Top 10 Equity Release Scheme Tips

10 Tips for choosing an equity release scheme

Choosing an equity release scheme is extremely important as this is your home we are talking about!

Equity release is a generic term which refers to a number of ways you can convert all or some of the equity in your home into cash to spend on other things you might want or need.

The following top 10 tips have been designed to help guide you through the process, so you can be confident in your final decision.

Tip 1 - Do you qualify for equity release?

Some of the main qualifications you may need to have (depending on the equity release provider you choose) include:

• Only a small mortgage left on your home, or none at all

• There are no children or other dependent relatives living with you, and

• You are over a certain age.

Tip 2 - Choose your provider with care

There are not only different ways of releasing your equity but also different providers. Choose a provider who is: • regulated by and therefore must comply with the rules laid down by the

Financial Conduct Authority (FCA) • also a member of the Equity Release Council. The Council obliges

members to follow an even stricter code of practice, reflecting the high standards expected of firms and companies working in this area.

Tip 3 - Choosing your type of equity release

There are two types of equity release schemes: • Lifetime mortgage – you borrow a sum of money secured against the

equity value in your home. Interest is charged and is repaid, together with the amount you borrowed, when you sell the property or when you die

• Home reversion schemes – you sell part of your property to the equity release provider but you are able to continue to live there for the rest of your life. When you die or the property is sold – because you are moving into assisted living, for example – the provider receives the current market value of the share he has bought in your property.

Tip 4 - Get a no negative equity guarantee

• A negative equity guarantee means that you – or your estate – are freed of any obligation to repay to the lender anything more than the amount the property achieves on the open market

• Clearly, this is an important protection, and one which any member of the Equity Release Council is obliged to offer its customers – one more reason for choosing a provider with this accreditation.

Tip 5 - Understand the costs

There are a number of costs associated with participating in any equity release arrangement. These vary considerably from one provider to another and may include:

• The provider’s setup or administration fees

• Solicitors’ fees, and,

• Depending on the provider you choose, the surveyor’s fees incurred when valuing your home.

Tip 6 - Make the most of your home

The current market value of your home is likely to affect how much you are able to borrow against the release of its equity, the proportion of ownership you may have to offer any provider, and the costs you need to pay for setting up the agreement.

Anything you are able to do to enhance the value of your home is likely to be worthwhile.

Tip 7 - Do you need a joint equity release plan?

You might be living with your spouse or a civil partner, whose interests you also want to protect in any equity release arrangement.

A joint equity release plan effectively gives equal rights to either party to continue to live in the shared home in the event that other dies or needs to move into alternative long term care.

Tip 8 - Keep the family on board

One of the reasons why any decision to take equity release is so important is because it is likely to seriously influence any inheritance. To avoid the kind of family disputes, misunderstandings and ill-feeling that your decision might generate, explain your reasons and keep everyone on board at an early stage.

Tip 9 - The cost of early repayment

If you have chosen a lifetime mortgage, changes in your circumstances might allow you to repay the loan in advance – and reduce the interest payments which continue to accumulate.

As with any other mortgage, however, such a decision is likely to come at a price – an early repayment levy charged by the lender.

Tip 10 - Make use of free advice

Equity release schemes can be complex and it is imperative you fully understand your options. • Use an online equity release calculator to see how much you could release

from your home• Make use of free advice from specialist, FCA-regulated providers.

What next?

• You can get free advice and useful information at Over50choices in partnership with Key Retirement

• If you decide to proceed, Key Retirement do all the work for you, obtaining quotes and assisting with your application right through to completion.

• Visit www.over50choices.co.uk