Helping demystify equity release

One of the many fears that can come to the fore when people discuss equity release, is the question, ‘what happens if I die before my wife?’

There’s a worry that having a lifetime mortgage or home reversion plan on your house means that your spouse or partner can find themselves out on the street following your death, with the house sold remorselessly under their feet. Thankfully, this worry is little more than one of the many myths surrounding equity release, but a failure to properly set up your equity release can result in some unpleasantries so it’s important to get it right.

The homeowners – who can get equity release in the first place?

If your house is jointly owned, then it is extremely unlikely that one of the partners can take on a mortgage, including equity release, without the permission of the other. This means that, realistically, any decision to get equity release on your home must be done together.

A single partner trying to take control of the equity could only occur if the original ownership contract for the house had a clause to allow such action, and no standard agreement would do so. Simply put, only the person or people on the house deeds can apply for equity release.
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Joint equity release

Couples seeking equity release should do so with a joint equity release application, whether that is a joint lifetime mortgage or a joint home reversion plan. It is important enough that most providers will insist on a joint plan if there is a couple living in the property, whether married, in a civil partnership or simply living together – even if the house itself is not joint owned.

A joint equity release arrangement works that the house is sold only when the last surviving partner dies. Should one of you pass away before the other, the agreement passes completely to the surviving party and acts as a single equity release contract from that point on. In this way, your partner is protected from any fear of being evicted from their home upon your death.

What happens without a joint equity release arrangement?
In the case where the equity release is in only one name, then the second partner is vulnerable. Under the terms of the contract, the lifetime mortgage must be paid, or the home reversion plan realised. This is likely to result in the loss of the home for the survivor.

Contract timing – how long do they have before becoming homeless? Most equity release arrangements must be completed in three- to six-months of your death. This is typically enough time for the appointed agents to complete a sale. Anyone still living in the house would have this time and no more to find alternative living arrangements.

My partner is not part of my equity release – what can I do?

Owning a house today is a very different prospect to how it was a generation or two ago. The difficulty of getting on the property ladder for younger first-time buyers is well documented but changes also happen at the other end of the spectrum, with those entering their retirement no longer seeing their home as nothing more than part of their estate ready for their children’s inheritance.

Equity release represents a part of that change, where older homeowners are looking to their property investment as part of their overall financial portfolio and have far fewer qualms about reaching into that investment to fund their lives.

A recent study released by the Equity Release Council reports on the shifting perception of property in retirement and later life.

A generational change to inheritance and property-secured lending

70% of people aged 65 and older look at their property as a major part of their plans to provide an inheritance for their descendants. Prior to equity release as an option, this figure would have been much higher, with downsizing the only real alternative to simply leaving your house to your family, but in the past three decades it has seen a downturn and continues to do so.

Compare that 70% figure to 60% for those aged 45 to 65 – showing that as they approach retirement, people are considering alternative options to simply handing their house down to their descendants.

Similarly, when asked if they see their property as part of a nest egg, available to them to use for unexpected expenses in later life, almost half (49%) of 45 to 65-year olds agree with this assessment, up from 43% of those over 65.

Equity release provides retired homeowners with a way to access the money tied up in their houses and, quite rightly, they are keen to take advantage of the option. While most are still very conscious of a need to leave a valuable inheritance behind, it is no longer considered taboo to reasonably suggest that an inheritance should not be created at the detriment of their own financial stability later in life!

Leaving something behind for your loved ones is wonderful; struggling to do so is not.

Seeing property as a substantial part to a retirement portfolio

Part of this update in thinking comes as older people begin to see property as an important part of their finances. Instead of feeling that the investment is in some way tied off, providing them with a home for life but little else, they are aware though lifetime mortgages and home reversion plans that the cash is available without putting a threat on the home.

As private pension funds are drawn on and diminish over time, the money tied up in the home becomes ever more important as a second income – and the chances are good that the equity is growing rather than shrinking as home prices continue to increase above inflation year-on-year.

Aged 55 to 64, private pensions nationally represent 51% of overall wealth with property wealth a less significant 31%, but those numbers change and switch over the years:

As improved lifestyles and medical and technological breakthroughs continue to see us living longer every generation, investment in property and the ability to utilise that investment becomes ever more important.

Looking after your descendants – when ‘now’ is better than ‘later’

We all want to be there to take care of our children – it’s not an attitude that stops the day they move out as a young adult! Even when they are fully grown with families of their own, we want to be there to help.

It is this attitude that drives some people to reject equity release as a selfish option, arguing that it feels like stealing from their children’s inheritance.

Sadly, it’s an attitude that is short-sighted, failing to take in the reality of life’s struggles. Statistically, the period of life where we need the most money is during the early years of building a family. Finding the money for a deposit on a home, struggling with the changes and demands of young children, paying for periods where one, or even both, partners take time away from work to concentrate on their small children and babies – all of this can put enormous financial pressure on people throughout their thirties and beyond.

Being able to help your children when they need it, rather than providing monetary relief years later, can make a huge difference.

Again, the statistics show that this attitude is also improving as time goes on, with a full quarter of people 45 to 65 (25%) saying that they see their money invested in property as a useful asset to help their children while they are still alive – compared with 21% for the older age bracket.

Equity release makes it possible for you to support your children by making their inheritance available to them earlier and when they need it most.

The increasing age of an heir

Due to our improved lifespans, a more traditional inheritance is becoming less useful. In many circumstances, the passing on of property is so irrelevant to the next generation down that it is better served skipping them entirely and many people have opted for an inheritance plan that goes from grandparent to grandchild, rather than parent to child.

One high profile example of increased longevity making a mockery of well-established succession traditions is with the Queen and the Prince of Wales. Now in his 70s, the future King of Great Britain, will have little chance to enjoy his monarchy and many already call for the crown to be passed directly to Prince William, skipping Charles entirely.

Equity release is a way for the generation below you to get their inheritance and not feel the unspoken resentment as it skips down to their children.

Equity release for you

When considering equity release, the most important consideration really is you. The equity in your home is money you have poured in through years of paying a mortgage. It doesn’t belong to anyone but yourself, and if you want it, even if that’s just to have an exciting holiday, then no one can (or should) judge you for it.

Remember, your property is a multi-purpose financial asset, and not just a building of memories where you sleep and store your things!

Getting Equity Release 

We work with a huge range of lifetime mortgage lenders and home reversion plan providers. Our expert team is here to give you the advice you need to make sure you get an equity release plan that works for you, with a range of online articles in our library, or through a direct no-obligation consultation.

Fill in our contact form to have someone call you back or simply pick up the phone and give us a ring today!


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What happens if there is no provision for a renegotiation?

Many providers, however, have no provision for a renegotiation in this way, which leaves a few limited options:

Ending the equity release contract early. This would involve paying off the balance of any lifetime mortgage held on the property or buying out the home reversion plan as the contract details. In this instance, there would be additional early repayment charges and unless there is a substantial amount of spare savings or cash, raising the capital to do so may involve selling the house anyway.

Discussing with the provider or potential replacement equity lender the option of taking out a replacement lifetime mortgage to pay off the first. Again, this would result in early repayment charges and would be subject to the agreement of the provider, but some lenders are willing to negotiate in this way.

Looking to a life insurance plan to cover the expected sum of the payment due. The premiums on a life insurance policy of the required size and term length could be considerable, but it remains a viable option for some. Issues such as age and health, both considered a helpful factor in accessing higher levels of equity for release, could prove to be obstacles in procuring life insurance.

Planning for an eventual move. Sad though it is, the realistic option for most is simply to accept that it is a situation that might happen and plan accordingly. Putting money aside for future living expenses and speaking with family to ensure the financial security of your partner is taken care of when you pass are both prudent strategies.

Leaving the remainder of your house – your partner’s inheritance

The myth – equity release will leave your estate with nothing to inherit

It’s easy to see why this myth exists. Equity release is a way of taking the value of your house with the promise that once you die it can be sold to pay back this cash injection.

Stories are told of greedy investors waiting in the wings and rubbing their hands in glee once you pass away so that they can get their grubby hands on all the money and run off laughing as your children and grandchildren leave dejected and destitute.

But this isn’t a children’s fairy tale, and financial investors aren’t really the bad guys that family slapstick films suggest.

In truth, lifetime mortgage lenders and providers of home reversion plans are businesses wanting to make a reasonable and competitive deal that suits both parties.

The reality is that both systems of equity release come with a clause for ring-fencing, the act of setting aside part of the value of the house to protect it from being used to pay back the equity release. Definitively earmarking it for your family’s inheritance.

Spending time with your family – when now is better than never

Access to your money will enable you to spend time with your family, and that’s better than any amount of inheritance. By taking out your equity in advance of your death in the form of a lifetime mortgage or home reversion plan, you don’t lose the money, you simply change when you get it!

Leaving it in the house means struggling yourself to give it to your heirs, but taking it now means you can give them something better – time.

In today’s society, it is easy to become fixated on making sure you are leaving large sums of money behind, but really it’s far nicer to live life without the kind of worry that can leave you acting like Scrooge whenever you go out. A comfortable bank account means you can take your family on holiday or help them with their immediate needs. Why make them wait until you die before they see your love or financial support when you could be there with them and support them through whatever problem they have right now?

Equity release really is the best of both worlds – properly arranged it will leave them with a significant lump sum when you do finally pass away, but it will also allow you to have quality experiences with them in the many years before then.

Finding the right mortgage balance

It’s true, some less caring mortgage brokers will push for you to take out 100% of the available equity of your house. They’ll sell you a lifetime mortgage with a high interest rate and convince you that it doesn’t matter – after all, you’ll never have to pay for it! At The Mortgage Hut, we’re nothing like that.

As specialised advisors with an unprejudiced overview of the entire market, we care about getting you the best deal for your circumstances. We make sure that the product you end up with is the one that matches your family’s needs. We will help you properly ring-fence a suitable portion of your home’s value to provide for your loved ones when you’re gone, and we’ll also get you the money you want right now to enjoy your life.

For help and understanding of equity release, why not contact us? You can fill in our contact form or simply pick up the phone for a chat. Our advice is free, we don’t hard sell and there’s absolutely no obligation from you. Release your investment and live a fuller retirement – give us a call today!


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Joint equity release advice from The Mortgage Hut

As specialists in finding the finest mortgages and equity release plans in the market today, we at The Mortgage Hut are perfectly placed to offer free expert advice to you.

Whether you are thinking about equity release and want to make sure that both you and your partner are safe, or if you need help regarding an existing contract, we can answer your questions and find the best solution for your needs.

Fill in our contact form or give us a call today!
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