Property Advice Blog - Equity Release FAQs

Equity Release - Frequently Asked Questions

PROPERTY ADVICE BLOG - EQUITY RELEASE - Frequently Asked Questions

Q. Are there any conditions connected to how I spend the money I make from equity release?

The answer is no. However don’t borrow beyond your needs, as the more money you take the more interest you will have to pay.

Q. What are the main risks related to equity release?

With a Rolled-Up Loan the biggest downfall is the amount of money you owe at the end of your loan. Depending on the rate of interest a Rolled-Up Loan will typically double after 10 years. Another risk is that your property loses its value over the years and you do not have any money to pass onto beneficiaries when you die.

Q. Will I still own my home with equity release?

If you take out a lifetime mortgage then you will still own your own home. However, if you chose a reversion company they will own all or part of the property. Therefore, you won’t own all of your home but you can still live in it for the rest of your life.

Q. Will I be able to move house easily?

Yes, depending on your lender. Some mortgage lenders allow borrowers to move home as long as the new house provides enough financial security. However, if you move to a cheaper property your lender may ask for some of the loan to be paid back first.

Q. What happens to my home when I die?

If you have a lifetime mortgage your house will be sold when you and your partner die. After the lender has taken back its loan, any extra money made from your home will go to your estate. With a reversion scheme, the reversion company will own all or part of your property when you die.

Q. What would happen if I died soon after taking out the loan?

Check your chosen company’s terms and conditions in terms of paying off a loan early, as some lenders and reversion companies will make a charge. Some reversion schemes do offer a refund if you die within the first few years of signing an agreement, so ask the right questions before you choose.

Q. If I died before the end of my loan, what would happen to my partner?

The surviving partner would have the same rights to the loan as before you died, as long as the plan has been taken out in both of your names.

Q. What would happen to my partner if I needed to be taken into long-term care?

This shouldn’t affect the conditions of your chosen plan as long as one of you remains in the property. The plan would only be effected if you both left the property. In these circumstances a doctor may need to verify your medical condition.

Q. What would happen if both my partner and I go into permanent care?

In this situation the house would normally be sold and any leftover money would belong to you after paying off both the loan and interest. If you had chosen a reversion scheme, the reversion company would own all or part of your property if you were both taken into care.

Q. Would the policy change if my property value falls?

No. The terms and conditions would remain the same. As long as you keep to the rules of policy the lender or reversion company take their own risk.

Q. Can I lose my home with a lifetime mortgage or a reversion scheme?

You shouldn’t lose your home under normal circumstances, but you should always check with the lender or company for a full understanding of their rules. The company should make clear in the ‘Key Facts Illustration’ if there is any chance you could lose your home. With Rolled-Up Interest Loans for example, even if you miss payments you cannot lose your home. The same is true of an Interest-Only Loan. However, every mortgage is different and every provider has different rules, so always discuss any potential problems before they become an issue.

Q. Who is responsible for repairs and maintenance?

You are responsible unless the lender or company has a policy which deals with repairs and maintenance. Often lenders and reversion companies recommend local suppliers to help maintain your property over the years.

Q. What happens if I change my mind about using equity release?

If you stop your lifetime mortgage early you may have to make an early repayment charge. However, it’s not possible to change your mind with a reversion scheme. Once you sell all or part of your home the contract is binding.

Q. Who can I talk to about raising cash from my home in the future?

Speak to the lender, reversion company, a financial adviser, a local home improvement agency, the Citizens' Advice Bureau, a solicitor or a local housing advice centre.

Q. If I receive bad advice or choose a product that does not suit me can I claim compensation?

It depends on whether your provider is regulated by a governing body. If you find that it is regulated but you are not happy with the outcome you can take your complaint to the Financial Ombudsman Service..

Q. I want to unlock my property’s value with equity release. What should I do now?

Speak to a professional financial adviser and members of your family before making a decision. Compare as many lenders and companies as possible and write down a list of questions which you want answered. PROPERTY ADVICE BLOG has listed a number of useful organisations below, helping you find the best people to help you with your future.