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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
Son living at home – can I get equity release?
My husband and I own our home outright and would like to release some equity to get us through the next five years.
We would actually like to downsize and move to a smaller property, but at the moment we cannot because our son lives with us and needs to be at the family home to commute to his work in London.
So, until he can save enough for a home we are hoping to release equity to help our son with his deposit and to cover some of our own livings costs and lifestyle expenses.
I would like to know whether we can release equity with our son still living at home – will there be any legal implications? Secondly, can we release the money when we intend to move?
Answer
You can take out equity release with your son living at home but there are potential implications that you should both be aware of. The first is if anything should happen to you both once your equity release plan is in place.
If you were both to die or move into long-term care, then your son would have to leave the property, as it is one of the requirements of equity release. Should that happen, then your property will likely be the source of the repayment and therefore need to be sold to repay the money borrowed (plus accrued interest) to the lender.
Typically, any occupiers (whose name is not on the deeds) aged 17 or over living in your property are required to sign a waiver form – waiving any right they have to occupy the property in favour of the lender.
If they do not sign the waiver form, the lender may not lend to you. It is a requirement that this person obtains independent legal advice before any waiver form is signed. Any fees incurred will need to be paid by that person.
Secondly, equity release will probably reduce the value of your estate and impact the inheritance you leave for your son.
This is why at Equity Release Supermarket, we always recommend that you include family members in your decision making and invite them along to any meeting(s) you have with your financial adviser.
For instance, are there any other siblings that would be affected by this course of action? If so, then this will also need to be addressed to ensure if an equal inheritance is to be provided, they are involved in the discussions.
When the time comes for you to downsize, you can ‘port’ or transfer your existing equity plan to your new property. However, this will always be subject to the new property meeting the providers lending criteria as well as assessing the value of the new property. For example, some lenders won’t let you transfer your plan to a retirement property.
Lender’s won’t charge a penalty if you port your scheme to a new property, although you usually need to pay a valuation fee and possibly admin fee, as well as your usual legal fees when moving to a new house.
Should the property you are moving to be of lower value, and the amount outstanding on your current plan is too high to port the whole balance, then you may need to make a part-repayment upon porting. However, this would come out of the equity that you would be raising by downsizing anyway.
Lenders consider each case on an individual basis and so if you are considering downsizing in the future, it’s worth speaking to your Equity Release Supermarket adviser.
The reason being is there are now ‘downsizing protection’ features within certain plans that allow you to repay the scheme in full after 5 years without incurring any early repayment charges.
This is why it’s always important to receive independent equity release advice as some of these features do vary between lenders.
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Question
Can I release equity on a second home?
Both my wife and I own two properties – our family home in a west London suburb and a holiday home in Suffolk. At present we live in our ‘holiday’ home pretty much half the year as we are retired and enjoy the slower pace of life.
We don’t want to sell either property but want to release the money on one of them to help our son and daughter with their first step onto the property ladder.
Can we do this? If so, are there any restrictions or conditions?
Answer
Owning two or more properties gives you options to consider with equity release – as you can take out a plan on either, or both of the properties you own, dependent upon your ages, proximity of the two properties and the amount you require.
Assuming you are both over 55 and you decided to take out equity release on your main property in west London (your residence) then you will be able to access the entire lifetime mortgage market and all the lenders.
This will give you the widest choice of plans and the most competitive interest rates and features to consider.
Some of our customers when they have the choice, prefer to secure their lifetime mortgage on a second/holiday home, feeling its gives them greater security of tenure.
This shouldn’t be so, as you cannot be forced out of your home with an equity release scheme anyway, however it is understandable and is something you can consider.
In such a case, you may decide to simply take out equity release on your holiday home in Suffolk.
There are a small number of specialist lifetime mortgages available to achieve this, but they come with different lending criteria and some restrictions, such as how long they are occupied, usage etc.
I suggest that you speak to your independent and impartial Equity Release Supermarket adviser, who will take the time to understand your financial situation and your plans for the future, before they recommend a solution that is tailored to you.
They would be able to calculate the amount that can be released on either property and then recommend the best course of action.
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Question
How much equity can I release?
I own my flat which I believe is worth in the region of £255,000 (based on sales of similar homes in my area – not an official valuation).
How much of this would I be able to release and, also, how much would I physically be able to receive in cash? I am female, 67, retired and live alone. I have no children and own my property outright.
Answer
You can typically borrow the maximum through a lump sum lifetime mortgage and using the calculator available at Equity Release Supermarket, with the details you’ve provided, you can borrow up to £99,450.
If you have any pre-existing health conditions, you may be able to borrow up to £127,500 through an enhanced lifetime mortgage.
That said, as your property is a flat, there may be other considerations to review, such as the length of the remaining lease (if it is leasehold) as different lenders have different minimum lease terms which can range anywhere from 75 up to 185 years.
Additionally, being a flat, some lenders – such as Aviva and Legal & General will only take into account 85% of the valuation figure when determining the maximum loan.
Therefore, any equity release calculator can only provide an approximation and is not personalised.
It’s for these reasons again I recommend as a next step that you that you speak to your local, independent and impartial Equity Release Supermarket adviser.
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Question
Family squabble over equity release
My wife and I have started looking into releasing equity in our property to pay off some debts and plug the pension gap. We have done lots of research and we are satisfied this our best option as we have very little in terms of pension or savings.
However, our two sons are completely against the idea. They are worried we are going to squander their inheritance and they are also concerned we will end up paying lots of interest and lose quite a bit of the value.
Where do we stand in terms of making a choice? Do we need to have consent from our direct dependents or can we go ahead without this? Could there perhaps be a compromise?
Answer
As your home belongs to you and your wife, it is entirely up to you if you decide to go ahead with equity release and you don’t need the permission or consent of anyone else.
Having said that, equity release is a big financial decision and I always recommend that your family – particularly your children – are involved in the process and support your decision, as equity release will ultimately reduce the value of your estate that you leave for them.
How much of the value of your estate is impacted depends upon a number of factors, such as the amount you borrow, the plan you choose, how long your plan runs for, if you choose to make any repayments and the future value of your home when your plan ends and is repaid.
We have a calculator at Equity Release Supermarket, which gives you an idea of what the value of your estate could be worth in the future, which you may want to share with your sons, so that they have an idea of the amount of money they may inherit in the future.
As equity release plans now offer a range of flexible features, you could maximise the value of your inheritance through the plan you choose.
For example, with an interest-only plan, you make monthly interest repayments which mean that when your plan is repaid, only the initial amount borrowed is repayable (as you’ve repaid the accruing interest monthly).
Alternatively, with a drawdown plan, you borrow your money in ‘chunks’ over time. As interest is only payable on the amount borrowed, this is a very popular way to minimise the interest repayable and maximise your inheritance.
Both these options come with the facility to make additional ad-hoc overpayments as and when you have the funds to do so. Again, this is an effective way to reduce the interest repayable and could even eat into the amount you borrowed – really maximising your inheritance.
We’ve experienced similar situations to yours, where the children have offered to make repayments to cover the monthly interest. By keeping the balance level over the term of the loan, they can protect their own inheritance and allay such fears.
With so many ways to maximise your inheritance with equity release, I recommend that both you and your sons meet with your local, independent and impartial Equity Release Supermarket adviser to talk through your plans.
This won’t cost you anything for an initial consultation and you will then have all the facts to hand to decide if equity release is right for you.
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Question
Looking for a good rate for a larger property
I have made enquiries for equity release with drawdown and have gotten as far as surveys being made on my property through two companies. Each surveyor has informed the companies that my house is a commercial property, which it is not.
My house is a five bedroom Victorian end terrace.
On the ground floor there is a: reception room, dining room, kitchen/breakfast room, shower room, small utility room and study.
On the first floor: sitting room, library/office, WC, bedroom one , bedroom two with en-suite shower room.
Top floor: Master bedroom with en-suite bathroom, bedroom four with en-suite shower room, bedroom five and bathroom.
Previously my home was a women’s refuge and rooms had been divided to make 10 bedrooms, nursery etc for the women and their children. I had builders put these rooms back to the five rooms they had been originally. I have lived here for 14 years, my council tax is domestic. There are commercial properties in the lower part of the street but higher up where we are and beyond are prohibited from being commercial.
My property was recently valued at between £400,000 and £450,000, I have an outstanding mortgage of £73,000 and was looking at a drawdown of about £50,000 if needed I would take increments of £10,000
I would pay the interest rate monthly, quarterly, six monthly or yearly as required. There are no loans against the property and I have a clean financial bill of health. I am 67 years of age and the property is in my sole name.
Are there any lenders out there able to provide for me at the advertised rate of under 3% that you know of?
Answer
Given the detail you’ve provided, it does appear odd that the surveyors are reporting that your property is commercial – which equity release lenders will not consider.
As your situation appears to be a complex one, I recommend that you speak to your Equity Release Supermarket adviser, who will be able to review your case in detail.
We are independent, impartial, whole of market advisers and we were recently voted as being the best adviser in the UK by the equity release industry.
We are also renowned for helping people where other brokers and advisers have failed, and as ever, our advice fee is guaranteed never to be more than £995, which is only payable when your plan completes.
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