Page 2 - Guide to Equity Release

Guide to Equity Release

Caesar and Howie are members of the Equity Release Council and adhere to the rules and standard of that
body. We are also members of The Equity Release Solicitors Alliance. This is a group of solicitors throughout
the UK providing specialist legal service to clients taking out equity release products. Many people today are
reaching retirement with a smaller nest egg than they had hoped, mainly due to a level of pension being less than
anticipated. Additionally people are living longer and many retired people are concerned that their savings will not
be sufficient to allow a standard of living they were hoping for. It is worth knowing that extra money can be raised
from an Equity Release Plan.

With the price of houses soaring over the past 30 years or so home owners of mature years can have a large
asset invested in their homes. Some decide to down-size to a smaller home when the family grow up and fly the
nest thus releasing equity for them to enjoy in their sunset years. For others this may not be an option if they
wish to remain in the family home. However, there is another option available to them.

Lenders are now offering equity release products which allow the homeowner to release some equity from their
property but at the same time, remain living in their own home. There are two types of products on offer, being

the Lifetime Mortgage and The Home Reversion Scheme.

With a Lifetime Mortgage a borrower will able to receive in cash a percentage of the market value of their home.
It differs from a normal mortgage, however, as unlike in a conventional mortgage a borrower will not have to
make monthly repayments. Nothing will be repaid to the lender until the death of the homeowner/s. If the
mortgage is taken out by more than one person nothing need be repaid to the lender until the death of the
second borrower. The lender recoups its money, plus accrued interest, on the death of the surviving partner, or
when the surviving partner has to go into care.

The initial equity release advance is decided by the lender. One of the main considerations taken into account is
the borrower/s life expectancy. This will be explained in more detail by the borrower/s financial advisor. These
lifetime mortgages are very flexible and money can be taken as a one off capital payment or income over time. It
is always tax free.

As you can see with a Lifetime Mortgage a borrower still remains owner of all the property. This is not the same

as a Home Reversion Scheme where in return for the equity the borrower enters into joint ownership with a
finance provider who will purchase a percentage share of the property at a discounted price. The proportion of
the property which can be transferred depends on the age of the owners and of course the amount of equity they
wish to realise. An independent valuation of the house is required to work out figures. . In effect the owner sells a
share of his property to the finance provider but the lender does not receive the price until the death of the
second house holder. Again, because it is a ‘joint ownership’ the parties taking out the reversion plan are entitled
to live in the house until their deaths or being taken into care.

Please note there are many variations to the Lifetime Mortgages and Home Reversion Schemes on the market,
which our financial consultants will gladly explain to you.

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