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There are two main ways in which such a result can be achieved. One involves selling the property outright and retaining the ability to continue residing there under a secure tenancy. The other involves creating a mortgage with a requirement for capital repayment on eventual sale or death. The latter schemes may require regular interest payments or may roll up the interest to be paid when the capital is paid back.
How much is released by such schemes depends upon the value of the property and the age of the owner and is governed by actuarial criteria. The amount released therefore does not compare with a full sale value, but then other considerations relating the need to live in the house are also to be borne in mind.
Alternatives to such schemes could include selling and buying a smaller and less expensive property or selling and moving into a rental property.
Considerations over how the capital released may affect long term care liabilities do need to be borne in mind though, as does the possibility of causing upset to those who hope to inherit but who may find that all capital is taken up by loan repayment and interest repayments.
Equity release is on the surface a straightforward matter but once questions are posed more complexity in the whole scheme becomes evident. It is right for some people: it is not right for others.
At Franklins we are happy to advise clients in relation to the issues and to act on their behalf in conducting such a transaction but would first seek to ensure that any scheme considered is subject to a full open market appraisal. This would be coupled with a full family review to ensure everyone was entirely happy with the potential outcomes. We refer all such queries to an independent adviser to assist and provide the open market comparisons; there are a lot of alternatives on the market and it is very confusing indeed.
If you are interested in finding out more please contact our Bespoke & Commercial Property department on 01908 660966 or 01604 828282, quoting “Equity Release” and we will be pleased to offer advice and see if we can help.
Equity release is a scheme which can help to release some of the equity tied up in the property. However, as with many financial schemes there are pros and cons. The primary downside is that you are effectively creating debt, with your property being the security against that debt.
It can be a good idea in the right circumstances. Equity release helps to release tax-free cash from the value of the property by creating debt against the secuity of that property. The debt is then paid off by selling the house when you die or go in to care and anything left over once the debt has been repaid is released for inheritance or other means.
There shouldn’t be a catch. You should seek professional advice about the pros and cons of equity release. It can be a useful way of releasing cash from the value of the property, but you are effectively creating a debt, which must be financed by the sale of the house either when you die or go in to care.
Equity release is a financial scheme which allows home owners to get a lump-sum tax-free payment with their house being used as security against that debt. It is effectively a long-term loan, which will accrue interest and must be paid back either when you die or go in to care.
Yes you can sell your house if you have taken an equity release scheme. You can re-pay the equity release debt at any point.
Yes you can get equity release on more than one occasion.
Equity release is a means of gaining a lump-sum tax-free cash payment, with your property being used as the security against that lump sum. It is effectively a long-term loan with the sale of the property when you die or go in to a home being used to pay off that loan (plus interest accrued). Therefore, you should carefully consider whether you wish to create a debt with your home being used as security.
Equity release schemes vary, but typically you can release anything from 20% to 100% of the value of your property, depending on the scheme you adopt.
If you have any questions about conveyancing, please don’t hesitate to contact our team of experts who are on hand and ready to help you.
