With the younger generation’s finances being hard hit by the Covid-19 pandemic, more parents may be looking at ways to support their children especially with regards to property transactions in light of the recent stamp duty holiday in place until 31st March 2021.
Our equity release legal team are seeing a growing number of instructions in equity release which has continued throughout the coronavirus pandemic.
Other common reasons for releasing equity in your home could include:
- Supplementing pension incomes
- Making gifts to family members (expert legal advice needs to be sought)
- Making home improvements
- Paying off existing mortgages or other debt
- Meeting one-off or regular expenses
- Having cash available for unforeseen circumstances
How does equity release work?
Equity release uses part of the value of your home to release a cash payment to you, either in the form of a lump sum or as a regular income. It is basically a long-term loan, however you don’t have to make monthly payments (unless you choose to). The loan is usually repaid when the last borrower either moves into long term care or dies but the property remains in your ownership. The maximum loan amount depends on various factors including your age and how much your property is worth.
Is equity release right for me?
Equity release is not always the right decision for everyone. It is a lifetime commitment and to qualify you need to be over a certain age which is usually 55. Equity release may affect your entitlement to state benefits and will reduce the value of your estate. It is therefore important to seek advice from a specialist solicitor who can advise you of the financial impact it may have based on your circumstances.
There are generally two types of equity release:
- Lifetime mortgage – This is when money is borrowed against the value of your home and is available to those aged over 55. When you move into a care setting or die, the mortgage is repaid from the sale of your property.
- Home reversion plan -This is available generally to those aged 65 and over. Money is released by the provider/lender who will pay a lump sum for a percentage interest in the home while you continue to live in it. You are able to live in it rent free or on a peppercorn rent basis until you move into a care setting or die whereupon the proceeds of the sale will be split between the percentage owned by the homeowner and that owned by the lender according to the terms of the equity release.
Is it still possible to release equity during the pandemic?
Most lenders remain open and fully functional and are able to complete processes through online portal and application systems. The Equity Release Council has also relaxed the face-to-face legal requirements to ensure that transactions can still progress smoothly.
How long does the legal process take?
Normally the legal process for dealing with equity release take between six and eight weeks although this could vary depending upon individual circumstances.
Why choose Moore & Tibbits
Entering into an equity release scheme is a legal contract. As your property is probably the most valuable asset you own it is important you understand what you are signing and any legal implications. Our team has a wealth of experience of equity release so you can rest assure that your interests are properly looked after. We will ensure you fully understand what is involved and carefully explain the process and the impact any equity release will have on your finances. Equity release works well for some people but may not be suitable for all which is why it is important to seek specialist legal advice. The advice of an independent financial advisor is essential at the outset regarding the suitability of a particular equity release scheme. Our equity release team are available for a free initial consultation so please contact Christopher Houghton on 01926 491181 or email Choughton@moore-tibbits.co.uk.
Thinking of gifting to family members?
It is essential specialist legal advice is taken before gifting to family members whether this is through equity release or other financial methods to ensure you are aware of any legal implications. If you are managing a person’s finances either under a Lasting Power of Attorney or a Court of Protection Order, special rules apply regarding gifting. To protect yourselves and your family, contact Marie O’Malley on 01926 354704 for a free initial telephone consultation.