Equity release: what is it, and do I need a solicitor?

What is equity release?

Equity release is a form of mortgage you can take out on your property; it allows you to access tax-free cash that you may have tied up in your property. As with general mortgages, many different equity release products are available on the market, and you can investigate these options via a mortgage broker or financial advisor.

Are there any requirements?

Generally, equity release products are available to those aged 55 and older, although some specify a minimum age of 60. You are also often required to have no current outstanding debt on the property from which you are looking to release the equity.

Equity release lenders will also consider other factors when deciding to lend, including the condition and construction of the property.

How does it work?

The most common form of equity release is known as a lifetime mortgage. A lifetime mortgage works by essentially taking out a loan against the value of your property; you can usually borrow up to 50% of your property’s value. Interest will accrue monthly on the loan, and you can either pay the interest off monthly or allow it to accrue and then pay this off when you sell the property. Of course, the latter option would result in a higher sum to repay as the interest accrued would compound over time.

The equity release lender will then have a charge registered against your property; this protects them and ensures their loan will be repaid on any property sale.

You can usually take the cash as a lump sum, in several smaller amounts released periodically over time, or as a combination of the two.

Do you need a solicitor? What do they do for you?

Your equity release lender will require you to take independent legal advice from a solicitor to complete the process. This is because the lender needs to be sure that you have been fully advised on the risks and obligations attached to the process.

When is equity release right for you?

As with anything, there are pros and cons to equity release that should be considered.

The main advantage is that you can access tax-free cash, and you can spend this in whichever way you desire. Furthermore, you will be able to unlock some of the equity in your home without having to sell up and move out. In addition to this, the flexibility to receive a lump sum, or smaller sums over time, means equity release can serve a wide variety of financial needs and uses. 

However, the potential pitfalls of equity release should be carefully considered. The main one is that if you do not opt to pay the monthly interest off, the repayment value of the loan could increase quickly due to compounding interest. Another point to consider is that it will affect the amount you will be able to leave as an inheritance to your family. It is also likely that you will be restricted when it comes to taking out further loans against your property.

There are many other pros and cons to consider, and you should take both financial and legal advice when considering if an equity release loan is the right step for you.

Our equity release solicitors can help.

At SO Legal, our equity release solicitors work alongside clients and independent financial advisers (IFAs) to ensure all parties fully understand the legal implications of the process.

Whether it’s a Home Reversion Plan or a Lifetime Mortgage, our equity release solicitors will ensure you understand the legal implications of the documents you’re signing. 

SO Legal has offices in the South East and North West. Our team of solicitors in London, Brighton, Eastbourne, Hastings, Uckfield, and Ulverston can help you understand your equity release options.