An Equity Release Mortgage (also commonly known as a “Lifetime Mortgage”) allows you to borrow money against the value of your home or main residence while retaining ownership. This is an effective way to free up some of the wealth tied up in your home to pay for things such as home improvements, larger purchases, gifts to family and long-term care costs.
Modern Equity Release Mortgages can be very flexible, enabling you to draw down funds when required to suit the changing needs of your lifestyle. Some schemes allow you to make voluntary or partial repayments when you feel it is appropriate to do so. Whether or not you make repayments, interest is charged on what you have borrowed like a traditional mortgage. When you pass away or move into long-term residential care the property is sold and the money from the sale is used to pay off the loan with any remaining money going to you or your Will beneficiaries.
If you are considering an equity release product, it is crucial to ensure the rights to your property are not compromised by the scheme you are considering and that the product 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.
Important considerations include:
The Equity Release Council is a trade body for companies providing equity release products and ideally you should check that the company you are considering is a member. Members sign up to a code of practice, formerly known as the Safe Home Income Plans (SHIP) Code of Practice, and there are product standards which guarantee that:
Before you sign up to any equity release product it is important to take legal advice so that you know what you are signing up to. You should consider the impact on arrangements made in your Will and also how the plan will affect your long term care and inheritance tax 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. Please contact us for further information and to book a consultation with one of our experts.
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