Frequently Asked Questions
On a daily basis, our advisers are asked lots of important and interesting questions about equity release. We’ve therefore compiled a comprehensive list of the most frequently asked questions that we’d like to share with you below. Additionally, our FAQ's factsheet is available to download here.
We hope that you can find the answer you’re looking for. If not, please call Equity Release Supermarket on 0800 678 5955, where an adviser is always on hand to answer all your questions.
What is equity release?
Equity release allows older homeowners to borrow money from the value (the equity) of their property that has built up over time. The cash released can be used towards any purpose. Lifetime mortgages - the most popular plan, charge interest which compounds over the lifetime of the loan. The final balance is eventually repaid by the sale of the property upon death, or long-term care of the last survivor.
Who are Equity Release Supermarket?
Based in Cheshire, we are a leading, independent and impartial equity release broker who are able to provide advice on all later life lending products.
We are not a lender, so our experienced financial advisers have the freedom to search the whole of the equity release marketplace to find the right deal for you.
What is the difference between equity release, lifetime mortgage and home reversion?
Equity release is the generic term for any financial product that allows you to borrow against the value of your home. There are then 2 main types of equity release plans – a lifetime mortgage or a home reversion.
Lifetime mortgages are the most popular type of equity release plan (total over 99% of plans). They are a form of mortgage, with a 1st legal charge on the property, but rather than having a fixed term of years, they run for the rest of your life. There are usually no repayments to make, however most plans now allow repayments for those wishing to control the future balance.
Home reversion plans work very differently as there is no interest element involved. With these schemes, you sell part, or all of your property in return for a tax-free lump sum, a regular income, or both. There is usually no rent to pay, and you receive a lifetime tenancy, meaning you can remain in your home for the rest of your life.
Do I qualify?
This depends on the age of the youngest person on the title deeds & also your property criteria. For lifetime mortgages the minimum age is 55, for a home reversion plan the minimum age is 65. The minimum property value acceptable in the equity release marketplace is currently £70,000.
How much could I release?
How much you can release depends upon the age of the youngest homeowner, the value of your property and whether you have any pre-existing health conditions.
You should only initially release the money that you need. Remember, the more you borrow, the more interest you are charged and need to repay. If you need additional money in the future, we have access to schemes such as the drawdown lifetime mortgage where you can take money in stages, rather than all at once.
Will I have to pay tax on the money I release?
Any lump sum or income you receive is tax-free, being a release of capital from your home.
However, any monies left on deposit or other forms of investments, could become taxable. If you are gifting monies from the proceeds of equity release, this can have implications on your estate planning and we can discuss the implications of this with you.
How long will it take to get my money?
The process should take approximately 4-6 weeks. This is dependent upon your property type, lender, solicitor and adviser all working together. With our experience, dedicated case handlers & panel solicitors we help smooth this process out for you.
Do I have to pass any credit or affordability checks?
Equity release schemes are not dependent upon repayment ability; hence a good credit history is not essential. Nevertheless, the number of schemes available may be restricted if you have an adverse credit record.
With our experience and ability to research the whole of the equity release market, we can still find the best plan based on your individual credit history.
What is an enhanced plan?
Some lifetime mortgages take into account the health and lifestyle of the youngest applicant when calculating how much you can borrow.
If you (or your partner for joint applications) have a pre-existing medical condition (or conditions), then you may be able to borrow more with an enhanced plan. Alternatively, any ill-heath issues can result in receiving a lower interest rate than standard terms available.
I have a mortgage outstanding on my house. Can I take out equity release?
Yes, you can. But with the money you release, you must repay your outstanding mortgage balance first. Equity release must be the only charge registered against your property.
You and your family
Should I speak to my family about equity release?
Being such an important financial decision, we always suggest that you discuss matters with your family and even have them present at any meeting. Remember, it’s your family’s inheritance that will ultimately be affected by any release of equity from your property.
I want to leave an inheritance for my children. How will equity release affect this?
Equity release will reduce the value of your estate that you leave for your beneficiaries.
By how much is determined by the type of equity release plan, how much you borrow, how long the plan runs for and whether or not you choose to make any additional repayments.
Lifetime mortgages now have features and options guaranteeing a percentage of your property’s value is still passed on to any beneficiaries –
- Inheritance protection guarantee – certain lifetime mortgage plans have the option to protect a percentage of the final sale value of your property.
You can also choose from a range of plans that can help minimise the amount of interest repaid:
- Interest-only lifetime mortgages – repaying the monthly interest charged by the lender will stop any interest accruing on the balance. If, for example, you borrow £80,000 and you pay the interest charged every month, your estate will only need to repay £80,000 when your plan ends – thus maximising the value of your estate.
- Voluntary repayment lifetime mortgages – some equity release companies allow ad-hoc repayments of upto 10-15% of the original amount borrowed, with no penalty. No proof of income or affordability checks are required. Making lump sum repayments reduces the final amount be to repaid, helping control your future balance and passing on a larger inheritance.
- Drawdown lifetime mortgages – rather than taking the whole amount in one lump sum, drawdown allows you to borrow in ‘chunks’. As lenders only charge interest on what’s been withdrawn, you’ll pay less, resulting in a lower final balance to be repaid and saving your estate money.
Whatever the final value of your estate, you can be sure that your beneficiaries will never be out of pocket because all the lifetime mortgages we advise on come with a 'no negative equity guarantee'.
Do I still own my home?
Any lifetime mortgage enables you to retain full ownership of your home and 100% of any increase in your property’s value.
With a home reversion scheme, the percentage ownership will depend on how much of the property is sold to the home reversion company. Nevertheless, you will have the right to remain in the property, usually rent free, for the rest of your life.
Can I move house?
All lenders who are members of the Equity Release Council must include the ability to transfer your equity release plan to a new property. This will always be subject to the new property meeting the providers lending criteria and be dependent on the new property’s value. Each case will be considered on an individual basis and it’s always best to speak to one of our advisers.
Does equity release affect my means-tested benefits?
Equity release can affect means-tested benefits such as pension credit, savings credit and council tax support. It's therefore important we fully understand your personal circumstances. Equity Release Supermarket's duty of care is to fully explain any potential implications, before proceeding. We will offer the best equity release advice to ensure that means-tested benefits are considered before advice is provided.
Can someone else live in the house?
Yes. A spouse or partner to the plan will continue to live in the property even after you pass away or move into long term care. However, anyone living in the property who is not party to the equity release plan usually need to sign a waiver of occupation rights. Thereafter, in the event of death or long-term care, they will then need to vacate the property.
What happens if I die or move into long term care?
On death or moving into long term care for a single life (or 2nd life if joint borrowers), your executors will need to contact the equity release provider. Your executors will be responsible for repayment of the plan, which is usually by sale of the property. Interest will continue to be charged until the loan is repaid, which normally needs to be within 12 months.
Fees and charges
What are the fees and charges?
Equity Release Supermarket doesn’t charge for any initial consultation with your adviser.
Our advice fee is only charged should you complete an application with ourselves. This cost is covered in our fees and charges page.
Lenders may also charge a valuation fee, an application fee and finally you will need to cover the cost of your own legal fees. Due to economies of scale, Equity Release Supermarket has access to free valuations, and cashback incentives all helping to minimise the set-up costs of your plan.
Use our compare deals tool to discover all our special deals with lenders.
How will my property be valued?
Your home will be valued by a local independent valuer. This report will determine the value of your property and ultimately governs how much you can borrow.
The valuation report will be based on similar properties in your area that have been sold recently and will form the basis of your Lifetime Mortgage Offer, outlining the terms of your equity release plan.
I already have an equity release plan: can I borrow more?
Possibly. This will depend on the terms of your existing lifetime mortgage and the balance outstanding. Using a combination of current age(s), new property valuation and the lenders loan-to-value tables, will help determine whether any extra funds can be released. If not, then we can provide advice as to whether any alternative equity release plans could assist.
Can I switch my plan?
Possibly. Again, this depends on your type of lifetime mortgage, its current balance and whether any early repayment charges apply. We’ll conduct a switch plans analysis to see whether it would be beneficial to transfer by researching the whole of the market. Switching equity release plans can be for three reasons -
- To obtain a lower interest rate - switching to a lower interest rate can potentially save your estate interest over the longer term.
- To borrow additional funds - if your existing lender cannot, or will not provide additional funds, you may need to find an alternative lender that will release more cash.
- To gain additional features - where old plans had limited flexibility, by switching plans today you can gain access to a host of new options.
Can I make partial repayments of capital?
Yes, you can with some of the lifetime mortgages now available.
With an interest-only lifetime mortgage, disciplined interest payments are made monthly and could be an option if you want to keep the balance level throughout the term of the plan and protect your inheritance.
Voluntary repayment lifetime mortgages allow upto either 10-15% of the original amount borrowed to be repaid each year. Using ad-hoc repayments, you can manipulate your final lifetime mortgage balance to suit your requirements for a final inheritance.
Can I close my lifetime mortgage?
Lifetime mortgages are designed to run for the rest of your life and are usually repaid when you die or moved into long term care.
So, if you wish to repay your lifetime mortgage in full, then your lender will prepare a settlement figure. This will illustrate your final balance and may include any early repayment charge (ERC) due as you are repaying the plan early.
However, there are plans available charging no ERCs under certain lifetime events, or fixed ERCs that reduce over a number of years. Your Equity Release Supermarket adviser will explain the impact of ERCs if you are considering an early repayment.
The importance of advice
Do I need financial advice?
Yes. To take out any type of equity release plan, you must speak to a suitably qualified financial adviser. This is a mandatory requirement of the Financial Conduct Authority (FCA).
Who should I speak to for advice?
Only financial advisers with specialist qualifications can offer equity release advice.
The Equity Release Council website lists all the advisers that are registered with them and are suitably qualified.
All Equity Release Supermarket adviser hold these qualifications and are members of the Equity Release Council.
Equity Release includes, lifetime mortgages, retirement mortgages and home reversion plans. To understand their features and risks, ask for a personalised illustration. There will be a fee for expert advice from Equity Release Supermarket, guaranteed not to be more than £995, only payable on the completion of application.