The equity release market is currently at its peak with a record number of applications. For those aged over 55 and are considering releasing equity, here we review how the equity release application process works, how long it takes and the involvement required.
The equity release sales process is now the most streamlined since the product was originally conceived. Increased competition in the marketplace from new providers has resulted in equity release companies looking at ways to steal an advantage. As better interest rates for customers are now also on offer and today’s equity release plans are much more flexible than those available until a few years ago, never has there been a better time to consider a release of equity for the over 55’s.
An equity release application usually takes somewhere between 4 to 6 weeks for a lifetime mortgage scheme and 6 to 8 weeks for a home reversion plan, assuming the title on the house is clear. The actual amount of time your equity release process takes, also depends largely on how efficient and experienced your solicitor is. Applying for equity release involves legal paper work, which needs to be handled by a solicitor, and solicitors with expertise in equity release plans can help to avoid any potential delays in your application.
The First Steps
The whole process starts with completion of an application form which must come in conjunction with financial advice as NO equity release provider will accept an application without it. At this stage any fees required which would be clearly stated in the Key Facts Illustration (KFI) would need to be paid. Normally this would include the valuation fee made payable to the lender. Some equity release brokers do charge an advice fee on application; however Equity Release Supermarket would only charge their advice fee upon completion, so beware of paying unnecessary upfront fees.
On completion of the application form, it is then submitted to the equity release provider who will instruct a local surveyor to complete a basic valuation on the property. The role of this surveyor is to complete a report which will advise the current market value based on a relatively quick sale. The surveyor’s role will be to assess the local proximity to the property and establish similar properties and the price they had sold for within the last 3-6 months. Additionally, the surveyor will ascertain whether any essential repairs will be needed should the property have material defects that could affect the long term structure or re-saleability of the property.
At the same time as application submission, for speed of completion it is wise for the legal process to get underway. Unless a client specifically requests to use their own family solicitor, we would recommend an equity release solicitor from ERSA (Equity release Solicitors Alliance). We have an experienced panel of equity release specialist solicitors covering England Scotland and Wales, who are all members of ERSA; including the two largest & most experienced - Equilaw and Ashfords. As part of the Equity Release Council rules all applicants must be seen face-to-face by their solictor as further protection.
Both these equity release specialists offer Equity Release Supermarket a specially negotiated fixed fee agreement for our clients of £595+VAT & disbursements. Additionally, these solicitors will provide a ‘no completion, no fee’ agreement with our clients which should be considered for any future lifetime mortgage or home reversion application. There are many benefits of using our recommended panel, not just speed, but also for communication, as we have online access to their portals, providing efficiencies and enabling quicker completion timescales.
The solicitor’s role
Two sets of solicitors must be in place to carry out the whole process. Under Equity Release Council (formerly SHIP) rules different solicitors must be employed on behalf of the client and the lender. Once instructed by the client or broker, the solicitor acting on behalf of the client will send out an initial questionnaire requesting further information. This will include a request for information on whether any mortgage exists currently, the owners to the title, any restrictions, further tenants or major improvements that have been carried out with respective planning permissions. This questionnaire also provides the permission for the prospective solicitor to act on their behalf.
What about existing mortgages or secured loans?
Should any existing charges by way of mortgages or secured loans be present on the title deeds then they must be removed prior to, or upon completion. Any mortgage will usually be settled by the proceeds from the equity release scheme at funds release stage. However, another role of the solicitor will be to establish exactly how much will be required on the proposed completion date. This will be achieved by requesting a redemption statement from the mortgagee, who will provide the current balance and the daily accrual rate of interest being added during the interim period to completion date.
For an application to proceed through to completion, the lender will carry out certain checks to meet money laundering and the consumer credit act requirements. This will be proof of ID including passport, driving licence or government backed evidence such as your annual state pension letter or Inland Revenue tax code notification. Should none of these be available most lenders will also require a birth and/or marriage certificate as satisfactory proof of who you are. Additionally, proof of address will be required, so a recent utility bill or bank statement will be necessary.
Equity release and adverse credit
Some lenders will carry out credit checks. You may ask why this would be necessary as NO monthly payments are usually required with a lifetime mortgage scheme. The lenders view is that if someone has been negligent with previous credit payments, then there may be a tendency to not look after their property, thus affecting the lenders security.
Nevertheless, there would have to be severe credit problems for a lender to decline an equity release application due to adverse credit. Most lenders will accept previously missed payments, defaults and even CCJ’s (County Court Judgements) on their credit file, unless they are significantly large. Even then, most lenders such as Stonehaven will accept the application as long as the applicant has been forthcoming with an explanation as to why the CCJ’s had been applied. Undischarged bankrupts would usually be unsuccessful with any equity release borrowings.
Upon successful valuation and title checks, the solicitor acting on behalf of the client will set the completion date. Once your equity release scheme has gone through, you can receive the money by having it paid directly into your nominated bank account, or if you wish to save the telegraphic transfer fee (approximately £30), you can receive the funds in the form of a cheque. Depending on the particular scheme, money can be borrowed either as a one-off capital lump sum or by taking ad hoc withdrawals from a cash reserve set up from the outset.
An equity release plan can be a great way to turn the equity tied up within your estate into something tangible and usable. But like any large loan, it has its own risks. Therefore, before you decide to release equity from your home, make sure you speak to your solicitor or independent financial adviser first.
Companies such as Equity Release Supermarket provide a complete equity release service, whereby we provide guidance to clients from the start to finish of the application process as complimented upon repeatedly in our customer reviews via feefo. With our online case tracking facility, this application process is enhanced further by allowing 24/7 access to your dashboard where your documentation and case updates are maintained.
If you have any questions with regards to the equity release application process please call Freephone 0800 678 5955 where a qualified equity release specialist can discuss your requirements.