Understand and simplify your equity release process to make your life easier. We explain the whole process to you so that you’re in the know.
But first, what is equity release?
Equity release refers to the equity that you have in your home that lets you access the money tied up in your house. However, you can only gain access once you’re 55 years or older. You can get the capital value of the equity in your home as a lump sum or as regular income based on its value. You’ll only need to repay the money you accessed at a later stage (when you pass away or move into long-term care). There are two types:
1. Lifetime Mortgage
The first type of equity release is a lifetime mortgage. This type lets you take out a mortgage on your home only if it’s your primary residence. However, you’ll remain the owner. You’ll have the option to ringfence part of your property for your family to inherit. You can also make repayments or let the interest accumulate. If you don’t want to make any repayments the accrued interest will be paid back when you pass away or move into a long-term care facility.
2. Home Reversion
The second type is a home reversion scheme, which means you either sell a portion of your property or your whole property. You can sell it to someone like a home reversion provider, and they’ll pay you a lump sum for it, but they can also pay you in regular payments. It’s your choice.
You might be asking yourself this:
Is Equity Release & The Whole Process For You?
Well, ask yourself this: Have you been struggling to meet your lifestyle needs, or you need some extra cash to cater to your lifelong dreams? Are you a UK resident, over 55 years, and own a home worth more than £70,000?
If yes, you could rush over to your financial adviser and start making plans towards taking out an equity release plan. Equity release will enable you to achieve your financial desires and meet your lifestyle needs by unlocking the equity tied up in your home.
It’s a secure way to release money that will be repaid when you pass away or move into residential care. Its process is also straightforward and easy to understand. That said, here’s a comprehensive guide on the equity release application process.
So, here’s the deal:
Typically, the equity release process can take between 4-6 weeks to be completed.
However, there have been cases completed in just 18 days. This affords you peace of mind and the ability to use your equity release funds as needed as soon as possible.
3 Core Factors Of The Equity Release Process
Certain factors will ultimately affect the time scale of the equity release process, placing a delay on your application and hindering a fast release of monies.
Naturally, you’ll want to allow your application to progress as timeously as possible. What factors, and how do you ensure your application for equity release is moving as fast as possible? Let’s look at these core factors.
The core factors that will affect the equity release process are:
1. Type Of Property
Some equity release providers or lenders have specifications about your property. Some might deny an equity release plan if your property has a flat roof, for example, or if it’s in a high-flood area.
Some might even have a problem with where the property is situated, for example, if it’s close to a commercial property or construction not built according to the right standard. If your property is also not made according to regulations, you might face rejection.
2. The Lender Involved
As mentioned before, lenders differ. You’ll need to research the different lenders out there to determine their requirements, terms, and conditions before deciding on one. Some lenders don’t offer any negative equity guarantee, which is quite essential, for example.
This guarantee protects you so that you don’t end up paying more to your equity release provider than your property is worth. However, when your lifetime mortgage plan comes to an end, the lender will sell your house and settle the loan amount plus any interest.
If the estate market value decreases and the money can’t repay your mortgage, the lender won’t request more cash from your estate or heirs. Since you’ll be protected by the ‘no negative equity guarantee’, they aren’t allowed to deviate from the agreement. Therefore, consider only equity release firms that will offer you this protection.
3. The Efficiency Of Your Solicitor
Ensure that your solicitor1 is a professional and has experience with equity release transactions. By getting an expert solicitor you’ll ensure that the equity release process movies along faster.
You might be wondering why we’re mentioning these three factors…
Being aware of these factors is essential. Your equity release adviser, alongside a case management team, expertly coordinates all the parties involved to ensure your equity release process is as fast and seamless as possible.
With the introduction of online case management, timescales to take out your equity release have shrunk considerably. The industry has progressed to reduce the need for paperwork, postage, and even your physical signature on documents.
Moreover, due to this progression, a more competitive market has evolved. To navigate this successfully, it’s now within the lender’s best interests to become more efficient – and most lenders certainly have.
Understanding Equity Release
Understanding the critical stages that are a part of the process of taking out an equity release plan is essential. This, in turn, helps you keep track of your equity release progress.
What are Average Equity Release Timescales?
An average equity release application can take between 4 to 6 weeks for a lifetime mortgage, being the most popular equity release plan, and 6 to 8 weeks for a home reversion scheme.
Your equity release process time will also be dependent on how efficient your chosen solicitor is. An experienced solicitor knows how to avoid potential delays in the paperwork submitted on your behalf, saving you time and assisting you to receive your equity release sooner.
The entire equity release process will start with the completion of an application form. You must combine this with professional financial advice since no equity release provider will accept your application without it.
Usually, any fees required by you would need to be paid upfront. These fees would be clearly stated in the key facts illustration (KFI) and include a valuation fee payable to the lender.
Some equity release brokers also charge a consultation fee, but here, you’re only charged a fee on completion, eliminating the need for unnecessary fees upfront.
An equity release provider will appoint a surveyor once you’ve completed your application.
The surveyor’s role is to conduct a valuation of your property. This is done by assessing the area within which your property is located and finding similar properties, then examining the price they sold for in the last 3-6 months.
The report will show the accurate market value of your home in the current market, based on a relatively quick sale.
The surveyor will also ascertain if your house needs repairs needed or has any material defects that could affect the structure long-term or the re-saleability of your property.
Why You Need a Solicitor
For the equity release process to be accelerated, it’s wise to simultaneously start the legal process as soon as you submit your application.
A solicitor from ERSA (Equity Release Solicitors Alliance) is recommended unless you specifically wish to use your family solicitor in accordance with the Equity Release Council standard. For your protection, you must have a face-to-face meeting with your solicitor.
Our equity release specialists are ERSA members and extensively cover England, Scotland, and Wales.
How Do You Benefit from Using an Equity Release Solicitor?
A specially negotiated fixed fee agreement of £695 + VAT & disbursements is typical.
Your solicitor will also provide you with a ‘No completion, no fee’ agreement, something that will give you peace of mind for any future lifetime mortgage or home reversion applications.
Using an Equity Release Solicitor, you’ll be guaranteed a speedy, efficient transaction and quality communication throughout the equity release process.
What Is Your Solicitor’s Role?
Under Equity Release Standards you require two solicitors to carry out the equity release process. One to represen the client and the other the lender.
On instruction, your solicitor will send out a questionnaire requesting further information to determine:
- If any mortgage currently exists
- Who the owner of the Title Deeds are
- Any restrictions in place
- If there are tenants involved
- If any significant improvements have been carried out with respective planning permissions
Also, to provide permission for your solicitor to act on your behalf.
What About Your Existing Mortgage or Secured Loans?
Should you have an existing mortgage or any secured loans present on the Title Deed, these will need to be removed before or after the completion of the equity release process. Any mortgage amount is usually settled with the equity release scheme’s proceeds once the funds are released.
Your solicitor will establish the exact amount required on the completion date by requesting a mortgagee’s redemption statement. This statement reflects the current balance and daily rate of interest added for the interim period up to the completion date.
What Information Does The Lender Check?
To process your equity release, the lender will need to ensure that your application meets the Money Laundering and the Consumer Credit Acts requirement.
Therefore, you will need to submit proof of identity in the forms of your passport, driver’s license, or government-backed evidence, such as your Inland Revenue tax code or annual state pension letter. Most lenders will require either a birth or marriage certificate to authenticate your identity if these are not available.
Proof of your address, such as a recent utility bill or bank statement, will be required.
Some lenders may also carry out credit checks. So, although no monthly payments are usually required on a lifetime mortgage, the lender will check if you have been negligent with any previous credit payments. These could affect the lender’s security.
Nevertheless, you would have to have amassed a severe credit problem for a lender to decline your equity release application due to adverse credit. Several lenders will accept previously missed payments, defaults, and even CCJ’S (County Court Judgements) on their credit file, except in the case of significantly large amounts.
Should you, however, be forthcoming, explaining why the CCJ was applied, to your lender, they may still accept your application. However, undischarged bankrupts are usually unsuccessful with any equity borrowing.
What You Need to Know While Awaiting Completion
Provided your solicitor has received a successful valuation and Title check, then acting on your behalf, they will set a completion date.
On the completion of your equity release scheme being approved, you will receive the money paid directly into your nominated bank account, or should you wish to save on the telegraphic transfer fee (approximately £30), you may instead request a check.
Depending on the scheme, you can borrow the money as a one-off capital lump sum or an ad hoc withdrawal from a cash reserve that will be set up for you from the onset.
Knowing all of this…
Your equity release plan is an excellent means to turn the money tied up within your property into a more tangible and usable amount.
Although, as with all large loans, equity release has its risks. Before deciding to release your home’s equity, ensure to first consult with your solicitor or independent financial adviser.
How Using Equity Release Specialists will Benefit You
As equity release specialists, we are proud to offer award-winning service to our clients, as you can see from our customers’ wonderful referrals.
As one of our valuable clients, we will also assist you in tracking your application’s progress at any time. This is done by offering an exclusive free to use online tracking facility, giving you immediate access to a secure dashboard which displays your documentation and case updates.
Now, you can stay ahead of your application.
Should you have any further questions about the equity release process, please contact one of our helpful, expert independent equity release consultants to assist you.
Do you need further encouragement?
The Equity Release Council2 and Financial Services Authority require you to ask a professional’s help, advice and services. Their rules stipulate that you need to do this even before you take out a plan. A professional financial advisor will help you through all the required processes effortlessly, and they’ll also assist in the valuation of your property.
They’ll also help you know about the different charges you might need to pay in the process, and they’ll inform you of the early repayment charges. They can also show you other alternatives to suit your needs: downsizing or using different assets to gain more money.
A financial advisor, or a solicitor, will help you with your legal needs when it comes to equity release. The solicitor will walk you through all your legal rights after you’ve claimed equity release. Always remember, however, to ask a professional for advice and not someone who knows a little about equity release. Instead, ask persons from approved companies like those approved by the ERC and FCA.
Firstly, look at your finances. Yes, this is part of the process even before you get the ball rolling…
Then, go to a qualified financial adviser to discuss all your options. They’ll explain all the options to you and you can choose the best one for your specific needs. You’ll be charged an admin and application fee, and initial fee and any other fees that go with the plan or scheme you chose.
After that, once your provider is satisfied with your home, they’ll tell you how much you can borrow. You decide the amount and then start repaying. That’s only the short version. Speak to an adviser for the full scope.
Simply put, it takes about 6 to 8 weeks, usually. However, it all depends on your specific equity release plan provider because all companies and providers have different ways of handling equity release. You also need to consider that if there are any complications along the way, the whole process could take longer.
If you want the money as soon as possible, it’s always a good idea to do your research, find out exactly what you need to do, provide them with, and how everything will work to have a smooth and quick process.
The simple answer is yes. You can be refused to release equity from your property or house by a company or a provider. Even though providers have different criteria, most of them will agree on this.
There are a few reasons that this could happen to you, most of which has to do with the property or residence itself, and not the owner. Let’s take a look:
- A flat roof
- Proximity to a commercial property
- Non-standard construction
- Flood risk
- Single skin construction
- Ex-local authority
- Clutter inside the house
- Proximity to electricity
- Spray foam under the roof
Yes, you do need one. When taking out an equity release scheme, you must go over your will with a professional solicitor to help you write your choice or rewrite it. Your solicitor should explain the effect of equity release on your estate. They should also inform you about what your beneficiaries will receive when you pass away. There are individual companies that won’t allow you to take out a plan unless you’ve consulted with a professional. Plus, that way, you’ll have total peace of mind, and you’ll be confident in your financial decisions.
Equity release is such a popular way to borrow money nowadays, and it’s such a great way to get cash fast when you need it the most. Some people have many questions regarding this and are still considering whether or not it’s the way for them to go.