4 Important Questions to Ask if You're Considering Equity Release

A home is the most valuable asset for most people because of its equity. You can release the equity in your house to gain finances which you can use to boost your retirement income, deal with medical bills, pay off debts or pass it down to a dependant as an inheritance.

Before activating an equity release, there is much you need to know to ensure you get the best deal. The following are essential questions to ask your equity release advisor or mortgage lender: 

Do You Qualify For An Equity Release?

One of the first questions you should ask an equity release provider is whether you are eligible for an equity release. Age is crucial in determining whether you are eligible for an equity release.

If you are over 55 years old, you qualify, but if you live with a partner or spouse, they also have to be over 55 for you to be eligible. The property value matters, too, and most equity release providers require a minimum property value of about £75,000 to qualify for equity release. 

The property you want an equity release for must also be your main home and not a property you rent out. You can also be eligible for an equity release if you have a mortgage and if the terms are agreeable. 

What Type of Equity Release Would Suit You Best? 

It would be wise to ask an equity release advisor about the equity release that would be best for you. Responsible Equity Release will tell you that there are two main types of equity releases: lifetime mortgages and home reversion plans. 

Lifetime mortgages are the more popular type of equity release as they allow you to remain the owner of your home. Moreover, you can release funds from the property's equity how and when you want it with a lifetime mortgage. Therefore, you can keep interest charges low or even use some money to reduce your interest balance. 

Home reversions are whereby the equity release provider makes a one-time payment for a portion of your home. You will get to live in the property rent-free until you die. However, you will not remain the property owner as it will be sold when you no longer live in it, with the proceeds divided between you and the equity release provider according to the portion of the home you own. 

Will Equity Release Affect Your Benefits? 

If you are an elderly citizen, you may be receiving means-tested benefits, including money you get based on your income and savings, such as Pension Credit, Universal Credit, and Council Tax Reduction.

If you are getting such benefits, an equity release may reduce what you get, and for some amounts, you may stop receiving the benefits altogether. Therefore, you should always know how a lump sum payment can affect your benefits. 

What Does The Equity Release Council Do? 

It is critical to note that any equity release plan you sign on for should meet the Equity Release Council (ERC) standards. The ERC is the voluntary trade body for the equity release sector and focuses on customer needs and safeguards. Therefore, your equity release provider or lender should be approved by the ERC and meet various terms such as: 

• You can remain in your home until death or move to home care, provided you abide by the contract.
• Interest rates for lifetime mortgages must be fixed or, if they are variable, must have an upper limit.
• You have the right to move to another property in the future, subject to your equity release loan terms. 

Getting an equity release is often a complicated process that requires you to know what you are doing. When talking to an equity release advisor or provider, ask them the above questions. It will help you better understand the equity release process and get the best deal possible.