With equity release, a fast-growing product in the mortgage industry, there are several issues which homeowners seeking equity release plans for comparison need to check.
One question is whether you can have a lodger, or a tenant in your property and still access an equity release plan?
First, it is important to distinguish between a lodger and a tenant. The former will live in the landlord’s main residence and share the living accommodation, and the landlord must live in the accommodation throughout the lodger’s time there. The lodger must not have exclusive occupation, so there cannot be a lock on their door within the property, otherwise a tenancy may come into operation.
Other issues which confirm that there is no tenancy include landlord services such as providing clean linen and cleaning, thus entering the room regularly.
It is important to distinguish between the two as different companies offering equity release plans apply different rules to third party occupation of the property.
The main rule of thumb is that by and large a lodger is acceptable, while a tenant is not. The main reason for this is the legal assumption that a tenant acquires rights. A survey of ten leading providers showed that only two, Just Retirement and OneFamily, may be prepared to offer a lifetime mortgage where a tenant lived in the property.
Meanwhile, only one company, Bridgewater, refused an agreement where a lodger was involved. Other issues where the companies differ is whether rent can be payable, whether the room can be advertised, and whether the lodger or tenant has signed a waiver. Again equity release providers all have different criteria for acceptance.
One area of certainty that does arise is the majority will require a waiver of occupancy being completed. This will be required to be signed by the lodgers or tenant, as it provides protection for the lender to be able to oust the resident should the need arise. This would almost certainly be when the homeowner had died or moved into care. At that point, the house would need to be sold and to do this the property would need to be vacated. The waiver document allows lenders to achieve this.
Finally, lenders may wish to put a cap on the number of lodgers or tenants, and this can range from one to no limit, hence check with your local Equity Release Supermarket advisor.
The good news for those seeking such a release of funds is that having a lodger and in some cases a tenant may not be a handicap, but still speaking to an equity release specialist will help find which lenders would accept lodgers or tenants under such circumstances.
Call the Equity Release Supermarket team on 0800 678 5955 to check whether you qualify for an equity release scheme where non-family members are present in your property or annex.