The Equity Release market continues to soar in 2022 and there is a growing demand for Equity Release products across the UK.

Read on to find out more.

What is an Equity Release Mortgage?

An Equity Release Mortgage, also known as a Lifetime Mortgage, is available to borrowers aged 55 and above. It allows you to take out a loan secured against your home (while maintaining ownership) which does not need to be repaid until you die or go into long-term care. Releasing a lump sum from your property enables you to spend on larger items which might not otherwise be possible, such as;

  • Home improvements
  • Purchasing a property
  • Going on holiday
  • Paying off existing debts
  • Gifting to family or friends
  • Repaying a mortgage
  • Supplementing income

How does an Equity Release Mortgage work?

Like a traditional mortgage, an Equity Release Mortgage is a loan secured against the value of your home. It can be very flexible, with the most popular schemes enabling you to draw down funds only when needed and giving you the option of making voluntary or partial repayments towards your loan when you can.

Interest is charged on what you have borrowed, and this can either be repaid through monthly/ad-hoc payments or rolled up and added onto the loan. When you die or move into long-term care, your home is sold, and the money made from the sale is used to pay off the loan with the remaining amount forming part of your assets or your estate.

It is crucial for you to ensure the rights to your property are not compromised by the scheme you are considering and that the scheme is appropriate to your circumstances.  If not, your home could be at risk, or you could end up owing more than you are able to pay back.

An Interest Roll-Up Mortgage or Interest Paying Mortgage?

There are two main types of Equity Release mortgage, the “interest roll-up” mortgage and the “interest-paying” mortgage. These account for most of the market with flexible drawdown products roughly twice as popular as those paying a single lump sum.

Worried about Negative Equity?

The Equity Release Council (“ERC”) is a trade body for companies providing equity release products and it is advisable that you check that the company you are considering is a member.

ERC approved products include a “no-negative-equity guarantee” ensuring that you or your beneficiaries will never have to pay back more than the value of your home even if the debt has become larger than the property value.  Other rights include the right to remain in your home during the term of the loan and the right to move home subject to certain criteria.

How can we help?

Before you sign up to any equity release product, it is important to take legal advice so that you know what you are committing to. Consideration needs to be given to the possible impact on arrangements made in your Will, and how the plan could affect your inheritance tax and care fees situation.

At Backhouse Solicitors we can provide expert advice on equity release schemes, explaining the benefits and potential problems of these arrangements and how they will affect your estate. Contact us today to book a free initial consultation with one of our specialist solicitors.

Tel:          01245 893400
Visit:       17 Duke Street, Chelmsford, CM1 1JU
Or send us a message through the Contact Us page on this website.