Lorraine Stratton-Webb, Head of the Residential Property Team at Clough & Willis answers your questions on Equity Release.

Q. What is Equity Release? 

Equity release is the releasing of some of the equity/capital that has accrued in your property during your ownership. You have two options when choosing an Equity Release product. 

1)      The most common is through a lifetime mortgage, whereby you release the lump sum by way of a mortgage against your property. Monthly repayments are not required and the interest accrues against the property. On your death, or on moving into long-term care, the loan and interest will have to be repaid usually by the property being sold. 

2)      The other option is a home reversion plan whereby you sell all, or a portion of your property to the home reversion provider. Similar to the first option there is no interest to be paid, however it is likely that the provider will buy the proportion of the property off you at less than market rate. You will have the right to reside in the property for the rest of your life. 

It is important that if considering equity release you seek advice from a specialist financial advisor as this product is not right for everyone but it can make a difference to those that it is suitable for, for the rest of their lives. 

Q. Can I sell my house if I have taken out an Equity Release? 

Yes you can. However the loan would have to be repaid, unless you have agreed with the Equity Release provider that the loan can be transferred to another property. The lender would not automatically transfer the loan as the new property would need to meet the lender's criteria.  

Q. Would taking out an Equity Release affect my Pension credit? 

If you are considering taking out an equity release it could reduce your Pension Credit. It is therefore essential that you obtain the appropriate advice before proceeding with an Equity Release to see whether the product would be appropriate or not.  

Q. Can you obtain further money from both schemes if required? 

For both types of equity release some providers offer facilities that can allow you to draw more funds in the future. However, this can depend on the valuation of your property at the time that you require the extra funds. Also if you have opted for a reserve facility this may mean that the interest that you pay is higher than those products without a reserve. Again it is important that you obtain the advice to ensure that the product you get is appropriate for your particular circumstances  

Q. Will taking out an Equity Release affect my benefit? 

Equity Release might affect any means tested benefits, particularly if you receive Pension Credit, council tax support or housing benefit.  It may affect your tax position.  Therefore you should take appropriate advice from the Inland Revenue, Benefits Agency or local Citizens Advice Bureau before proceeding further. 

Q. Will I no long need to maintain or insure my home? 

Your obligation to insure and maintain your home continues after taking out an Equity Release.  It would be classed as a breach of a term of the mortgage if you did not insure or maintain the property once you have taken out an Equity Release. 

If you need further information about Equity Release or any other Residential Property matter, contact Lorraine on 0161 7645266 or via email Lorraine.Webb@clough-willis.co.uk