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Mark Gregory, Founder and CEO at Equity Release Supermarket
www.equityreleasesupermarket.com
Tel: 0800 678 5955
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Question
What information will I need to supply?
I am planning to arrange to speak to an equity release adviser to discuss releasing money from my home to pay for renovations.
I wondered what paperwork I will need in place and what accounts the adviser will need to see. My husband and I own our house outright and we are both pensioners. Do we need to show the deeds and any other financial information?
Answer
At the point you speak to your equity release adviser for the first time, they will help establish your initial requirements and therefore any information to prepare for an initial meeting.
Dependent upon the solution – either lifetime mortgage, RIO (retirement interest-only mortgage) or retirement mortgage will help the adviser gauge the documentation required.
Lifetime mortgages work very differently to residential mortgages. The lender doesn’t consider your income or expenditure when deciding what they will lend. The main factors that determine how much you can borrow are your age and the value of your house.
However, for RIO’s and retirement mortgages, these are based on income and affordability, thus these figures will impact on your borrowing capacity.
Nevertheless, to be able to tailor any later life lending plan, your adviser will always conduct a fact find to assess your current situation and obtain a clear ‘picture’ of your finances.
This will include details of your current income/expenditure, loans, mortgages and further information. Using this information, your adviser would be able to make you a personal recommendation and document this in your personalised Suitability Report.
Regarding the deeds, unless there was anything specific you needed to point out, they will be checked during the legal process, so there would be no requirement at the advice stage to produce any deeds at the meeting with your adviser.
So, I’d suggest your next steps are to speak with your local adviser at Equity Release Supermarket and they will be on hand if you have any questions regarding the process.
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Question
Helping my daughter get onto the property ladder
I have been very seriously considering using equity release as a way to help my daughter take her first step onto the property ladder.
I have had a look at some products which my daughter could take out which involve me being a guarantor, or becoming a joint borrower with my daughter. Is there any way of tying up to the two transactions at the same time? Or would I need to carry out the two processes separately?
Answer
It’s becoming increasingly popular for parents to help their children onto the property ladder and there are many ways you could look to do this depending upon the amount required.
There are residential mortgages, retirement interest-only mortgages or even personal loans where you could be your daughter’s guarantor or indeed borrow jointly with your daughter.
However, a lifetime mortgage, the most popular type of equity release plan, isn’t a residential mortgage and works very differently from one.
The ability to take out any of the aforementioned loans is largely driven by affordability. If the lender believes you have the right level of income and credit file, then they will typically lend to you, but individual lenders can have very different ways of assessing affordability.
I would therefore suggest you consider all lending opportunities during your research and line of enquiries.
Should these options not prove fruitful, then a lifetime mortgage may be a suitable alternative. This is proving a popular option as one of the advantages of lifetime mortgages is that there are no affordability checks for you to pass.
If you are over 55 and a homeowner with a property valued over £70,000, then you will probably qualify for a lifetime mortgage.
How much you can borrow will depend upon your age and the value of your property. Lifetime mortgages don’t have to be repaid until you die or move into long-term care and you also don’t have to make any monthly repayments.
If you chose not to make repayments, then the accrued interest and the amount borrowed are repaid when your plan ends, and this could be a considerable amount.
However, there are many ways to control the amount of interest to be repaid and one of these is to use an ‘interest-only’ plan, whereby you repay the interest charged on a monthly basis, thereby only the initial amount borrowed is repaid when your plan ends.
At Equity Release Supermarket, we find that this is a popular option for parents to help their children financially and often the child repays the interest for their parents. This is a double benefit for the child, as they get the financial help they need now and the impact on their inheritance is minimised.
The equity release process usually takes just four to six weeks. If you’d like to talk through how equity release could help your daughter buy her first home, why not get in touch with your local Equity Release Supermarket adviser today?
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Question
Limitations on cash released
Can you please advise me of any restrictions on the money issued upon taking out equity release? For example, could we use it to top up my son’s pension or put it into a savings account?
I realise the returns on savings are not as good as property, but I would very much like to keep some of my money aside for an emergency whilst also supporting my son’s future retirement too.
Answer
The money you release through equity release is tax-free and yours to spend as you wish.
However, from an advice perspective, we need to ensure that you are releasing equity for the right reasons and only taking sufficient to cover any immediate needs.
One rule of thumb, however, is we would not recommend equity release just for investment purposes. The reason for this is that you will pay more in compound interest on a lifetime mortgage than you will receive from deposit accounts or investments with no guarantees.
Furthermore, future savings/investments returns are unknown and therefore cannot be used as clear rationale for withdrawing equity from your property, particularly as noted, with interest that would compound over the lifetime of the mortgage.
You could use your money to support your son financially, but there could be potential tax implications to any type of ‘gifting’. So I recommend that you speak to a tax adviser as the implications of gifting money can be complex.
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Question
How long does the equity release process take?
I wondered if you could advise me on the process which will take place between me giving the go-ahead for equity release and receiving the money and also how long this is likely to take, please?
I am assuming it’s a bit like taking out a mortgage and should take several weeks. However, I would like to manage my own expectations, if that makes sense! Thank you in advance for your help.
Answer
The equity release process begins with you speaking to your expert adviser at Equity Release Supermarket to talk through your financial situation and the goals you have for the money you’ll borrow.
We always recommend that you involve your family as their inheritance will be affected by taking out equity release.
Once your adviser has assessed your circumstances, and if equity release is right for you, they will then undertake research across the whole of the marketplace to find a plan that best meets your individual needs.
Your adviser will present their recommendation, prepare a Suitability Report and if you are happy to proceed, your adviser will then submit your application to the lender.
At the same time, you need to appoint your solicitor and you are free to use your own solicitor. However, we recommend that you use one of our panel firms who are also members of the Equity
Release Council, as they are experts and we have negotiated special terms with them.
In accordance with the Equity Release Council rules, you must have at least one face to face meeting with your solicitor and they will manage the legal aspects of equity release for you.
Once the lender has received your application, they will instruct an independent surveyor to determine the value of your property and this will be used to decide what they will lend you.
Once this has been approved an offer will be sent to you, and one to your legal representative. This will outline the terms of your lifetime mortgage.
Here at Equity Release Supermarket we ensure that continuous dialogue is maintained using a combination of our dedicated case coordinators and unique online case tracking system.
This will send emails and advise when you reach key stages of the application process which typically only takes four to six weeks, from our first meeting until your money is in your bank account.
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