In case you’re wondering,
The equity Release Process is a process that allows homeowners to release the equity in their property and receive funds.
Equity Release Process helps people whose retirement income or other assets are too low to meet their living expenses but who have built up significant equity in their house.
Main article: What is Equity Release
Equity release is financing that allows homeowners to access the equity in their property and receive funds. It’s designed for people who have built up significant equity in their house but need smaller or larger sums than can be reasonably provided through traditional mortgages, personal loans, or other lending products.
When you take out an equity release product, such as a lifetime mortgage or reverse mortgage, you will still own your home and continue to pay any monthly repayments due on it while also making payments towards repaying the advance taken from your property’s value.
How Does the Process Work for You?
Everyone will be different in their needs for the equity release process, but there are a few basic steps:
Let’s have a look:
- Think about your financial goals and priorities. For example, suppose you want to use some of your home’s value as security for an income stream or supplement retirement funds. In that case, this might suit you – if not, it may not be right for you.
- Work with a reputable lender who specialises in equity release products.
- Understand the process and what it involves so you can decide if this is right for your specific needs.
- Read all of the terms and conditions before signing anything to avoid any surprises or misunderstandings later on.
- Check out some unbiased reviews online about these lenders, both positive and negative, to get a balanced view.
- Once you are confident in the equity release product and lender, apply for a loan offer from them. This will then be assessed on its own merits rather than against your credit score or any other factors which may not relate to the purpose of this specific loan request.
The Equity Release Calculator can help you work out how much money you might have at retirement age if interest rates stay unchanged – it’s worth doing as a starting point before making any decision about using home equity to supplement pension incomes.
3 Core Factors of the Equity Release Process
Type of Property
There are three types of property for which you can release equity:
- A house
- End of terrace
- Semi or detached home
The mortgage is usually the first charge on this type of property. So to release some of that equity, it may be necessary to take out a second charge with the lender if they are willing to offer one. This means your repayments won’t change, but there will be two people’s names registered against the title deeds as guarantors of repayment in case anything goes wrong;
A flat – whether you own outright, where all your money had gone into buying it upfront from when you purchased it (plus any associated fees), or buy-to-let where you’re relying on rental income every month to service the mortgage, you will need to have a 25% equity stake remaining in the property before it is eligible for release;
A commercial or investment property – this includes properties with redevelopment potential where there’s an opportunity to increase the asset’s value.
The Lender Involved
It is important to note that many lenders take part in this process, and each follows the same general guidelines. The lender will then either explain how much you would need to repay on your home or property each month through an annual percentage rate (APR) calculation which takes into account any potential interest rates changes over time; include commission fees for arranging the equity release transaction and legal expenses incurred by both parties with regards to setting up the agreement; before moving onto explaining what you can do with the funds once they have been released as well as other costs associated with releasing equity from your property.
The Efficiency of Your Solicitor
When looking for a solicitor to help you with your equity release, it is worth researching. First, you need to find out how much they charge and whether any hidden fees will arise due to the transaction.
It’s also important to ascertain what level of experience they have in this area to not be taken advantage of by someone new in the industry who knows little about their rights when dealing with solicitors on these types of transactions.
It is important to note that solicitors cannot charge any fees for arranging an equity release plan, but there may be other charges. This includes the cost of valuation and surveyor’s reports which will vary depending on the type of property you want to put up as collateral, how much money is required and what level of cover you’re looking for.
Let me tell you something,
You should also expect some legal costs associated with preparing your agreement; before moving on to explain what you can do with the funds once they have been released as well as other costs associated with releasing equity from your property. It is worth noting that these legal costs depend on who prepares them: if it was a solicitor, then this would likely add £500 – £2000 to the transaction, whereas Legal Executives would be much cheaper.
You can use equity release funds in several different ways: paying off debts, reducing mortgage payments, or for DIY home improvements such as an extension or conservatory. Of course, you should speak to your solicitor about how best to invest the money.
Still, there are some general guidelines and recommendations, including investing in UK government bonds which provide a secure income stream with low volatility; alternatively granting loans secured against a real estate where this provides better interest rates than those available on bank deposits at present (although it is worth noting that these may not offer the same level of security).
Understanding Equity Release
What Are Average Equity Release Timescales?
The period for the equity release process, from start to finish, will depend on several variables. These include your age, how much equity you need to be released, and what type of property needs releasing.
If you are aged over 55-60 years old, then you can expect the whole process to take around six months or longer. Still, it may be more complicated than this in some circumstances, depending on all these different factors.
The process of an equity release scheme is a complex one, and it can be difficult to fully understand all the steps involved. The solicitor will need to know your age, how much equity you want to be released from your property, and what type of property this is before they can give an accurate timeframe for when everything should be finalized regarding the whole process.
In general terms, though, there are four main stages that any person looking at applying for Equity Release scheme needs to go through: Assessment; Legal Fees; Offer Letter; Final Discharge.
At each stage, solicitors or lenders may request additional information about you and request evidence such as bank statements for them to assess whether or not they think you would qualify under their criteria.
Once everything is agreed, you’ll be given an Offer Letter that outlines how much equity release they are willing to offer as well as what their legal fees for dealing with the application would be before being asked to decide whether or not you want them to proceed with processing this application.
Suppose all parties agree that Equity Release is still viable at this stage. In that case, final discharge letters can take between six months and one year from the start date until completion, dependent on various factors such as age, health status, property type, etc.
An equity release is not the same as a property valuation. Instead, equity release assesses whether or not you will qualify for an equity release loan to meet your financial needs.
Only once all parties have agreed that this is still viable at this stage can we help with any house valuations necessary and complete the application process in its entirety, which usually takes between six months and one year from the start date until completion, dependent on various factors such as age, health status, property type, etc.
Why You Need a Solicitor
Several factors need to be considered – for example, whether your property is bought outright or mortgaged and what type of mortgage it has (fixed-rate or variable).
On the other hand,
Equity release solicitors can help assess how much equity will be released and if any restrictions apply. They also ensure that all legal requirements have been met before approval.
Only once these considerations are made would an application procedure, which usually takes between six months and one year from the start date until completion, be dependent on various factors such as age, health status, property type, etc.
How Do You Benefit From Using an Equity Release Solicitor?
Suppose you are considering using Equity Release to release some money from the value of your property. In that case, it is worth taking professional equity release advice and discussing all available options with an equity release specialist.
They will be able to assess what type of mortgage best meets your needs and how much cash can be released by unlocking this part of the capital to create a more comfortable retirement income.
What’s Your Solicitor’s Role?
Your solicitor will be able to answer any queries you may have about the equity release process, including what’s involved in drawing up and signing a legal agreement for an Equity Release Mortgage.
They can also explain your rights against lenders who might seek to sell off property belonging to their customers under mortgage schemes such as DPSS or PLS without considering whether they still have dependents at home dependent on that pension fund.
What About Your Existing Mortgage or Secured Loans?
If you have a mortgage or secured loans, Equity Release cannot be used to service these debts.
Equity Release can release up to 100% of the value of your property at retirement. This means that if you own your home outright and are planning on downsizing, it may make sense for you to sell before releasing equity with an ERC – but this is not always advisable.
What Information Does the Lender Check?
The lender will do a credit check to make sure you can afford the monthly repayments. You may ask for employment history or proof of income.
The security is your property, so if anything goes wrong with your finances, they can take back the money released from it. It’s important not to release equity too early on in retirement. This could leave you without recourse when circumstances change – say somebody dies or becomes ill.
What You Need to Know While Awaiting Completion
Once you have agreed with the lender on a repayment plan, they will clear your house for sale. You’ll need to pay off any mortgages and other debts on it before selling it.
Some people can sell but keep their mortgage open – this is called “mortgage release” and can be an option if you only want equity released from part of your property as not all lenders offer ERCs in full.
How Using Equity Release Specialists Will Benefit You
A good equity release specialist will advise you on the risks and returns of releasing equity for specific needs and ensure that it is done safely. They’ll also offer ongoing support through your retirement with their guidance and reassurance.
And the bottom line?
It is important to consider the risks of equity release before you make any decision. You can find an independent, regulated specialist through the Equity Release Council who will be able to give impartial advice on whether it might work for your situation and what its likely impact may be.
That was just the beginning.
The equity Release Process is an important consideration for people who are nearing retirement age and want to live in their own homes. It can be a great way to get back some of the equity you have invested in your house, but it’s not something that should be entered into lightly. The process involves signing over ownership of your property. Once you sign on the dotted line, there is no turning back! You need to make sure this decision makes sense financially and emotionally before proceeding with any such transaction.