Equity Release Lawyers
As you reach the golden years of your life, your home isn’t just a place filled with cherished memories—it’s also a valuable financial asset. If you’re looking for a way to access wealth tied up in your property without selling or downsizing, equity release could be the solution.
Equity release allows homeowners aged 55 and over to release tax-free cash from the value of their home. This financial product can provide a lifeline for those seeking to supplement their retirement income, fund home improvements, or simply enjoy a more comfortable lifestyle.
However, like any significant financial decision, equity release requires careful consideration and expert guidance.
At Lawhive, we specialise in simplifying the complex and making legal services accessible and affordable.
Our unique approach combines a state-of-the-art tech platform with a network of highly qualified lawyers, offering you the best of both worlds—personalised expert advice at a fraction of the cost of traditional high-street law firms.
Our network of experienced solicitors is well-versed in UK equity release laws and can help you navigate the process with confidence.
Contact us today for a free, no-obligation case evaluation to discuss your equity release options. Discover how our expert legal network can help you.
What is equity release?
Equity release is a financial arrangement that lets you access the cash tied up in your home without having to sell it.
It’s an increasingly popular option in the UK, especially among retirees looking to enhance their quality of life.
How does equity release work?
Equity release allows you to unlock some of the value of your home while continuing to live in it. This can be done through two primary types of plans:
Lifetime Mortgages
Home Reversion Plans.
Each option has distinct features and implications, and the best choice depends on your circumstances and financial goals.
Lifetime mortgages
A Lifetime Mortgage is the most popular form of equity release.
It involves taking out a loan secured against your home. This means, you retain full ownership of your home and can continue living in it until you die or move into permanent care.
You can borrow a percentage of your home’s value, usually between 20% and 60%, depending on the age and value of the property. The interest rate on this loan is either fixed or variable, and it compounds over time.
Unlike a traditional mortgage, you don’t have to make monthly repayments.
Instead, the loan and accumulated interest are repaid from the sale of your home when you die or move into permanent care. However, some plans offer the flexibility to make interest repayments during your lifetime to reduce the overall debt.
Home reversion plans
A Home reversion plan involves selling a portion or all of your home to a reversion company at a discounted rate (usually between 20% and 60% of its market value) in exchange for a lump sum or regular payments.
Unlike lifetime mortgages, there’s no interest to accumulate on the money you receive.
You continue to live in your home rent-free until you die or move into long-term care, but you no longer own the sold portion of the property.
When the property is eventually sold, the reversion company receives its share of the proceeds based on the proportion of the home they own.
How do I choose between a lifetime mortgage and a home reversion plan?
With a lifetime mortgage, you get to keep full ownership of your home and you don’t have to worry about making monthly payments, which can ease your cash flow.
Further, some plans allow you to ring-fence a portion of your property’s value as an inheritance for your family.
On the other hand, compound interest on a lifetime mortgage can cause the loan amount to grow very quickly, reducing the value of your estate.
With a home reversion plan there’s no loan or interest to repay, so you know exactly how much of your home’s value will go to the reversion company. Plus, you can live in your home rent-free for the rest of your life.
However, you receive less than the market value for the portion of your home sold and lose ownership of that portion, too.
Deciding between a lifetime mortgage and a home reversion plan involves careful consideration of your financial goals, personal circumstances, and long-term plans.
If you’re unsure, it’s a good idea to seek advice to understand the pros and cons of each option.
Am I eligible for equity release?
The key eligibility criteria for equity release are:
Age
Property ownership
Property value and condition
Type of property
Financial considerations
Current mortgage or debts
Age requirements
To qualify for a lifetime mortgage, you typically need to be at least 55 years old. This age requirement applies to the youngest homeowner if the property is jointly owned.
For home reversion plans, the minimum age is usually higher, often set at 65 or older, depending on the provider.
If you own the property jointly, all owners must meet the minimum age requirement to be eligible for equity release.
Property ownership
You must be the sole or joint owner of the property you want to release equity from, and all owners must agree to the equity release plan.
If your property is leasehold, the lease should generally have a minimum remaining term of at least 75 years, although some lenders might require a longer period.
Property value and condition
The amount of equity you can release is usually a percentage of your property’s current market value, and most providers require your property to have a minimum value.
Your property must also be in good condition and well-maintained. The provider will conduct a survey to assess the property’s value and condition as part of the application process.
Type of property
Equity release is typically available for primary residences in the UK.
Second homes or buy-to-let properties may have different eligibility criteria or limitations. Further, commercial properties or those with mixed residential and commercial use may not qualify.
Financial considerations
While equity release doesn’t require monthly repayments, lenders will still consider your overall financial stability and any outstanding debts or obligations.
Current mortgage or debts
If you have an existing mortgage, the equity release funds must be used to pay off this mortgage first. The remaining amount can be used for other purposes.
Any secured debts against your property must also be cleared as part of the equity release process.
What are the financial implications of equity release?
Impact on inheritance
For lifetime mortgages, the loan amount and accumulated interest are repaid from the sale of your home when you pass away or move into long-term care.
This can significantly reduce the value of your estate left to your beneficiaries.
With home reversion plans, you sell a portion or all of your home at a discounted rate, which reduces the equity available to your estate upon the sale of the property.
Cost of interest and fees
Interest on lifetime mortgages compounds over time, meaning the total amount owed can increase rapidly, especially with high interest rates.
Equity release products often include additional charges, like arrangement fees, ranging from a few hundred to several thousand pounds. You may also have to pay for a property valuation to assess the market value of your home.
Further, some plans include penalties if you repay the loan early.
Effects on state benefits
Receiving a lump sum or regular payments from equity release could affect your eligibility for means-tested benefits such as Pension Credit or Council Tax Reduction.
This is because the cash received might be counted as part of your savings or income.
What are the risks associated with equity release?
Equity release can be an attractive option for accessing the value tied up in your home, especially for those seeking financial flexibility in retirement.
However, you should be aware of the potential risks such as:
Reduction of the value of your estate
With a lifetime mortgage, the loan and accumulated interest are repaid when the property is sold, usually when you die or move into long-term care.
This repayment can significantly reduce the value of your estate and, consequently, the inheritance left to your beneficiaries.
For home reversion plans, selling a portion of your home means that this share will not form part of your estate when the property is sold.
Because of the above, you should discuss your equity release plans with family members to manage their expectations about their inheritance.
Compound interest
With lifetime mortgages, the interest is typically added to the loan amount, and compounds over time. This means the total amount owed can grow quickly, especially with higher interest rates.
As the debt grows, it can consume a significant portion of your home’s equity, reducing the value available for your estate or future needs.
Therefore, you should be clear on how the interest will accumulate and affect the total debt over time.
Negative equity risk
If property values decline significantly, there is a risk that the amount owed could exceed the value of your home, leading to negative equity.
However, this risk is mitigated for plans with a No Negative Equity Guarantee. Members of the Equity Release Council provide this guarantee, ensuring that you or your estate will never owe more than the value of your home when it is sold.
Impact on means-tested benefits
The funds received from equity release can affect your eligibility for means-tested state benefits such as Pension Credit or Council Tax Reduction, as they might be considered part of your savings or income.
You should, therefore, evaluate how equity release might impact any benefits you currently receive or plan to apply for.
Costs of early repayment
If you decide to repay your equity release early, you may face significant early repayment charges, depending on your plan’s terms.
Some plans have fixed early repayment charges that decrease over time, while others have variable charges linked to changes in interest rates or other factors.
Changes in property value
Fluctuations in the property market can affect the value of your home, which in turn impacts the amount of equity available and the debt’s proportion relative to your home’s value.
If property values decline, it could also affect the potential resale value of your home and the funds available to repay the loan or provide for your estate.
Restrictions on moving home
While many lifetime mortgages are portable, allowing you to transfer the loan to a new property, the new property must meet the lender’s criteria.
This can limit your options if you plan to move.
Home reversion plans can be more complex when moving, as you will need the provider’s approval and may have to sell your current property to repay the loan.
So, if you anticipate moving in the future, you should ensure your chosen equity release plan offers flexibility and understand the requirements for transferring or repaying the loan.
Do you have to pay tax on money you receive from equity release?
The money you receive from equity release is tax-free, as it’s considered a loan rather than income.
And, since you are not selling the property outright, capital gains tax does not apply to the money released.
Can I still move house after taking out equity release?
One of the common concerns for homeowners considering equity release is whether they can still move house after taking out an equity release plan.
The good news is that many equity release products, particularly lifetime mortgages, offer flexibility that allows you to move to a new home, subject to certain conditions.
Moving with a lifetime mortgage
Most lifetime mortgages are designed to be portable, meaning you can transfer your loan to a new property if you decide to move. However, lenders generally require that the new property is of equal or higher value and suitable as security for the loan.
Moving with a home reversion plan
Moving with a home reversion plan can be more complex. You need the reversion provider’s approval, as they own a portion of your current home.
Generally, you would sell the existing property, settle the reversion company’s share, and then purchase a new property.
You may need to negotiate a new reversion plan if you want to continue with equity release in the new home.
What happens if I want to repay my equity release early?
Early repayment of equity release is possible, but it comes with specific considerations and potential costs.
Many lifetime mortgages have fixed early repayment charges, which are set as a percentage of the loan amount and decrease over time.
Further, some plans use a variable early repayment charge structure based on the performance of gilts (UK government bonds). That means if gilt rates have fallen since you took out the mortgage, the early repayment charges could be higher, and vice versa.
Therefore you should carefully review your equity release agreement to understand the specific early repayment charges applicable to your plan.
How much money can I release from my home?
The amount of money you can release from your home through equity release depends on the type of equity release plan, the value of your property, your age, and your health.
With a lifetime mortgage, you can typically release between 20% and 60% of your home’s value. The exact percentage depends on your age, property value, and lender’s policies.
With a home reversion plan, you sell a portion of your home at a discounted value. The percentage you can sell and the amount you receive depend on your age and property value. Typically, the older you are, the larger the share of your property you can sell to the reversion provider.
Generally, the older you are, the more equity you can release as the lender anticipates a shorter period before the loan is repaid, reducing their risk.
Further, some equity release providers offer enhanced lifetime mortgages that allow you to release more money if you have certain health conditions or lifestyle factors that might reduce your life expectancy.
Can I use equity release to pay off my existing mortgage?
When you take out an equity release plan, one of the conditions is that any existing mortgage must be repaid. This ensures the equity release provider holds the primary charge on the property.
Any remaining balance can then be used for other purposes, such as home improvements, travel, or supplementing your income.
How long does the equity release process take?
Typically, the entire equity release process takes between 6-12 weeks but the overall timeline can vary depending on the type of equity release product you choose and how quickly all parties involved can complete their tasks.
Do I need a solicitor for equity release?
You’ll need to appoint a property solicitor to handle the legal aspects of the equity release process.
Your solicitor will review the equity release contract and provide you with independent legal advice to ensure you are fully aware of the implications of the equity release plan.
Your solicitor will also conduct necessary legal checks, such as verifying the title of your property and checking for any existing charges or restrictions.
What is the Equity Release Council, and why is it important?
The Equity Release Council is a not-for-profit organisation that sets standards and promotes best practices within the equity release industry.
It brings together providers, financial advisors, solicitors, and other stakeholders to ensure that consumers are treated fairly and that products meet high standards of safety and transparency.
The Council:
Establishes and enforces standards for equity release products and practices
Offers protections that safeguard consumers' interests and promote confidence in the equity release market.
Educates consumers and professionals about equity release and advocates for the interests of those considering or using equity release products.
Regulates its members, ensuring they adhere to the Council’s Code of Conduct and standards.
One of the most significant protections offered by Council members is the No Negative Equity Guarantee.
This means that you or your estate will never owe more than the value of your home when it is sold, even if the loan and accumulated interest exceed the property’s value.
How can a solicitor help with my equity release decision?
Choosing to release equity from your home is a significant financial decision. Engaging a property lawyer who specialises in equity release can provide valuable assistance throughout the process.
They can help you understand what equity release is, how it works, and the different types of plans available. They can also help you understand the legal implications of entering into an equity release agreement, like the impact on your property ownership and estate.
A solicitor can also assist with preparing and reviewing all necessary paperwork, including the application forms and the equity release agreement. They will coordinate with the equity release provider to handle the property valuation and any required legal checks, such as verifying the title to your home.
At Lawhive, we are dedicated to providing comprehensive legal support and advice for your equity release decision.
Contact us today for a free case evaluation to discuss your equity release options and discover how we can help you make an informed decision.
Get expert legal advice on equity release
Equity release offers a valuable opportunity for homeowners, particularly those in retirement, to access the cash locked in their property without the need to sell or move.
Whether you’re looking to supplement your income, fund home improvements, or simply enjoy a more comfortable lifestyle, understanding the process and potential impacts of equity release is crucial.
Equity release involves careful consideration of the various types of plans, such as lifetime mortgages and home reversion plans, each with its own set of benefits and risks.
It’s also essential to understand how these choices will affect your financial future, including the impact on inheritance, interest accumulation, and eligibility for state benefits.
At Lawhive, we specialise in making complex legal decisions straightforward and accessible.
Our experienced team is dedicated to helping you navigate the equity release process with confidence.
Why choose Lawhive?
Expert legal advice: Our network of specialist solicitors is well-versed in UK equity release laws, ensuring you receive comprehensive and tailored guidance.
Transparent and affordable services: We offer clear, affordable legal solutions, making expert advice accessible without compromising on quality.
End-to-end support: From your initial consultation to the release of funds, we support you through every step, ensuring a smooth and informed experience.
Contact us today for a free, no-obligation case evaluation to explore your equity release options.