You will see advert after advert on the tv assuring you that equity release is the way to go to give yourself some money once retired, however, there are two ways of looking at this type of mortgage.
Do you take the money and run and not worry about the diminution of assets after you have gone or do you manage on your pension etc and make sure your family are secure? If you have no family to leave your property to, or they are not in need of your assets, you may decide to proceed anyway and that is your choice.
The main factor of an equity release, or lifetime mortgage is that the outstanding amount increases year on year. There are a few types of equity release mortgage, but the main type is where you borrow money against your property. It is registered as a charge at the Land Registry. When you move, sell or pass away the charge is redeemed in the normal way.
There are options available after you have taken the money, some allow you to repay the interest each month so that the debt does not increase, but also does not decrease, and you do not have an insurance policy to repay it at the end of the term. The money comes from the sale of your property. Some allow you to make a payment ‘as and when’ and should you have a little extra cash one month, you could repay some of the capital. Most hope that you will repay nothing, and that the monthly interest will add to the capital, which then adds to the interest etc etc adding up each month. The options available will be discussed at the outset with your Financial Advisor who will then find the best mortgage for your situation.
There are strict rules that Financial Advisors must adhere to when advising on an equity release mortgage, and it must be right for each individual. Equity release is not right for some people and the option not to proceed must be given.
There are also very strict rules once you have taken your equity from your property and the mortgage offer sets all of these out in plain English, thus ensuring the individual knows exactly what they are agreeing to.
It is advisable to discuss with your family and any beneficiaries under your Will that you are thinking of taking an equity release mortgage, as it comes as a shock to some, when their loved one has passed away and they knew nothing of the existence of an equity release mortgage and the equity in the property has been vastly reduced.
Once you have decided to take an equity release mortgage, you will need to engage a lawyer to deal with this for you. These are specialists who deal with such mortgages. You will need to meet with the lawyer face to face and sign various documents, before the mortgage money will be made available.
This article was prepared by Yvonne Kellow, Associate in the Property team at WBW Solicitors in Paignton. If you would like to contact her to discuss anything mentioned in this article or for any property related query, please call 01803 546118 or email yvonnekellow@wbw.co.uk.
WBW has offices in Torquay, Paignton, Newton Abbot, Exeter, Bovey Tracey, Exmouth, Honiton, Sidmouth, Launceston, Axminster, Chard and Seaton.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
