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Equity release lets you access money that is tied up in your property. You can then use this money to improve your quality of life, whether you want to stay in your current home or move to another one.

So, for instance, if your property is valued at £250,000 and you still have an outstanding mortgage of £50,000, that means you have £200,000 in equity. On the other hand, if your house is worth £250,000 and you have paid off your mortgage, it means you have £250,000 in equity.

If the value of your home is not enough to pay off the outstanding mortgage on it, then you will be in negative equity. It also means there is no positive equity to cash out.

In this two-part article, your trusted conveyancer in Manchester gives you a closer look at how equity release works and why you should know more about it:

What Is an Equity Release?

Equity release simply means releasing the equity you have in your home to pay off the outstanding mortgage. It allows you to access the cash that you have in your home. As a homeowner, you need to have at least 50% or 25% equity in your home to be able to qualify for equity release.

However, it is essential to note that when you take out an equity release plan, the property will cease to be your primary residence and become a secondary residence. As a result, you may lose certain state benefits such as the Government’s help to buy scheme and the winter fuel allowance for pensioners.

Equity release plans can also increase your tax liability. This is because you will now be liable to pay CGT (Capital Gains Tax) on the money you withdraw.

What Are the Different Types of Equity Release?

Equity release schemes are designed to help people retire from their main home or help them gain access to their home’s equity if they can no longer live there. The two types of equity release schemes are lifetime mortgages and home reversion schemes. A report from the Equity Release Council shows that lifetime mortgages were the most common type of equity release in 2018, with 65% of customers choosing this type of plan; only 1% of customers choose a home reversion scheme, while 34% chose a lump sum plan. 

Home Reversion Schemes

A home reversion scheme is a type of equity release plan that you move into your current home, usually as a rental, but the property will pass on to your loved ones when you pass away. If you die before the reversion plan ends, your loved ones will be able to take over your home and continue paying off the mortgage.

Lifetime Mortgages

A lifetime mortgage is an equity release plan where you are given a lump sum of cash. You will then be required to pay the money back throughout your lifetime. This type of plan also allows you to release the equity in your home over time. A lifetime mortgage is an excellent way for homeowners to convert their property into cash so that they can enjoy the rest of their lives in comfort.

How Much Does Equity Release Cost?

Typically, a lifetime mortgage will cost you between £12,000 to £30,000, while a home reversion scheme will cost you between £25,000 to £80,000 depending on your age, the value of your home, and the interest rate.

Equity release plans typically last for 25 years, and the amount you will be paying back will be between £300 and £600 per month.

Getting a quote is usually straightforward, painless, and quick. You will only have to provide some basic home information and the size of your mortgage. You will then have to answer some questions regarding your retirement and other lifestyle choices. The company will then present you with a quote for the equity release plan.

Conclusion

If you are in a situation where you know that your current home is not enough to pay off your mortgage, then an equity release plan is a good option for you. You will be able to use the money in your home to relax and enjoy your retirement the way you want.

In the second part of this two-part article, our residential conveyancing experts are going to answer other questions you may have about equity release. 

Looking for quality conveyancing services? Conveyancing experts can help you. We provide reliable services to clients in the U.K. Contact us today so we can assist you!

In the first part of this two-part post, you learned about equity release and what it is. We also discussed the different types of equity release. In the second half of the article, your reliable conveyancer in Manchester will answer more questions you might have about the topic:

How Long Does Equity Release Take?

We recommend that you do your research before beginning the equity release process. The application will take at least four weeks and up to six weeks for a lifetime mortgage and six to eight weeks for a home reversion scheme. The time it takes for the entire process to be completed varies depending on the surveyor and solicitor you are working with. 

Once the application has been approved, you need to hire a chartered surveyor to evaluate your property’s worth and its condition. Your equity release solicitor will then start with the legal process of your scheme and liaise with the mortgage lender until the equity release’s completion.

Is Releasing Equity the Right Decision?

There is no right or wrong answer to this question. It depends on your individual needs and preferences. Some homeowners choose to release equity for other reasons, like paying off debt, buying a new car, or reducing the mortgage (more details on this later). These homeowners sometimes want to sell their homes after they die and leave the equity to their heirs.

What Are the Benefits of Equity Release?

Easier to obtain: Equity release is getting easier to obtain, and more people are eligible because lenders are becoming more lenient. Many lenders now work with homeowners who have a poor credit rating, and others will even accept borrowers who are in debt. As long as they pay their mortgage and stay within their credit limit, equity release providers are willing to help.

What Are Drawbacks of Equity Release?

A standard equity release will affect your entitlement to state benefits such as Pension Credit, Winter Fuel Payment, and Personal Independence Payment.

You may be required to pay a higher rate of interest than a lender would typically charge on a secured loan.

If you decide to sell your home in the near future, you could be forced to lose some of your equity.

You will have to pay for a legal charge (for the solicitor), a valuation fee, and an arrangement fee.

How Do You Know Which Equity Release Solution is Right for You?

Your equity release provider can answer this question for you. They will be able to provide you with an assessment of your financial situation and adjust the equity release plan based on how much you are willing and able to pay.

You can also speak to your trusted financial advisor to determine if an equity release is suitable for you.

Conclusion

If you have equity in your home that you want access to, you have a few options. The first and most common course of action is to sell your home. However, this may not be the best solution for everyone. Equity release is another way to access the money that is sitting in your home. However, you must be cautious because this solution does involve risks. Contact your conveyancer in Manchester for more advice to learn more about equity release.

Conveyancing Experts can provide you with quality conveyancing services that you can trust. Contact us to learn more about equity release and to know more about our services!

A conveyancing expert is a person who is highly knowledgeable and experienced in the process of transferring ownership of a property from one person to another. Conveyancing experts are typically solicitors or licensed conveyancers who have undergone extensive training and have a thorough understanding of the legal issues involved in the sale or purchase of a property.

Conveyancing experts help you navigate the complex process of buying or selling a property, and advise you on a range of issues including contracts, mortgages, and local searches. They also represent you in negotiations with the other party and ensure that all legal requirements are met. If you are planning to buy or sell a property, it is recommended to seek the advice of a qualified conveyancing expert to ensure that everything is done properly.

1. Instructing a conveyancer or solicitor to handle the legal work involved in the sale or purchase.
2. Arranging for a survey or valuation of the property to be carried out.
3. Negotiating the terms of the sale or purchase with the other party.
4. Reviewing and approving the draft contract for the sale or purchase.
5. Arranging for any mortgage or loan required to fund the purchase.
6. Carrying out local searches to check for any issues that may affect the property.
7. Exchange of contracts, at which point the sale or purchase becomes legally binding.
8. Completion, when the keys to the property are handed over and the sale or purchase is completed.

Both conveyancers and solicitors can perform conveyancing services, which involve preparing and reviewing legal documents, conducting searches, and handling the exchange of money and titles in the process of transferring ownership of a property.

A conveyancer is a professional who specializes in conveyancing, while a solicitor is a broader term for a legal professional who is qualified to practice law in a particular jurisdiction. Solicitors can offer a wide range of legal services, including conveyancing.

One key difference between conveyancers and solicitors is the level of training and qualification. Conveyancers typically undergo a specific course of study and training in conveyancing, while solicitors are required to complete a more general law degree and pass a series of professional exams.

It is important to note that the conveyancing process can be complex, and it is recommended to seek the advice of a qualified conveyancer or solicitor to ensure that everything is done properly.

1. Start packing early: Don’t wait until the last minute to start packing. Start packing non-essential items a few weeks in advance, and make a list of everything you need to pack to keep track of your progress.
2. Get plenty of boxes: You’ll need a lot of boxes to pack all your belongings. You can buy boxes or get them for free from supermarkets and other retailers.
3. Label your boxes: Label each box with its contents and the room it belongs in. This will make it easier to unpack and put everything in its proper place.
4. Hire a reputable removal company: Do your research and hire a reputable removal company to handle the heavy lifting on moving day. Get quotes from a few different companies and ask for references before making a decision.
5. Notify all relevant parties: Remember to notify utility companies, banks, credit card companies, and any other relevant parties of your change of address.
6. Change the locks: When you move into a new home, it’s a good idea to change the locks to ensure the security of your property.
7. Take a meter reading: Remember to take a meter reading on the day you move out of your old home and on the day you move into your new one, to ensure you are only billed for the energy you have used.
8. Get your post redirected: Consider getting your post redirected to your new address to ensure you don’t miss any important mail.
9. Take some time to unpack: Don’t try to unpack everything in one day. Take your time and unpack a little bit each day to make the process less overwhelming.

If you’re a first time buyer or starting fresh with all new belongings, there are a few things you can do to make the process easier:

1. Create a budget: Determine how much you can afford to spend on new items, and stick to it as you shop.
2. Make a list of essentials: Make a list of the items you’ll need right away, such as bedding, towels, and kitchen essentials, and prioritize those purchases.
3. Shop around: Take the time to compare prices and look for deals to get the best value for your money.
4. Consider second-hand items: Don’t be afraid to consider purchasing gently used items, such as furniture or appliances, to save money.
5. Don’t overbuy: It can be tempting to want to fill your new home with new items all at once, but remember that you’ll likely be adding to your collection of belongings over time. Don’t feel like you need to buy everything all at once.
6. Think about functionality: When choosing new items, consider not only how they look, but also how they will function in your new home.
7. Measure your space: Before you go shopping, measure the space in your new home to ensure that the items you purchase will fit properly.
8. Get organized: As you unpack and set up your new home, take the time to organize your belongings to make it easier to find what you need and keep your space clutter-free.

Finally, enjoy your new home.