Equity Release Schemes

What is ‘Equity Release’?

Equity is the difference between any secured mortgage and the value of a property. It can be released in a number of ways e.g. downsizing, selling the property and renting another, selling a share to a family member, or, re-mortgaging.

An Equity Release Scheme…

…is a commercial product to provide capital or income to a home owner who can continue living in the property.

Reasons for Equity Release Schemes.

• The steep increase in average house values over the last 20 years (about 5 fold!) leading to large equities in many houses, AND
  
• Debt in retirement caused by pension failure, supporting family members, failing investment returns etc.

Two main types of Equity Release Schemes.

(i) Lifetime Mortgage Scheme

Here the property owner borrows against the value of the property releasing a loan which can be used to provide capital and/or income. The loan does not have to be repaid until the owner dies, vacates the property or moves into long term care.

(ii) H ome Reversion Scheme

Here the owner sells all or part of the property to a Reversion company but retains the right to live in the property for life as a tenant paying a nominal rent in return for capital and/or monthly income. On sale of the property or part of it by the Reversion Company, that company retains the increase in value of that property or part sold.

Which scheme should you choose?

The above is very much a brief précis of the scheme details. Both schemes are now regulated by the Financial Services Authority. It is advisable to obtain advice from a member of the Financial Services Authority.

In 2005, 1,137 Home Reversion Schemes and 23,216 Mortgage Schemes were sold.

Please note that our role in connection with the above Equity Release Schemes will be confined to:

• Advising you of the nature, effect and implications of entering into the Equity Release Lifetime Mortgage and/or advising you on the Lender’s security documents.
• Providing the Lender with title documentation and other documents requested.
• Advising the Lender of any change in circumstances which may affect the Lifetime Mortgage prior to completion.
• Rectifying any title defects which could otherwise prevent the property being good security for the Lender.
• Completing and signing the Solicitor’s Certificate (when required).
• Redeeming all secured lending.
• Assisting with any requisitions raised by the Land Registry and HM Revenue & Customs.
• Providing you with a copy of the Land Registry Title Information Document when registration of the Lender’s charge has been completed.

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