Often, peoples’ largest asset will be their property and in later life, it isn’t uncommon for them to consider releasing some of the equity that is tied up in their home. Equity release can be a brilliant way to improve your quality of life in your retirement years and help to prevent any financial concerns when you’re no longer working full time. What’s more, you can even continue living in your home after releasing equity, so you won’t have to worry in this regard. 

Understandably, when contemplating equity release in later life, people will have lots of different things to take into consideration and many will ask mortgage advisors the same questions about this type of ‘later in life lending’. So, to help anyone who is interested in equity release, below we have answered three of the most commonly asked questions. 

Can you sell your house if you have an equity release mortgage?

As you get older, your needs may change in relation to your property. For example, your family home may be too big for you to maintain or you may require a more accessible single-story property. Thankfully, even if you have an equity release mortgage, you can still sell your home and like all other mortgages, you can either pay off the mortgage or take it with you (port) it with you when purchasing a new property. 

There are different types of equity releases schemes though and some will be more complicated than others when it comes to selling your house. What’s crucial to remember is that if you’re going to port your mortgage, there needs to be enough equity in the new property to cover the debt and if not, your lender may request that you repay part of the equity loan. The new property you purchase must also meet your lender’s criteria and sometimes retirement homes, for example, are outside of lenders’ remits.

What happens when you die with equity release?

Some forms of equity release allow you to make a partial or full repayment whenever you want, but most people choose to pay the lender back upon their death. If you opt for a lifetime mortgage for your equity release, which tends to be the most popular option, when you pass away, your home will be sold and your debt to the lender will be paid with the proceeds. Whereas, if you choose a home reversion mortgage, the property will still be sold upon your death, but the lender will take the pre-agreed percentage of the proceeds instead. 

The majority of equity release mortgages nowadays come with a ‘no negative equity guarantee’ and this is really important. This guarantee means you will never owe a lender more than the value of your home. So, when you pass away, your estate will always be able to repay the lender and your family won’t inherit your debt, so to speak.  

Does equity release affect inheritance tax?

Inheritance tax (IHT) is incredibly complicated and it is only payable when the value of an estate exceeds a certain threshold. There are a variety of different allowances and reliefs available to an estate that is subject to IHT too and it is always beneficial to get some specialist estate planning advice if you want to learn more about IHT in your individual circumstances.

Sometimes, equity release can actually reduce the amount of IHT payable when you pass away. Due to the fact that releasing equity will reduce the value of your estate, it may even cause your estate to fall under the threshold, resulting in no IHT needing to be paid. If you plan on gifting some of the equity release funds, it is important to note that any gifts you make may affect IHT too, so make sure you’re taking this into consideration. 

Where can I get some equity release advice?

If you would like to find out more about equity release and get some advice from an experienced mortgage advisor about whether this is the best option for you, don’t hesitate to contact our team at Mortgage Required. As part of the Equity Release Council, you can rely on us to provide you with the sound equity release advice that you need. We can discuss all available options with you in more detail and should you wish to go ahead with realising some of the equity from your home, we can help you find the best equity release products in your unique situation. What’s more, we never rush anyone into making a decision, we will always go at your pace!

Recent posts

Lloyds Banking Group has jumped on the bandwagon to boost lending for first-time buyers as they allocate an additional £4 billion to help first-time buyers on to the property ladder.

As the Loan to Income (LTI) cap has been increased to 5.5 times income, applicants who fit the First Time Buyer Boost criteria could borrow up to 22% more. 

The government is introducing mortgage reforms to boost homeownership, stimulate economic growth, and make the housing market more accessible, especially for first-time buyers.

Chancellor Rachel Reeves has announced the most significant mortgage reforms in over a decade—great news for those dreaming of homeownership.

Nationwide ease their ‘Helping Hand’ mortgage designed to help first-time buyers get onto the property ladder by allowing them to borrow up to six times their income.

 

Keeping the kids entertained over the six-week summer holidays isn’t always easy, especially with the cost-of-living making it even more difficult. Below is a list of fun, inexpensive ideas to do over the break

The Financial Conduct Authority (FCA) has published a discussion paper about the future of the mortgage market in a bid to improve access for first -time buyers, self-employed, and those borrowing in retirement.

Ever wondered where the most reasonably-priced towns for families to buy are? Property company, Zoopla has identified the top 10 towns for families to live in the UK by looking at the most affordable towns, and how many people are looking in that area.

There was a 32% increase last year in 100% loan-to-value (LTV) mortgages which are mortgages that require zero deposit. According to a recent report by chartered accountants and business advisers, Lubbock Fine, the reason behind this is buyers simply struggling to save enough for a deposit.

Many people are quite private when it comes to what is in their bank account. In this short blog, we look into what Brits have saved by age group.