When first thinking about Equity Release, so many questions are likely to come up. Here are some of those I’m most frequently asked.
Q. Can anyone apply for Equity Release?
A. No – there are certain requirements. For example, you must be at least 55 years old – and of course, a homeowner or wanting to buy a home. Younger people are not accepted for these loans. This is because the loan is essentially designed to help you through later life.
Q. Do all properties qualify for Equity Release?
A. Again, no… Lenders will need your home to meet certain requirements before they can accept your application. If you’d like to know if your house would qualify, do get in touch and I can discuss your case with you.
Q. Can we use Equity Release as a short-term loan?
A. Although it is possible to borrow against your house for only a few years, and some people choose to do this, you will incur an early redemption charge if you want to repay the loan within a certain period. Fees vary according to the lender, and each lender will also have their own rules about early redemption periods. This is something we can discuss before you proceed with an application but this is essentially lifetime planning and lenders are expecting the loan to last until you die.
Q. Are there any restrictions on how I spend the cash from my Equity Release loan?
A. No restrictions, however your adviser will try to guide you so that you use your money wisely!
Q. Will my Equity Release loan tie me to staying in this house?
A. No. While Equity Release loans are designed to enable you to stay in your home for the rest of your life, you do still have the option of moving house if you want to. It will often be possible to take all or part of your loan to another property so long as it too qualifies– but in some circumstances you also have the option of repaying it when you move.
Q. Do I keep the loan against the house if I move into a residential care home?
A. No, at this point your loan will need to be repaid – whether from the sale of your house, or from funds that your family raise by other means. However, if moving into a care home is the reason for redeeming your loan, you will not have to pay an early redemption fee. If you're a couple, it is only when the second of you dies or moves into long term care that the loan becomes repayable.
Q. Can I take Equity Release against a property that I own but do not live in?
A. Generally, no – you must be living in the house that you are borrowing against. There is however one lender who will lend against buy to lets – but as with all commercial loans, the interest rate is typically higher.
Q. Will my partner have to repay the Equity Release loan if I die?
A. No – the loan remains intact until the death of the second home owner/ borrower so long as you are both on the Deeds to the home and of course the equity release
Q. How much will my family have to repay when they sell the property after I die?
A. This depends on how long you have had the loan and how much interest is being applied to it. It also depends on whether you allow your interest to roll up, or choose to service it during the lifetime of the loan.
If the interest is left to roll up, your adviser will be able to tell you exactly how much your family will have to repay in any given number of years once the lender's interest rate is known. If you pay all the interest as you go along, your estate will only have to repay the original sum.
Q. Could an Equity Release loan help my family to pay less Inheritance Tax when I die?
A. Potentially yes, so long as you have moved the money outside of your estate – because in doing so you will have reduced the overall value of your estate. I discuss this in more detail in my post on Inheritance Tax.
For more information, get in touch for a no obligations chat.
