Guide to Equity Release Part 2

Guide to Equity Release

Unlocking cash in your home – is it right for you?


Q: What happens to my partner if I die?

A: If the scheme is in both your names, the arrangements will continue. If you are using equity release to improve your income, make sure you consider what the situation would be if you or your partner were to die. If the property and scheme were in your sole name, the property would have to be sold and your partner would have to fnd somewhere else to live (unless, for example, they could repay the lifetime mortgage in full).

Q: Is there a minimum amount I have to take?

A: There may be a minimum amount you have to take. This, for example, could be £15,000 or £25,000. It will depend on the scheme and provider. But you may not have to take it all at once. Drawdown loans can be taken in smaller amounts over time.

Q: Would an equity release scheme reduce the amount of Inheritance Tax (IHT) due on my estate after my death?

A: An equity release scheme will reduce the value of the estate you leave when you die, so this may reduce a potential IHT liability. But if you are thinking of using an equity release scheme as part of your planning for IHT, you should obtain professional fnancial advice.

Q: Who would be responsible for maintenance costs in the home?

A: You will be responsible for keeping the home in good repair. If you don’t maintain the home, the scheme provider could arrange the necessary repairs, and you would have to pay for them.

Q: Should I use equity release as a way of dealing with my debts?

A: Equity release may not be the best way to clear your debts. You should obtain professional fnancial advice to review your situation.

Q: Is a sale-and-rent-back scheme the same as a home reversion?

A: No. You may have to leave your home after the end of the fxed term in your tenancy agreement, which may only last fve years. You will have to pay a much higher rent than under a home reversion plan, and the rent could go up.

Q: What happens if my partner or I need long-term care?

A: Your equity release scheme will usually carry on unchanged if care is provided in your own home or just one of you moves to a residential or nursing home. If you both move into a care home, the scheme will usually end and the property will be sold.

Q: What about changes in my circumstances?

A: If you take equity release while single and later decide to share the home, you may be able to transfer the scheme into your joint names, but this may only be possible if the second person meets the scheme’s minimum age requirements. There may also be a charge for this. If you cannot transfer the scheme into joint names, the other person will not be able to stay in the home if you die or move out.

Time to make an informed decision? Taking out equity release is an important decision, so it’s vital that you have obtained as much information as possible to be in a position to make an informed choice. We can help you look at your options and establish whether equity release could be right for you. Please contact us for further information – we look forward to hearing from you.

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