Conveyancing: An insight to equity release

For most of us, our home is the most expensive purchase that we will ever make, and the most valuable asset we will ever own. Most of its value remains locked up until you sell, but there are ways to access this to fund your lifestyle aspirations. 

How equity release works

Equity release is becoming a popular way for homeowners to tap into the value of their home by borrowing against its value. It is usually limited to people aged 55 and over who have paid off their mortgage or don’t have much left to pay.

If you are eligible, it can be a useful tool if you want to have access to your home’s value, but don’t want to move because you like where you live, you don’t want to downsize, or you want to stay close to friends and family. Equity release is a way of freeing up this value so you can use it for whatever purpose you want, whether it’s for home refurbishments, to enjoy retirement or for the benefit of your loved ones – such as paying for a grandchild’s school fees.

The benefits

The main advantage of equity release is that there are no immediate regular repayments. If you are asset rich but your income is low, you don’t have to worry about finding the money every month to make a repayment. You can also borrow a large sum as the loan is assessed on the property itself and not necessarily on your ability to repay, which is often the case with a personal loan. You can also make gifts to loved ones during your lifetime, which can limit your liability for inheritance tax but also allows you to see them enjoy the benefit.

Potential drawbacks

On the flip side of this, whilst equity release can benefit you during your lifetime, it can also affect your ability to claim certain benefits should you need to do so in the future and will diminish your estate once you pass away. The original capital sum is secured against the house and repaid when the house is sold. This normally occurs either when you can no longer live there and must go into long-term residential care, or when you die. The profits of the house sale will initially be used to pay off the mortgage, including the interest, which can be substantial. A specific cash gift in a will could be affected because there may not be enough money left in the estate.

It’s also worth noting that the mortgage loan must be paid off in full if you wish to pass down a property through the generations.

How can we help

We provide personal advice and straightforward one-to-one consultations with our clients to ensure that they are fully informed about the implications of big life decisions. Our team of qualified legal conveyancers aim to make the process efficient, reliable and as stress-free as possible.

For more information on equity release, contact Stuart Harries on 01727 738221 or sh@debenhamsottaway.co.uk.