Frequently asked questions
In this section you will find some of the most common questions people want to know about equity release.
If you have a specific question then please call one of our equity release experts on 0800 622 6414.
Equity release allows homeowners aged 55-85 to release equity in their home into tax-free cash, without the need to sell or downsize.
This depends on the type of equity release product you opt for. The most common type of equity release is a ‘Lifetime Mortgage’, and this product allows you to retain 100% ownership of your home. If you opt for a ‘Home Reversion Plan’, you essentially sell your home to the lender, lose ownership of this, and are then considered a ‘tenant’. Here at Giraffe, we almost always recommend a ‘Lifetime Mortgage’ instead of a ‘Home Reversion Plan’, as we understand that our clients home should be theirs to own. However, there are some situations where a ‘Home Reversion Plan’ may be more suitable, and that is where we will be able to use our expert knowledge to inform you.
This depends on the type of equity release product you opt for. The most common type of equity release is a ‘Lifetime Mortgage’, and this product allows you to retain 100% ownership of your home. If you opt for a ‘Home Reversion Plan’, you essentially sell your home to the lender, lose ownership of this, and are then considered a ‘tenant’.
If you want to move home you can potentially ‘port’ the plan to your new property or repay the loan using the proceeds of the sale. This depends on the terms and conditions of the recommended product, all of which will be fully explained by one of our expert advisers.
There are two main products – Lifetime Mortgage or Home Reversion Plan. A lifetime mortgage is where you retain ownership of the property. The loan is repaid at the end of the term, together with any interest that has rolled up if you decide not to service the interest payments. A home reversion plan is where the lender buys 100% of your home and rents it back to you for a nominal fee e.g. £1 per month. However, you lose ownership of the property and have zero equity left.
There are two main ways to take your money – either as a lump-sum or as a drawdown. A lump-sum product means you take a payment of equity in one go. A drawdown policy allows you to take up to a set amount as and when you need it the most.
The main providers in the market, which is growing due to consumer demand, are: Just Retirement, Aviva, Legal and General, Retirement Advantage, More 2 Life, Pure Retirement, Hodge Lifetime and Liverpool Victoria.
The Giraffe founders have been in the financial services industry for over 15 years and have advised clients, including high-net worth individuals, on many areas in the financial spectrum. All of our Giraffe advisers hold the Certificate in Equity Release, while the company is a member of the Equity Release Council and regulated by the Financial Conduct Authority.
That’s the beauty of equity release. The money is yours to do whatever you want with it. It could be for a holiday, a new car, to help your family or to enjoy your life. The choice is yours.
Since 2004, the equity release market is fully regulated. All equity release providers and advisers are authorised and regulated by the Financial Conduct Authority (FCA) – which regulates and protects to put your mind at rest. There is significant consumer protection in place – whether you choose a lifetime mortgage or a home reversion plan. For extra peace of mind, there is also an industry trade body, the Equity Release Council (ERC), that represents providers, qualified advisers, intermediaries and surveyors who work in the sector. Members must adhere to the council’s Statement of Principles, which puts in place safeguards for you.
Even though you won’t be able to leave your home behind for your loved ones, the money from the sale of the home will be used to pay off your loan – and anything leftover will go to your estate. Plus, if you want to guarantee an inheritance for your loved ones, you can do so. You’ll be able to ringfence some of the value of your home to leave as a legacy – just make sure you tell your adviser when you meet them for the first time. They’ll be able to find and tailor a suitable equity release plan for you.
When you take out an equity release plan in the form of a lifetime mortgage or home reversion scheme, you can rest easy knowing you’re fully protected by a “no negative equity” guarantee. This is because although the amount released plus interest will be a debt against your home, the amount charged will never be greater than the value of your house. The debt will be repaid from the sale of your home on death or moving into long-term care. If there’s a downturn in the property market and your house was to fall in value (and the sale of your property wasn’t enough to repay the plan), any debt would be written off when the house is sold.
No – both home reversion and lifetime mortgages have safeguards to ensure this will never happen. Provided that the property remains your main residence, and you comply with the full terms of the agreement, you can remain in your home until you decide to move, go into full time care or until you die.
Actually, this isn’t true with most plans – as long as your property meets the criteria of your equity release provider, you may be able to move and take your plan with you. You won’t have to pay a penalty, though there may be costs. This will be explained to you fully before you take out equity release, and it’s always a good idea to discuss the prospect of moving home with your equity release provider before setting the wheels in motion. One thing to note is that the value of the property you are moving to must be enough that the equity release provider is happy to lend the same amount against it. If not, you may have to pay off some of the amount you’ve borrowed.
Many people will be relieved to know that equity release is available ONLY as an advised product, and that you will also need to appoint a solicitor, meaning you will only get the correct advice.
Although some products allow you to pay the interest on the initial loan, you may choose to let the interest roll-up and therefore no monthly repayments are required. In this case, the initial loan, plus any rolled-up interest will only be payable on permanent vacation of the property, usually on death or moving into long-term care.
As long as enough money can be raised on the lifetime mortgage or home reversion plan to pay off the mortgage and any other loans secured on the property, then it is possible to arrange equity release if you still have a mortgage.
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