How Does Equity Release Work?

Posted by Coles Miller on 13th May 2020 -

Most people have heard of equity release but few really understand how it works or how to go about it.

To help you, here is a jargon-free step-by-step guide to explain the process of unlocking the wealth you have in the value of your home.

In these challenging times life may have thrown you a curveball. Perhaps you have been made redundant or had to fork out unexpectedly for something essential such as a new roof.

Or you may be in need some essential cash to maintain your standard of living without having to downsize to a smaller property.

 

Step 1: Are You Eligible?

Firstly you must be at least 55 years of age. If applying jointly with your partner or spouse, the youngest applicant must be at least 55.

This is the minimum age to apply. You may not be eligible for all the different types of equity release on the market – you may need to be older.

Secondly, the property you’re looking to release equity from must be your main residence.

Step 2: Research, Research, Research

Do your research. We would recommend that you seek further information from: 

• www.equityreleasecouncil.com/what-is-equity-release/
• www.ageuk.org.uk/information-advice/money-legal/income-tax/equity-release/

We recommend that you contact us to arrange a free 30-minute no obligation consultation.

During the Covid-19 lockdown, we can contact you by telephone, Skype or another video conferencing application.

Many of our clients prefer to discuss equity release with us informally at a preliminary stage, rather than contacting an unknown financial adviser.

We have excellent relationships with a range of specialist advisers and are happy to help if you need an introduction.

Step 3: Seek Advice From A Qualified Adviser

Equity release is a specialist area that is regulated by the Financial Conduct Authority (FCA). Seek advice from a qualified and regulated adviser. 

Your adviser will help you to decide whether equity release is the right option for you. They will explain the benefits of equity release and also the other implications you need to consider.

If equity release is suitable for you, then your adviser will let you know about all the available products. (If your adviser thinks equity release is not the best option for you, they will tell you and can suggest alternatives.)

You will receive a written report explaining the details of the plan that is recommended. This will include details of the costs and risks associated with it. For a lifetime mortgage, this is known as a Key Facts Illustration (KFI).

If you are considering more than one option, you must be given a KFI for each plan so you can compare them.

Step 4: Consider Your Options

Consider your adviser’s recommendations. Take time to decide. You may want to chat it over with family because any decision you make may impact their future inheritance. Again you may need to seek further advice on this.

Consider whether there would be any implications for your:

• tax position
• options for moving home in the future
• eligibility for benefits.

Step 5: Application

If after consideration you wish to go ahead, you will need to apply to the equity release plan provider.

If you are successful, you will receive a formal offer. The offer will set out the full details of the plan including interest and any early repayment charges.

The equity release provider will also instruct a qualified surveyor to value your home. You will then receive a copy of the surveyor’s report.

Step 6: Legal Contract Advice

Before signing an equity release contract, you must consult a solicitor. This is obligatory under the rules of the Equity Release Council.

A solicitor will make sure you are proceeding with full knowledge of the benefits and risks. They will usually prepare a written report explaining the contractual obligations within your offer.

The solicitor will verify that you understand the terms of the contract you are planning to sign.

If you are happy to go ahead, you and your solicitor will sign the acceptance form. A certificate will then be issued to confirm that all the key points have been discussed.

Step 7: Your Equity Is Released 

After the final legal checks, the equity/money will be released to your solicitor. They will then arrange for the money to be transferred to you. This usually takes a couple of weeks. 

Step 8: Enjoy Your Money

You have received your money and are free to use it however you like.

Whether you want to help family members financially, carry out home improvements, travel or clear your debts for a more comfortable retirement, this is the time to do it. 

Find Out More About Equity Release

Contact Coles Miller Partner Anthony Weber in the Wills and Probate Department for expert advice. He is a solicitor member of the Equity Release Council and has been advising clients considering equity release for more than 20 years.

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