Twenty Questions Frequently Asked About Equity Release Schemes, Discover Your Answers at a Glance.

Having assessed the potential risks to their equity by using an equity release risk calculator, potential equity release homeowners have many questions they wish to ask. Here are twenty of the most common questions although it should be appreciated that the list is not exhaustive by any means.

Q. 1. How old must I be to qualify?

You and your partner must be at least fifty five years old to apply for aLifetime Mortgage. Home Reversion Schemes normally stipulate a minimumage of 65 and this applies to the youngest person for couples.

Q 2. Is there a maximum age limit?

There is normally no maximum age limit.

Q 3. What is the maximum amount of cash that can be released?

This depends on your age as older persons are eligible for a larger percentage of valuation. The maximum amount available for a Lifetime Mortgage is usually up to 49%   of the property value for people aged over 90 and up to 60% of valuation for Home   Reversions on the same basis.

Q 4. What is the minimum amount that can be released?

The minimum amount for lifetime mortgages is in the region of five thousand pounds or 15%of valuation for persons aged 55 and possibly fifteen thousand pounds or 25% of valuation atage 65 for a home reversion.

Q. 5. Will I be able to move property?

Members of S.H.I.P (Safe Home Income Plans) are obliged to allows portability although the new property must meet the existing criteria of the equity release scheme provider.

Q. 6. Will I be in danger of losing my home?

Equity release providers that are members of S.H.I.P. must guarantee that you can never lose your home unless you are in breach of the contract. This obliges you to maintain and insure the property just like a normal mortgage. The S.H.I.P. code also ensures there will never be any negative equity that could be charged against your estate when the property is sold.

Q. 7 What if a person living with you is not a partner and or under the minimumage?

This is at the discretion of the equity release company. If they accept the proposal, the other party residing at the property will need to sign a waiverover all rights of occupancy when you leave the property.

Q. 8 Will my beneficiaries receive less from the sale of my property?

Yes in all cases. Even if you send all the money on home improvements there is no guarantee this will increase the price of your property to cover the amount released plus rolled up interest.

Q.9Is there a risk that my beneficiaries will receive nothing from the sale ofmy property?

Yes unless you are able to enter a lifetime mortgage that guarantees your equity release loan together with rolled up interest does not exceed a certain percentage of your property. If you take out a partial home reversion scheme, your heirs will always receive the proceeds from your part of the property.

Q.10 Will I be able to pay off my equity release mortgage at any time?

Yes but there may be harsh penalties depending on interest rates at the time. If    interest rates have fallen substantially below the level at which you fixed your loan initially, the exit penalty could be as high as 25% of the initial advance. Other schemes may simply charge say 5% of the advance during the first 5 years followed by 3% for the next 5 and nothing after 10 years. In the event that you have chosen a variable interest rate there may be little or no exit penalties. However these schemes are not eligible for membership of S.H.I.P. and carry uncertain interest rate and negative equity risks.

Q 11.  Is it possible to take out an equity release scheme if I have an existing mortgage or secured loan?

Yes but any existing mortgage or secured loan will need to be paid off At the same time your funds are released.

Q. 12. What happens if I move into long term residential care?

If you are the sole surviving partner and no longer occupy the property it may need to be sold to repay the equity release company.

Q 13. Should I use the equity release company solicitor to save time and money?

No you must use your own solicitor to ensure that you benefit from a legal adviser acting solely for you. Most solicitor firms that deal with mortgages do not frequently handle equity release business. Their mortgage administration staff may not be trained in this specialist field and this can in higher fees and a longer time to completion. It is recommended you chose an E.R.S.A. (Equity Release Solicitors Alliance) registered solicitor.

Q. 14. Can the new money from my equity release affect my benefits?

If your total savings exceed ten thousand pounds, means tested benefits such as Pension credit can be affected together with Council tax and certain NHS concessions. Benefits that are not means tested such as attendance allowance are unaffected.

Q. 15. Will my property be acceptable for an equity release scheme?

Your UK property will normally qualify if it is constructed with traditional materials such as stone or brick with a slate or tiled roof etc. Mobile homes and timber static holiday homes are unacceptable. the minimum value may be in the region of sixty thousand pounds to seventy thousand pounds. Channel Island and Isle of Man properties are usually excluded. Home reversion schemes may refuse apartments, former local authority buildings, retirement homes and sheltered accommodation.

Q. 16. Do I need to any income or capital gains tax on money released?

Your cash proceeds from equity release are free of income tax and capital Gains tax provided the property is your main residence. However certainBenefits can be affected as outlined in Q. 13.

Q 17. I decide to proceed with an equity release what costs are involved?

There may be a scheme providers arrangement fee usually not more than six hundred pounds. However you will need to pay legal and survey fees. Your independent adviser may also charge an arrangement fee and will probably receive a commission from the plan provider although this does not affect you.

Q. 18 Surely I would save money by avoiding independent advice?

Quite the reverse, in fact you could make substantial savings as well obtaining unbiased advice researched from the whole market place. Equity release advisers can obtain special deals such as a reduced lifetime fixed mortgage rate that could save you thousands of pounds. Also there may be a free survey fee or no arrangement fee.

Q. 19. How do independent equity release specialists get paid?

Equity release advisers normally derive their earnings from a a combination of a fixed arrangement fee often around five hundred pounds together with a commission from the equity release company of say one percent of the advance. Many advisers place a maximum on their total remuneration so that if their commission is high they will reduce their arrangement fee accordingly.

Q.  20. When my equity release scheme is set up will I be able to access More money in the future?

Yes if you have arranged a flexible draw down facility offered by some lifetime mortgages. Alternatively, if your property as increased in value in the future there may be opportunities for negotiating an extra release although different terms may apply at the time. If you have a partial home reversion you may be able to sell a few more bricks. Of course the percentage available should be greater as you get older.