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Equity Release Specialists – Overview, FAQs & More

Equity release specialists

For free and impartial money advice and guidance, visit MoneyHelper, to help you make the most of your money.

What are equity release specialists and how much do they charge? These are two of the main questions we will be answering in this guide. But before we get into that, let’s recap on lifetime mortgages, home reversion plans and related topics. 

What is equity release and who can use it?

Equity release is available to people over the age of 55 who own their own home with no existing mortgage, or a very small mortgage they plan on repaying as part of the equity release process. It is a method of borrowing against some of their home equity without needing to make any monthly repayments.

The tax-free cash is only repaid in one of three situations from the forced sale of their property. The money raised from the property sale is used to repay the equity release plan first. These three situations are:

  1. After death, in which case the property is sold from the deceased’s estate.
  2. After moving into long-term care, in which case the property must be sold to repay at this point.
  3. If you decide to repay the equity release plan for any other reason, which is unlikely because it incurs high early repayment charges in most situations. In this situation, the homeowner will need to repay with cash. 

Equity release is available through two financial products. These are lifetime mortgages and home reversion plans. Only consider one of these from a company that is authorised and regulated by the Financial Conduct Authority. 

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Lifetime mortgage explained

A lifetime mortgage is a lot more popular than a home reversion scheme. This may be because a lifetime mortgage debt grows gradually, compared to the additional risk of a home reversion plan that grows significantly as soon as you agree to the plan.

When you take out a lifetime mortgage, you agree for the lender to charge your loan with monthly interest. Only the interest doesn’t need to be repaid each month. 

Why do people release equity?

Older homeowners choose to use a lifetime mortgage or home reversion scheme so they can access large amounts of tax-free money to help them improve the quality of their life in their twilight years. The money may be used to pay for holidays, general living, home improvements or even for private healthcare services.

Others may decide to release equity and give the money to their children, which might help them get onto the property ladder or start a new business. If you do give away any money, this money can still be subject to inheritance tax if it was gifted within the seven years prior to your death. This is why equity release is rarely used as a method to mitigate inheritance tax. 

What is the catch with equity release?

Equity release plans can sound very appealing. You really do receive a lump sum or drawdown loan without ever being asked to make monthly repayments. But the catch is that both a lifetime mortgage and home reversion plan can become extremely expensive. No matter how big or small your loan, most people end up paying more than double that amount back from their property’s sale proceeds. 

This will not be an issue for senior homeowners who do not have anyone of significance that they wish to leave their property and wealth to within their will. But if you have children and other loved ones counting on an inheritance from you, it can make the decision a lot tougher to make. 

Use an equity release calculator

If you want a better idea of how much a home reversion plan or lifetime mortgage could cost you, it is a good idea to use an equity release calculator

An equity release calculator is an online calculator found on many websites, including lender websites, to give you a projection of how much a home reversion plan or lifetime mortgage could cost you over specific periods of time. 

For example, you can enter in your preferred loan amount and an interest rate to show how a lifetime mortgage debt grows over 5, 10, 15 years etc. 

What are equity release specialists?

As part of the equity release application process, homeowners are required to engage with a niche type of financial adviser who understands equity release products. These financial advisers are known as equity release specialists. Sometimes lenders will offer you access to their own equity release specialist working in-house, or you can always choose independent equity release advice elsewhere. 

What do equity release specialists do?

The job of an equity release specialist is to explain the different equity release options and assess your suitability for these products. They should explain the full costs and answer any of your questions honestly. They are even required to identify alternative options that are more apt for your situation, meaning they should recommend against using equity release if it is not the best option for you. 

There have been many cases of equity release specialists mis-selling lifetime mortgages, which can result in a complaint and significant compensation. 

How much do equity release specialists charge?

Equity release specialists may charge a fixed fee for a consultation (or no fee) but then charge a fixed percentage of the loan you want to take out. The percentage you may be asked to pay can range from 1% to 5%. So if you released £25,000 equity, you may have to pay anywhere from £250 to £1,250 in fees.

Other equity release specialists will charge a fixed fee for their service rather than a percentage of the loan. These fees tend to be around £1,000 including VAT. Depending on the size of your loan, it may be cheaper to use a fixed-fee equity release specialist for some loans. 

How much does it cost to arrange equity release?

Arranging equity release involves the services of an equity release specialist and a solicitor for legal checks and advice. You may also be subject to administration and application fees, or even a fee to work out the updated value of your home, which will help determine how much equity you can release. 

For all of the above, you should expect to pay a minimum of £2,000 – but some equity release arrangement costs can easily exceed this amount. 

What is the Equity Release Council?

The Equity Release Council is a voluntary membership group for lenders and equity release specialists. By joining the Equity Release Council you can be assured that the advisor is a legitimate professional and has committed to upholding excellent standards within the industry. 

They must follow a wide range of rules and guidelines as part of their process, so it is best to opt for advisors who have already joined the council. 

Who are the best equity release providers?

Some people refer to equity release specialists as the companies that provide lifetime mortgages and home reversion plans. The best equity release provider will be determined by personal circumstances. But you may want to check out some of the most respected companies, such as:

  1. LV
  2. More 2 Life
  3. Aviva
  4. One Family
  5. Nationwide 
  6. Pure Retirement
  7. Legal and General

Is equity release right for you? Find out with MoneyNerd

The only way to fully understand if equity release is right for you is to collect all of the facts and have your personal situation assed by an equity release specialist. MoneyNerd can assist with helping you to learn everything you need to know about equity release. We have lots of new guides answering common questions about lifetime mortgages, and we discuss some of the award-winning equity release providers in the UK.