Equity Release FAQ's
Below you’ll find answers to the questions we get asked the most about Equity Release Lifetime Mortgages and Home Reversion Plans.
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Equity release refers to home reversion plans and lifetime mortgages. To understand the features and risks ask for a personalised illustration
What is the minimum age for a lifetime mortgage
Minimum age is 55, but if you are considering a joint application the lender will look at the youngest life before considering the lending criteria
Does a lifetime mortgage reduce inheritance tax liable on my estate?
It is potential that a lifetime mortgage can reduce the value of your estate below the “nil rate band” above which inheritance tax becomes chargeable at 40%. For Inheritance Tax Planning we act as introducers only.
What is “No Negative Equity” Guarantee
If the property price falls in value or the loan interest exceeds the value of the property you will always have the right to remain living in your home. Upon sale or death, the estate will not be liable for any negative equity. The maximum that the Estate has to pay cannot exceed the value of the property.
What would happen if my spouse went into a care home and I was still living in the property?
The lifetime mortgage would not be affected and you would continue to live in the property
Can Eligibility for Housing Grants be affected by a lifetime mortgage?
Yes, you may find yourself not eligible as you will have increased funds
Could a lifetime mortgage affect my entitlement to free personal care?
Yes, except for Scotland which is not means-tested.
Are capped rates available for Lifetime Mortgages?
Yes, if interest rates fell below your rate you would pay less, conversely, if they rose you would not pay more than your agreed rate
What would happen if I remarried or divorced?
A new name may be added to a lifetime mortgage if they moved into the mortgaged property. This is called the transfer of equity. Equally named persons can be removed from a lifetime mortgage in the event of death, separation or divorce. The scheme would be changed to your name solely.
What would happen if I remarried a much younger person?
The provider would ask for the details of all permanent residents in the property and require those not part of the original contract to waive residency rights.
I have a pre-existing condition that is likely to reduce my life expectancy. Will this be taken into consideration?
Yes. Some providers will increase the amount they will lend for people with a lower life expectancy due to poor health
If I paid interest on a lifetime mortgage, would I be able to borrow more at a later date?
Yes, as long as you have not already borrowed the maximum amount. If you have borrowed the maximum amount then if the value of the property has increased and depending on the lender’s maximum lending guideline you may be able to borrow more.
Can I let the property out after taking out a lifetime mortgage?
No, not without the lender’s permission
Can I make overpayments and underpayments?
If you have selected a lifetime mortgage where you pay back an agreed amount you can usually overpay and underpay. You can even ask for a payment holiday to defer repayments. You can sometimes convert the scheme to a roll-up plan where no payments are necessary.
Can I transfer the lifetime mortgage if I move to another property?
All providers who adhere to the Equity Release Council’s Code of Conduct (formerly SHIP) would allow you to move the plan to another suitable property. However, the property would need to be acceptable to the provider so approval would be required.
What rights does the provider have over my property once the plan is taken out?
The lifetime mortgage provider has the right to enter the property to carry out essential repairs and maintenance. The costs can sometimes be added to the mortgage debt.
Should I change my will if I take out a Lifetime Mortgage?
There is no obligation to amend your will however, we would encourage you to keep your will up to date to reflect your current wishes
Can I repay a lifetime mortgage early?
Yes, but you may be subject to charges, associated costs and any Early Repayment Charges.
I have relatives living in the property, how can I get a lifetime mortgage?
If you have children or other relatives over the age of 18 living in the property they must sign an occupancy waiver releasing rights to the property. Children under the age of 18, or financially dependent adults would not need to sign a waiver but confirmation from your solicitor confirming what arrangements would apply should you die or go into long term care.
Can I do a lifetime mortgage on a buy-to-let property?
This can be done with some providers but is discretionary. If agreed it is likely that all tenants must sign a six-month assured short-hold tenancy agreement.
Can I do a lifetime mortgage on a Holiday Home?
Some holiday homes that are let through agencies to holidaymakers are acceptable to some providers. Conditions would apply.
I have a leasehold property with a lease of less than 80 years. Can I do a lifetime mortgage?
You would need to extend the lease to a minimum of 80 years to become eligible.
I have a valuation where the surveyor indicated essential work needed. Could I take out a lifetime mortgage?
Sometimes a valuer will include a “retention” for essential maintenance work which needs to be carried out. If this is less than £5000 it should be possible to find a lifetime mortgage provider.
Are capital gains liable for a lifetime mortgage?
No, unless the property is “buy-to-let” or used for commercial purposes.
How much can I get from a Home Reversion Plan?
Between 35% and 60% of the value of your property is dependent on age, state of health and terms of the provider.
How much rent would I need to pay?
The provider would charge a nominal rent. This is for the purpose of contract law and is often as low as £1 per month
Who will own the property?
If the full value of the property is sold, the property will be conveyed to the reversion company in full. Where only part of the property is sold, the property is still conveyed to become joint owners as tenants in common. Details of the revised ownership will be updated at the HM land registry.
Can I move to another property?
No. if you have retained an interest in the property and you wish to move the property would have to be sold and you would receive your agreed proceeds.
Who values the property?
An independent, suitably qualified valuer, not associated or connected with the home reversion plan provider. You have the right to select a valuer who must be accepted by the reversion plan provider.
If I took out a partial home reversion plan, how much of the building insurance and maintenance would I have to pay?
You would have to pay all of the insurance premiums and all of the maintenance. The obligations and rights of a tenant under a Home Reversion Plan are broadly comparable to those under a conventional mortgage. The tenant, not the reversionary company, is responsible for the essential repair, maintenance and insurance
Can I take out a home reversion plan if I cohabit?
Yes, the plan would be set up on a Joint Life plan on the last survivor basis
I cohabit with an adult child, can I still take out a plan?
Yes, but the provider would usually ask your child to sign a disclaimer waiving their occupancy rights.
For a partial home reversion plan, who is responsible for the sale of the property?
The provider would be responsible for the sale and has an obligation to obtain the best price.
I have an outstanding mortgage; can I take out a home reversion plan?
Yes, but the provider will usually require the mortgage to be cleared prior to agreeing to a plan.
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE