- What is an equity release mortgage?
- Do I make any monthly payments?
- What is SHIP?
- What happens when I die or vacate the property?
What is an equity release mortgage?
There are two main types of equity release schemes in which equity can be released from your home: a home reversion plan and a lifetime mortgage.
Home Reversion plan - In its basic form, all or part of your home is sold to a private company or a group of investors, and in return you will receive a cash lump sum, an income or both. You can remain in the house rent-free or for a nominal monthly rent, for the rest of your life. When the property is sold, usually after your death or when you move to alternative accommodation, the investors receive the proceeds of sale, depending on the percentage share of the property you sold to them.
Lifetime Mortgage Scheme - With a lifetime mortgage you borrow money against the value of your home. The money released could provide an income, a lump sum, or both. The loan does not have to be repaid until you die or move to alternative accommodation.
The most usual form of lifetime mortgage is a Roll-up scheme. Under such a scheme interest, usually at a fixed rate, is compounded monthly and ‘rolled up’ and added to the outstanding loan.
It is important that you seek advice from an Independent Financial Advisor on which product is suitable for your needs. There are a large number of products on the market and as solicitors we are not able to offer you this advice.↑ Back to the top
Do I make any monthly payments?
One of the attractions of an equity release plan is that there are usually no monthly payments.↑ Back to the top
What is SHIP?
SHIP is short for Safe Homes Income Plans. This is a code of conduct which many lenders in this area are signed up to. It is advisable that you look for a product which is SHIP compliant.
If your lender is signed up to SHIP then they will have to abide by certain minimum standards in terms of the advice they give to you and the terms of their products.↑ Back to the top
What happens when I die or vacate the property?
An equity release mortgage is usually repayable when you die or vacate the property for an extended period of time (such as entering long term care).
If you live in the property with a partner then, provided they are also owners of the property and a party to the mortgage, the property will only need to be sold when both of you have died or vacated.
If your partner is not an owner of the property then they will need to vacate the property when it is sold. This should be discussed with your Independent Financial Advisor when discussing the potential products available.
If you would like to discuss a potential matter or would like any further information then please contact one of our team using the details shown on this page.