ownership in return for either a tax free lump sum, a regular income or in some cases a combination of them both. The loan is redeemed when you die or move into long term care. The proceeds of the sale of the home are then split according to the proportion of ownership. One of the benefits of the Home Reversion plan is that if only a percentage of the property is sold the rest of the ownership will be guaranteed to be left to your estate.

Do I have any restrictions on what I can do with the money I raise from equity release?

There are no restrictions and you can use the money for anything you like, however it is important to think carefully about how much you need to borrow to ensure you are not taking out more than you need as this will reduce the amount you leave to your beneficiaries.

Do I have to repay my existing mortgage if I take up an equity release scheme?

Any existing mortgages or secured loans will have to be repaid, this is a requirement for all equity release lenders/providers .

How long does it take for the money to be released?

Timescales can vary between different providers/lenders however it generally takes 6 to 8 weeks for a Lifetime Mortgage and 8 to 12 weeks for a Home Reversion Scheme from the day the application is received to the day the moneys are released .

Is there a minimum amount I have to take?

The minimum amount you have to take can vary between lenders/providers. This can be anywhere from £10000 to £25000 dependent on the type of equity release scheme and provider. There are equity release schemes available where you do not take the money all at once, the Drawdown Lifetime Mortgage allows you take the money over time and you will only be charged interest on the money you use.

Who would be responsible for repairs on the property?

You will be responsible for keeping your home in good repair.

How safe is equity release?

All equity release plans are fully regulated by the Financial Services Authority. The Financial Services Authority is an independent watchdog that regulated Financial Services and insures standards are met within the financial services.

Also, all the equity release lenders/providers recommended by Equity Advice Line are members of SHIP (Safe Home Income Plans) or from providers/lenders who adhere to the standards and offer the same guarantees. SHIP is an organisation dedicated to the protection of consumers. Their plans include a No Negative Equity Guarantee which means you can never owe more than the value of your property or leave a debt to your estate even if the debt has become larger than value of the property.

What are the costs involved in taking out an equity release scheme?

Below is a list of the general costs for taking out an equity release scheme, these can vary from lender to lender and there may be additional or fewer fees dependent on the provider , your advisor will clearly state what the specific costs are on the recommended plan and the Key Facts Illustration will confirm this.

Valuation fee

The valuation fee is paid upfront on application and is usually non refundable. The cost of the valuation is dependent on how much your home is worth with higher charges for more expensive properties. For a property worth £100000 the fee is likely to be between £200 to £300. Some lenders have offers where they will waiver the valuation fee. A valuation is required for a Lifetime Mortgage so that the lender is sure the property provides good security for the loan. For a Home reversion Plan the provider needs to value the property to value your home to see how much they are willing to pay you for the percentage or all of the property you are wishing to sell to them

Solicitor fees

You will need to instruct an independent solicitor to cover the legal work carried out on your mortgage. You are usually looking at around £500 to £600 and this is paid on completion when the funds are released.

Completion, arrangement or application fee

These are paid to the lender usually on completion of the equity release when the moneys are released. These are normally between £500 to £600. There may be costs you may have to pay later for further advances in the future.

Advice fee

As Equity Advice Line are independent we give you a choice of how you want us to be paid. You can either pay us a fee of £495 and we will also get paid commission by the lender. Or you can choose a fee only option where you will pay us a minimum fee of £1200 or 2.5% of the loan and the commission paid by the lender is then refunded back to you. Our advice fee is paid on completion of the loan when the funds are released.

Buildings Insurance

You need to take out buildings insurance on the property as a condition of the equity release scheme.

How old do I have to be to take out equity release?

With a Lifetime Mortgage the minimum age is 55 and for certain types of Home Reversion schemes you need to usually be 65 or over. If you are applying in joint names the youngest age is the one taken into account.

Can I move house in the future?

This will depend on the type of equity release scheme you choose. SHIP registered plans can be transferred to a new property as long as it fits the lenders criteria and is acceptable security for the loan. If you are moving to a cheaper property you may have to repay some of the loan and pay a charge to the lender.

Can I repay the equity release scheme early?

With a Lifetime Mortgage you can usually repay the amount you owe at any time but the lender may charge you extra charges (early redemption charge) in doing so. As most equity release schemes are intended for the long term it is important you tell your adviser if you plan to clear the loan early as there are plans available with specific periods of early repayment charge penalties such as 5 to 10 years.

With a Home Reversion Plan you may have to sell the property to pay off the outstanding amount and then may find you do not have enough to purchase another property. However with SHIP reversion plans these are portable to new acceptable properties.

Would an equity release scheme reduce the amount of inheritance tax due on my estate after my death?

An equity release scheme will reduce the value of your estate you leave when you die so this may reduce any inheritance tax. If you are thinking of using equity release as part of your plans to mitigate inheritance tax it is important you seek professional specialist advice.

What happens to my partner if I die?

As long as the plan is in both names, the arrangement continues with the surviving partner. If it is in your name only, then unless the lifetime mortgage is paid in full the property will have to be sold and your partner will have to find somewhere else to live.

Do I need to revise my will if I go ahead with an equity release plan?

Equity release will have an impact on the inheritance you leave to your beneficiaries so this is a good time to review your will. If you take out a lifetime mortgage the amount you have borrowed plus the 'roll-up interest' must be paid by your executors before they make payments under your will to your beneficiaries. If you have taken out a Home Reversion plan you may have no value left in your home (if you have taken out a 100% home reversion plan). If you have retained a share for example 50% then this amount will be free to be passed to your beneficiaries after the value of the percentage owned by the reversion provider has been paid to it. Therefore due to the implications of equity release on your estate it is advisable to review your will and to ensure at the same time your existing will reflects your current wishes.

What happens if the lender goes into liquidation?

If the lender goes into liquidation after the funds have been released the equity release plan will be passed on to a new organisation. The new organisation will be bound by the terms and conditions of the original loan and will not be able to force you to repay the loan other than in the same circumstances that applied to the loan.

Will my benefits be affected by taking out an equity release scheme?

This will depend whether your benefits are means tested. For instance your state pension will not be affected as it is not means tested. However Pension credits and Savings credits for example which are means tested may be affected if your income or savings rise above the limits specified by the government.

If you have any other questions regarding equity release please call 0800 085 3181 and speak to a specialist advisor.

What is Equity Release? Benefits of Equity Release How Safe is Equity Release? Why Choose Equity Advice Line?

Equity Release Schemes will reduce the value of your estate and may affect your entitlement to state benefits.
Equity Release may involve a Lifetime Mortgage or a Home Reversion Scheme. To understand the features and risks ask for a personalised illustration.
Equity Advice Line is registered in England and Wales, company Registration number 6391398, is directly authorised by the Financial Services Authority, FSA number 485022.
Our typical fee is £495 paid on completion and we will also be paid commission by the lender/provider. We also offer the choice of a fee only option where you will pay a higher fee and the commission paid by the lender/provider is refunded back to you. Consumer Credit Licence number 624653.