WHAT IS EQUITY RELEASE?
The equity in a property is its market value less any outstanding mortgages. Equity release refers to ways of accessing the value in a property without having to sell it.
There are two types of equity release: ‘lifetime mortgages’ and ‘home reversions’.
WHAT IS A LIFETIME MORTGAGE?
In our experience a lifetime mortgage is by far the more common type of equity release. It is a mortgage on a property that incurs interest, but, unlike a conventional mortgage, the interest rate is fixed for life, and there is no requirement to make regular payments. Instead, the interest “rolls up”, which means it is added to the mortgage debt. When the owner passes away or ceases to live at the property (e.g. because they are being cared for elsewhere), the property is sold and the debt repaid.
Some lifetime mortgages allow repayments to be made during the life of the mortgage, but there are limits on how much can be paid without penalty.
All reputable lifetime mortgage providers offer a “no negative equity guarantee”, which means the debt will never exceed the value of the property.
WHAT IS A HOME REVERSION?
In a home reversion, the lender purchases all or part of the property in return for a lump sum or regular payments. The owner will either retain an interest in the property or will be granted a new lifetime lease.
Once the owner passes away and the property is sold, the lender is paid the appropriate share of the sale.
HOW DO I GET EQUITY RELEASE?
These are regulated financial products which you will need to contact a specialist broker to advise you about. Some of the main lenders have in-house advisors who can help you, but they can only advise on their own products.
HOW CAN MJP LAW HELP ME?
Once you have selected your Equity release product, applied for it and your chosen lender has made you an offer, you will need legal advice on the meaning and content of the offer, the lender’s terms and conditions, and the documents you will be asked to sign. You will also need a solicitor to manage the completion.
MJP Law’s conveyancing team is experienced in giving this advice and managing equity release completions for clients. For further information contact the team on 01202 842929.