The list below shows the questions we get asked most frequently. Click on the links in the table for a brief discussion of each.

• Are there any repayments?
• What will it cost?
• Just how soon could I have the money?
• Could I lose my home?
• Doesn't it reduce future inheritances?
• Could there be negative equity?
• Will it affect my benefits?
• Will Equity Release prevent me moving?
• What happens if I need long term care?
• Can I pay off the loan?
• Are there any properties on which you cannot release equity?
• Who sells the property on your death?
• What about taxation?

Are there any repayments?

This will depend on the type of scheme chosen. With a Lifetime Roll Up Mortgage, you pay nothing back during the term of the mortgage. The loan plus interest and any other charges are repaid once the house is sold and the house will be sold when you either die or move into long term care (or in the event of a joint plan the remaining partner has either died or gone into long term care). If you choose a reversion scheme you may have a nominal fee to pay on a monthly or yearly basis but this is usually very low. Should you prefer an ordinary mortgage you will of course have to make monthly repayments.

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What will it cost?

You will incur costs and these depend on the type of scheme you choose, you will normally have a valuation fee to pay, at time of application, the cost of which is determined by the value of your house. You may have lenders arrangement fees to pay, adviser's fees and solicitor's fees. Some of these fees can be added to your loan or you can pay them from the proceeds. Before proceeding we will provide you with a full Key Features Illustration of the plan we would recommend, which will outline all of these costs.

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Just how soon could I have the money?

In the case of an ordinary mortgage you could usually expect to receive the money within 6 weeks. In the case of Lifetime Roll Up Mortgages or Reversion schemes we would hope to have them completed within 8 -10 weeks, although it can take longer, with a lot depending on just how quickly your solicitor acts.

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Could I lose my home?

In the case of all SHIP approved Lifetime Roll Up Mortgages, Home Income Plans or Reversion schemes – NO. Providing you keep to the scheme rules you can be assured you can remain living in your home for just as long as you want to. Should you chose an ordinary mortgage, then if you didn’t keep up the repayments, the mortgage lender could repossess the home.

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Doesn’t it reduce future inheritances?

Certainly the interest rolled up on Lifetime Mortgage schemes (or reduction in the value of the portion sold, plus any share of future increases in value in a reversion scheme) will reduce the estate's value and this is why we suggest you talk it over with your family. However, as many people are finding, it can allow you to enjoy helping family members during your lifetime – possibly to help grandchildren buy they’re first home.

With a lifetime mortgage, if you live a long time or house prices fall, there may be no equity left for your heirs to inherit.

Also for those whose estate (including the home) exceeds the level of inheritance tax (£312,000 for a single or divorced person, £624,000 for a married/widowed person and spouse /late spouse didn’t use their Nil Rate Band allowance 2008/9) it may also reduce, possibly even avoid the estate being liable for any tax (40% of everything over £312,000). Indeed some of the lump sum realised from equity release can even be invested in trust for your children, so that growth made on it would normally fall outside of your estate for tax purposes. However, as the rules on Inheritance Tax are liable to change and equity consumed by any equity release scheme may exceed any Inheritance Tax savings made, we strongly suggest that Equity Release should not be considered solely as a means of mitigating Inheritance Tax but only if there are other more immediate needs to raise money.

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Could there be negative equity?

No. Whilst under a Lifetime Mortgage the debt will grow over time (with the interest rolled up on the amount of capital borrower), providing you keep to scheme rules any SHIP lender guarantees never to ask for more money back than the house could be sold for. Therefore you can be reassured that your children or other beneficiaries will never inherit a debt.

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Will it affect my benefits?

Yes. Any income or capital generated will affect any means tested state benefits you may be entitled to and may even mean you loose them. As such it should only be considered after checking with the Benefits Agency, Citizens Advice Bureau or Local Authority and you are happy that the benefits gained outweigh any loss.

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Will Equity Release prevent me moving?

No. All the schemes recommended by us allow you to move. However, if you move to a smaller property, to avoid a loan representing an irresponsible percentage of your new home, you may be asked to repay some of the original loan, to keep the new loan in proportion to the cheaper property. If so, this would normally come from the profit made on moving. The right to move is subject to the provider's approval and depends upon there being sufficient equity remaining to afford the new property.

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If time comes when, one applicant in joint cases requires professional care, the other applicant still retains the right to live in the home and the plan continues.

In the case of a single applicant needing to move into a Residential or Nursing Home the house is sold and the provider repaid. The amount repaid would normally reduce the value of the home in any calculation of assets used by the Local Authority when assessing your ability to pay.

From April 6th 2006 anyone living in England with assets over £22,250 (2008/9) needs to pay for their own care until assets fall below £22,250. This leads to further erosion of your estate. You could, however, use some of the equity released to purchase a Long Term Care protection Plan which would help provide for such care costs. (For further details on Long Term Care protection please click here)

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Can I pay off the loan?

Any specialist Equity Release plan should be seen as a life-long plan. However, should you come into money or want to sell your home without buying another (in the UK), most Lifetime Mortgage schemes or interest only mortgages will allow you to pay off all or some of the loan, but you may need to pay an Early Repayment Charge in the first 5 years although with some specialist schemes, this may be at anytime. You may therefore, prefer to invest the money or put off selling until such time as the penalty period no longer applies.

Under a Reversion scheme you may be able to buy back any share previously sold to the company but it would be at their discretion and would cost you the same percentage of the property, but based on market value at the time you paid it back, and not the value of the property when you took out the plan originally.

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Are there any properties on which you cannot release equity?

Yes:

• Properties not on mainland UK (Although there are a few lenders now willing to lend in N. Ireland).
  
  
• Properties worth less than £40,000 would not be attractive.
  
  
• Properties not of standard construction including – homes built of prefab concrete, caravans, mobile homes, wooden chalets, boats etc.
  
  
• Leasehold properties where less that 75 years of the lease remain, or when the property is part of a trust.
  
  
• Freehold flats may also be unsuitable. As might some former council houses and one bedroom properties to some lenders.
  
  
• Some companies will not lend on properties already owned under “Tenancy in Common”.

Should your property fall into one of the last three, The equityRelease Centre may still be able to find a suitable lender. If in any doubt please complete our online enquiry form and we will look into it for you.

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Interest Only Mortgage/Lifetime Mortgage schemes

As you do not sell any legal ownership, it remains for your representatives to arrange the sale of the property and pay the loan and interest back to the lender, retaining the balance. As interest is due until such time as the debt is repaid, it is in their interest to try and obtain the best possible price as quickly as possible. Specialist lenders do, however, retain the right to sell the property should it remain unsold after a prescribed period of time. This period varies between providers and can be from 6 - 18 months. Your estate will be responsible for all selling costs.

Reversion plans

If you sell 100% of the ownership to a company, the provider will arrange the sale of the property. If you sell less than 100% the majority of companies will arrange the sale. You or your estate will still receive the proportion of the home's value (minus costs) you originally chose to retain. Regarding sale costs, some will split the costs with you or your representatives in the same proportion as the percentage you sold to them, whilst others may charge you all the fees.

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The lump sum produced from releasing equity via a lifetime mortgage or reversion scheme is free of both Capital Gains Tax and Income Tax. Should, however, you put the money into a deposit account you will be taxed on the interest you receive from it. If you wish to invest some of the equity released for income, we can offer you advice on how to achieve this tax efficiently.

The income produced by a reversionary scheme is normally provided by an annuity. This allows a percentage of each income payment to be regarded as a return of the capital used to purchase it, and therefore tax-free. The balance however, is deemed as interest and is taxed at source at 20%, unless the income together with your other income does not make you liable for tax when it could be paid gross. Higher Rate taxpayers would have additional tax to pay on the annuity’s income.

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