Following on from last week’s piece on equity release, and how for many retirees with no outstanding mortgage it can provide a great alternative to their income drawdown pension, we’re now going to take a look at some of the more frequently asked questions about equity release.
Will I still own my home?
Yes: with a Lifetime Mortgage you are still the owner of your home and your name will remain on the deeds; the loan is simply secured on the property by the lender, to protect their interests. Home reversion plans differ in that you are selling off part or all of your home to a company. It is your responsibility to ensure the home is kept in good repair. If the scheme provider deems certain aspects of the home unsatisfactory and has to arrange for repairs, you will be responsible for paying for these.
Can I live in my home for the rest of my life?
You are entitled to stay in your home; after all, it is still your home. If you decide, towards the end of your life that you need to move into long-term care, your property will then be sold to allow the loan to be repaid. Some lenders may permit you to receive care in your home up until the end of your life.
What if I want to move homes?
For both lifetime mortgages and home reversion schemes, this is still a possibility under the provision that the lender is happy to accept the new property. Moving to a lower-value property usually means you’ll have to repay part of the mortgage (if you have a lifetime mortgage). If you and the lender do not agree on the transfer of the property, you will have to buy back the property plus interest; there may even be an early repayment charge too.
I’ve seen a better mortgage deal elsewhere, can I switch?
You are able to switch a lifetime mortgage if you feel you can take advantage of lower interest rates elsewhere, however there may be an early repayment charge that may outweigh the benefits of switching.
What happens to my partner if I die?
If the scheme is in both of your names, the agreed arrangements will continue. If you are the sole holder of both the property and the scheme then they would have to leave the home and find somewhere else to live. You should be able to add a partner to your scheme (if you took out the policy while you were single, for example) and have the conditions apply to both of you, though there may be a charge or even certain restrictions depending on the provider.
Can my beneficiaries be landed with any debt after I die?
Many equity release products will always offer a ‘no negative equity’ guarantee, with a promise from the provider to only claim the debt back against the property from where the equity was released. With a ‘no negative equity’ guarantee, customers will never owe more than the value of the home and no debts will be left to the estate.
What if my provider goes into liquidation?
You will still be protected under your current agreement, even if the scheme is sold to another lender. The only changes will be those specified in your original contract.
This article was created with the help of Ryan Smith, part of the content development team at My Retirement Options, helping retirees to choose the best pension income route in retirement.