Understanding equity release

What is equity release?

Equity release is a financial arrangement that allows homeowners, typically aged 55 and over, to access the cash tied up in their property. The money can be taken as a lump sum, smaller payments over time, or a combination of both.

There are two types of equity release: Lifetime Mortgages and Home Reversion plans. Both of these are regulated by the Financial Conduct Authority.

Lifetime Mortgages

A Lifetime Mortgage is a type of mortgage secured against your home which does not require monthly repayments as the interest is rolled-up (compounded). There are also Lifetime Mortgage plans that allow you to make monthly repayments if you prefer.

When you take out a Lifetime Mortgage, you retain ownership of your home and the loan, and the rolled-up interest is repaid by your estate when you pass away or move into long-term care. If you own your property jointly with your partner, the loan does not have to be repaid until the last remaining person living in the home either dies or moves into long term care, allowing you and your partner to live in your property for the rest of your lives.

Lifetime Mortgages can play an important role in funding retirement and, due to the changes in Inheritance Tax, more people are using Lifetime Mortgages as a tool to cut Inheritance Tax as they can free up cash from their home and gift it to their children and grandchildren. If they survive seven years after making the gift, the amount usually falls outside their estate for Inheritance Tax making it a Potentially Exempt Transfer.

When they pass away, the loan is paid off from the estate, which reduces the net value of the same, potentially lowering the Inheritance Tax liability. However, careful financial planning and financial advice is essential, and it is crucial to receive specialist legal advice before entering into a Lifetime Mortgage agreement.

Equity release can be a helpful solution, but it is not suitable for everyone and, therefore, it is important to consider:

• The effect on your estate and inheritance for loved ones
• The long-term financial commitment involved
• Possible impact on means-tested benefits
• Whether downsizing or other financial planning options might be more appropriate

How DMH Stallard can help with equity release

Equity release can bring peace of mind and financial freedom, but only if handled carefully and with the right legal support. At DMH Stallard we provide clear, independent legal advice to guide you through the process. We will:

• Review the terms of the equity release agreement in detail
• Explain your rights and obligations in plain English
• Ensure you fully understand the impact on your home and estate
• Protect your interests at every stage

For more information about equity release, get in touch with one of our team of legal real estate experts who will be happy to assist. You can contact us by email or call +44(0)3333 231580.