If there’s a chance you may sell your home, is it still worth taking out equity release? Mark Gregory of Equity Release Supermarket unravels a reader’s property conundrum…
The Question
I’m in a bit of a confusing situation and wondered if you could help, please. I am about to take out equity release but recently heard some developers were interested in the land around my property. Yesterday, the development firm approached me to discuss the possibility of selling to them.
I spoke to my son and he said, even if the developer were to buy my home, the process might take months – even years. Now I am in a quandary. Do I take out the equity release, under the risk I may be offered an above-market price for my home in the near future? Or, do I hold off and risk not having the money from the equity release when I need it most?
To put this into context, I am 78 and releasing the money to help with day-to-day living costs and to visit my sister in Australia.
I am aware equity release is either paid off when the homeowner dies or moves into care. So, would a lender agree to a full repayment should I sell up to a developer?
Thank you and I hope this makes sense!
Mark’s Answer
Thank you for your question, and yes it makes perfect sense as your type of enquiry is more common than you think, and something our experts are used to helping their customers with. However, without knowing explicit details of your situation, I am only able to provide you with some generic information at this stage.
Firstly, assuming you own the freehold to your home, which means you are the owner of both the building and the land, this gives you the freedom to make decisions regarding the home or land, such as dividing title documents. Sometimes land or property owners may opt to transfer all or a portion of these specific assets for a variety of reasons.
For example, as developers are interested in your land, you could sell them the land and retain your home on a separate title. However, the process of splitting a property into two titles in the UK can be long and time consuming and you should most definitely consult legal, professional advice.
Once the titles have been split, you could use the proceeds of the sale of your land to help with your day-to-day living costs and trips to see your sister in Australia. Furthermore, once you have spent the capital raised from the sale of the land you could consider equity release on your home in the future.
Without assessing your circumstances, it is impossible to make a recommendation for you. However, a popular choice for many customers when releasing equity from their home is a flexible Lifetime mortgage, as you retain 100% ownership of your home and the amount of capital you can release is dependent on your age and the value of your home.
A fixed lifetime interest rate is added to the loan each year and then a customer decides whether to make payments to service the interest, or they may decide to make no payments at all.
If they do not service the interest, the capital borrowed will increase, and reduce the amount of equity remaining in the estate.
There are costs to set-up the Lifetime mortgage, and early repayment charges can be over four, eight, 10 or 15 years, should a customer decide to repay the loan early.
Of course, the initial charges, fixed interest rate, and early repayment charges are explicit charges, so one of our specialist advisers will be able to provide you with exact, personalised details of the costs and charges with a flexible lifetime mortgage.
Meet our expert…
Mark Gregory, founder and CEO of Equity Release Supermarket, is here to answer your questions. Mark is an adviser himself with over 20 years equity release experience.
He launched Equity Release Supermarket 10 years ago and it has grown to become one of the UK’s leading equity release specialists.
Email kate.saines@emap.com to ask Mark a question
