Equity release v Home reversion plan: What’s the difference?
Question
Is equity release the same as a home reversion plan? I am aware they work under the same principle but would be keen to understand more detail. Thank you in advance.
Answer
Thank you for your enquiry, and I am happy to confirm that there are several ways to raise capital from the equity in your home including downsizing, a retirement interest-only mortgage (RIO) and equity release.
To focus on your enquiry, equity release has two options which are a Lifetime mortgage and a Home Reversion Plan and here at Equity Release Supermarket our advisers are whole of market experts and they can provide advice on both equity release options.
Firstly, a Lifetime mortgage is a special type of loan which is designed to run for the rest of your life, and you borrow money that is secured against your home to give you a lump sum.
The amount you owe to the lender is usually paid back from the proceeds of the sale of your home after you have passed away or you enter long-term care. You retain 100% ownership of your property.
The loan will attract a fixed interest rate, and you decide if you would like to make any money back to the lender using flexible voluntary payments. Alternatively, if you choose not, the interest charged will roll-up resulting in your loan balance escalating due to the compounding effect of the interest which will also reduce the value of your estate.
With a Home Reversion Plan the provider will buy a share or all of your property and transfer part or all legal ownership of your property to them. In exchange they will release a cash lump sum to you and grant you a lifetime lease for the portion of the property you have sold.
You can continue to live in your home until you have passed away or you move into long-term care. If you sell part of your home, you will retain your share via a Declaration of Trust.
If you would like to find out more information our friendly advisers will be the first person you speak too because here at Equity Release Supermarket, we do not have a call centre.
Furthermore, they can provide you with a sample illustration to allow you to better understand the plan without obligation, and free of charge, so you have nothing to lose if you would like further information.
Can I release equity on a thatched cottage?
Question
I own a cottage with a thatched roof which I inherited from my mother. I live in it with my wife and teenage children. I’m 62 so I know I will be eligible for equity release – however, I am not sure my home will be, due to the roof!
I understand it’s a bit of a sore point with mortgage lenders and wondered if equity release lenders were in agreement.
Answer
Thank you for your enquiry, and I can confirm that your cottage with a thatched roof may be eligible for equity release. For example, one provider has confirmed that they will consider properties that are listed buildings, including Grade I and II, properties that are built with historic building techniques, and also properties with a thatched roof,.
Furthermore, they state that 30% of houses in the UK were built before 1919, and they will lend on properties such as wattle, and daub, cob, and thatch. However, to give you specific information I would require further information including the value of your home, your wife’s age, and how much capital you are looking to raise for your objectives.
Rest assured that one of our friendly expert advisers can provide you with specific details at no cost or obligation, and they are available directly, as we do not have a call centre to hinder your enquiry. All advisers at Equity Release Supermarket have access to every provider within the whole of the market, and they can find a bespoke plan based on your circumstances.
Buy-to-let and equity release – changes to the rules
Question
I’ve been told I cannot release equity from my buy-to-let property at the moment. Can you confirm this is the case and why it is so? Also, do you see this changing in the future?
I own a property which I let to tenants. There is no mortgage on it. I also own my own home which is also mortgage-free. I may have to sell the buy-to-let but may hold off if equity release rules are likely to change.
Answer
Thank you for your question, and I can confirm that due to the recent economic events, the Buy-to-Let Lifetime mortgage with Canada Life, was withdrawn to new customers.
Unfortunately, I am not able to confirm when it will return, though if you are able to defer your plans to sell your property for a few months, the plan may be reinstated, though sadly I cannot offer you any guarantees at this time.
By contacting Equity Release Supermarket on 0800 689 1378 and providing one of our expert advisers with your contact details, they will get in touch with you immediately if the provider returns to the market.
To help you understand if you may be eligible, before the plan was withdrawn there were some key requirements, and the most basic were that you had to own the property, you had to be a UK resident, and you would need to be at least 55 years old.
Furthermore, for you to be eligible, the property had to be in England, Scotland, or Wales, and it must not have been lived in by you, the owner, or your family, and it had to be let out under an Assured Shorthold Tenancy (AST).
As noted, I am not able to guarantee if and when the plan will return; however, if you are able to defer your plans to sell the property, one of our friendly advisers will contact you without obligation as soon as we have any updates.
What’s the maximum which can be raised using equity release?
Question
What’s the maximum amount one can borrow under an equity release plan? Is there a percentage limit? I presume it differs according to circumstances and properties. I own a property outright and it’s worth £420,000; I am aged 72.
Answer
Hello, yes you are quite correct to presume that raising capital from the equity in your home differs due to your personal circumstances. I can confirm that based on your property value of £420,000 and your age you are eligible for equity release.
Since the mini budget of 2022, and the effects on the economy and mortgage market the amount equity release providers will lend has fallen by between 10% and 12% of the property value. This has resulted in homeowners not being able to borrow as much as previous. Therefore, at age 72 currently, the maximum release would be around 39% of the property value equating to £163,800.
However, to provide you with the specific amount that may be available, I need some additional information. For example, is your property a flat or a house, whether you would like to retain 100% ownership of your property and secure a Lifetime mortgage or sell all or part of your property in return for a cash lump sum.
Also, based on your medical history, if you are looking for a maximum release some providers will enhance the amount you can borrow based on your current or previous health conditions.
Alternatively, if you are looking for a specific amount and you have health issues, you can get a reduction to the standard interest rate available.
To allow you to find out how much you can personally raise from the equity in your home, you have a few options available at no initial cost.
Firstly, you can telephone and speak to one of our specialist whole of market advisers using our freephone service or contact them via the live chat facility, and they will be happy to provide you with a personalised illustration.
Secondly, you can complete your own research and have a plan tailored to meet your circumstances by using smartER on the Equity Release Supermarket website.
As noted, you will not have to pay for our advice or services until any application you make completes, if you decide not to apply for a plan, you will not pay any fees, that is my personal promise.
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 him a question
