Equity release FAQ’s
Simply Put: Key can offer you independent equity release advice and can answer any questions.
- What is equity release?
- Who qualifies for an equity release plan?
- Will I still own my own home?
- Can I still leave an inheritance?
- Am I able to end the plan early?
- What is an APR?
- Can I still take out an equity release plan if I have an outstanding mortgage?
- Can I change my equity release plan?
- What happens if I decide to move into long term care?
- Is the money I release through an equity release plan tax-free?
- Will I need to alter my Will?
- Can you release equity on second homes/holiday homes?
- Can I borrow more money at a later date?
- Can I swap to a better rate in the future?
- Can I pay my lifetime mortgage off early?
- What happens if I remarry after taking out my equity release plan?
- What happens if I divorce after taking out the equity release scheme?
- What happens if my spouse dies after we have taken out an equity release plan?
- I’d like to move house. Am I able to do this now that I have released cash from my home?
What is equity release?
Equity release is a way for you to release cash locked up in your home to spend as you wish. There are currently five types of equity release schemes on the UK market known as lifetime mortgages, drawdown lifetime mortgages, home reversion plans, enhanced lifetime mortgages and interest payment lifetime mortgages. Each plan comes with its own benefits and drawbacks. An equity release adviser will be able to explain the plans in full to help you decide which one suits your individual circumstances.
Once you have taken out an equity release scheme, you are able to remain in your home until you and your partner pass away or move into long term care. With a lifetime mortgage, the loan, plus interest accrued is repaid in full to the equity release provider upon your entry into long term care or when you and your partner pass away. Lifetime mortgages allow you to pay some of the interest accrued on a monthly basis. If you have taken out a home reversion plan, the percentage of the property you sold will revert to the provider.
Who qualifies for an equity release plan?
To qualify for an equity release plan you must be over 55 and own a home in the UK worth at least £50,000. You can find out how much you could release today through our free equity release calculator.
Will I still own my own home?
If you take out a lifetime mortgage, drawdown lifetime mortgage, enhanced lifetime mortgage or interest payment lifetime mortgage, you will remain the owner of your home. However, if you take out a home reversion plan, a percentage of your property will be owned by the home reversion company who you sold your house to in order to release the cash from your property. All of these plans, however, allow you to remain in your property until you and your partner pass away or move into long term care.
Can I still leave an inheritance?
All equity release schemes will reduce the amount you leave as an inheritance; however there are plans available which allow you to guarantee an inheritance to your loved ones when the plan comes to an end.
For example, if you take out a home reversion plan and sell less than the full value of your home, you will be able to guarantee this part of the property as an inheritance to your family from the sale of the property. This percentage will be paid at the end of the plan when you and your partner pass away or move into long term care.
Am I able to end the plan early?
An equity release plan is intended to last for the rest of your life; however there are ways in which you can repay the plan back early. If you take out a home reversion plan, you can buy back the reversion company’s share of the property; however you will have to pay the full market value for the percentage of the property that you sold. This will be more than the amount you received when you originally sold your house to the provider.
If you have taken out a lifetime mortgage and wish to repay earlier than planned, you will have to pay off the full amount, including the loan and interest accumulated. There may be an early repayment charge. You should check this before you proceed with any type of plan.
What is an APR?
APR stands for Annual Percentage Rate. This can be used to compare the cost of different lifetime mortgages from different lenders. This rate looks at the interest rate as well as all the charges and costs you have to pay, for example the arrangement fees and the valuation fees. This allows you to compare the overall costs of different lifetime mortgages when it comes to choosing your plan.
Can I still take out an equity release plan if I have an outstanding mortgage?
Yes. Equity release providers allow you to release cash from your home if you have an outstanding mortgage on your property, however all providers would expect you to use the cash you release to pay off the outstanding mortgage owned first.
Can I change my equity release plan?
If you have already taken out an equity release plan then you may be eligible to change to a more competitive plan. Read more about switching your equity release plan to see whether you are eligible.
What happens if I decide to move into long term care?
If you move out of the property into a care home, the equity release plan will come to an end, meaning your house will be sold and the debt will be repaid in full to your equity release provider. If you are a couple and only one of you moves into care, your partner can remain in your home until they pass away or move into long term care too.
If you live in your home and receive domiciliary care, then the equity release plan will continue, allowing you to remain in your home until you pass away.
Is the money I release through an equity release plan tax-free?
Yes. The money released would be free of both Capital Gains Tax and Income Tax. However; any interest accrued on the amount released may be liable to tax.
Will I need to alter my Will?
This depends upon what your Will says about your property. If you have stated monetary values to be passed onto your beneficiaries once your property is sold, then it would benefit to change the wording as there may not be sufficient equity left in the property once your provider has been paid.
If your Will simply states that any remaining money from your home will be passed onto your beneficiaries then there should be no need to alter it.
You can contact our Wills team today to help you with your Will or to arrange your Lasting Power of Attorney. Contact our team today on 0800 915 0405.
Can you release equity on second homes/holiday homes?
There are a few providers who will allow you to release money on second homes. Request a call back from Key and we’ll tell you more about it.
Can I borrow more money at a later date?
Yes. It is often possible to top up your existing equity release plan, or swap your equity release plan and release more cash.
Can I swap to a better rate in the future?
Yes, we can compare your current equity release plan with others on the market and tell you the options available. We can make switching equity release plans hassle free by helping you with the paperwork and liaising with your equity release provider and solicitor.
Can I pay my lifetime mortgage off early?
As the name suggests, a lifetime mortgage is meant to last for the rest of your life and is not designed to be repaid early. It is possible to repay the loan early but there may be an early repayment charge to pay. This can apply for the duration of the loan or a specified number of years.
What happens if I remarry after taking out my equity release plan?
If your new spouse qualifies for equity release then it is normally possible to add their name onto the equity release plan, subject to lender criteria, or your spouse may need to sign a waiver of entitlement. Ask your independent equity release adviser.
What happens if I divorce after taking out the equity release scheme?
It is possible to remove parties from an equity release plan; however, whether it is possible to do so will be subject to provider criteria.
What happens if my spouse dies after we have taken out an equity release plan?
The equity release plan will continue until the death of the last surviving partner so you will be able to stay in your home for the rest of your life.
I’d like to move house. Am I able to do this now that I have released cash from my home?
Yes. Key recommends plans that are approved by SHIP (Safe Home Income Plans) and all plans approved by SHIP allow you to move home if you wish. The move is subject to provider criteria, which can differ between providers.
*Key Retirement Solutions Customer Care Questionnaire 2011.
The process was easier than we had anticipated and the support of the staff made it even easier. 
All positive, with no pressure. 
I have been completely satisfied and overwhelmed by the professionalism from start to finish. Thank you Key. 
