Equity Release in Simple Terms
Equity release allows homeowners aged 55 and over to release some of the value tied up in their property. This can provide a cash lump sum, regular payments, or a combination of both, without needing to sell your home and move.
Equity release is commonly offered through a lifetime mortgage. This means the money released, together with any interest, is repaid when the property is sold. This typically happens when you pass away or move into long term care.
There are two main types of equity release:
Lifetime Mortgage
You retain full ownership of your home and borrow against its value. Interest is usually rolled up and added to the loan over time.
Home Reversion Plan
You sell a share of your home to a reversion company in exchange for a lump sum. You can continue living in your home, usually rent free, for the rest of your life.
The Role of a Solicitor in the Equity Release Process
As your solicitors, our role is to guide you through the legal process and ensure that you understand the implications before proceeding. Equity release lenders require you to receive independent legal advice, which is why a solicitor plays a key role in the process.
We will also liaise with the equity release lender’s own solicitors. This can sometimes slow the process slightly due to the need to exchange information in order to comply with the lender’s requirements. You will usually be responsible for the lender’s legal fees as well as your own solicitor’s legal fees.
What Our Work Will Include
Our work typically includes:
- Reviewing and checking the equity release mortgage offer
- Checking the legal title to your property
- Ensuring that your home meets the lender’s criteria
- Advising you about the long term nature of the equity release mortgage, including compound interest and any restrictions
- Completing all the lender’s legal forms and certificates
- Reporting to the lender’s solicitors once all requirements have been satisfied
There is also a requirement for you to have a face to face meeting with us (either in person or via video call). This allows us to verify the Conveyancer Certificate, which forms part of the legal documentation that must be provided to your equity release lender’s solicitors.
Key Issues to Consider Before Taking Out Equity Release
We would always recommend that you seek independent financial advice from an equity release specialist to ensure that an equity release product is the most suitable option for you.
There may be other options available, such as:
- Ensuring you are claiming all relevant benefits
- Obtaining a standard loan or mortgage secured against the property
- Financial support from family members
- Downsizing to release capital
- Grants from charities or local authorities if funds are needed for home improvements to help you remain living independently
When deciding whether an equity release mortgage is a sensible option, the following issues should also be considered:
- Compound interest – interest is added over time, which means the total amount owed can increase significantly.
- Impact on inheritance – the value of your estate that you leave to family members may reduce, which could affect any inheritance planning you have undertaken.
- Early repayment charges – fees may apply if you or your family wish to repay the loan earlier than expected.
- Means tested benefits – accessing funds could affect your eligibility for certain benefits depending on how the money is used.
- Future plans for the property – restrictions may apply if you wish to move home, make alterations, or let the property.
The Equity Release Legal Process: Step by Step
1. Financial Advice
You will first need to obtain independent financial advice that takes into account your specific financial circumstances and needs. If equity release is considered suitable, the adviser will recommend the most appropriate product for you.
2. Instructing Your Solicitor
Once you instruct us, we will open a file and complete the regulatory requirements for verifying your identity. We will also request the legal pack from the lender’s solicitors.
You will need to bring your original identification documents to the face to face meeting so that we can provide certified copies as part of the lender’s legal documentation.
3. Reviewing Your Property Title Deeds
After you have completed the client instruction paperwork, we will review the title deeds for your property to confirm:
- Who the legal owners of the property are
- Whether there are any existing mortgages, loans or charges registered against the property
- Whether there are any restrictions, covenants or other legal obligations
- Whether the property is suitable security for the lender
If we identify any issues, we will discuss them with you and the lender’s solicitors. It is rare for a problem to arise that cannot be resolved.
4. Legal Advice Meeting
We are required to meet with you face to face, although this can be done either in person or by video conference. During this meeting we will:
- Explain the terms of the mortgage
- Discuss the long term implications
- Ensure that you understand those implications and that you are proceeding freely
At this meeting you will sign the mortgage documentation and we will complete the Conveyancer Certificate.
You may also be advised to speak with a solicitor from our Wills & Estate team to discuss the potential impact on your estate and inheritance planning.
5. Reporting to Your Lender
Once we have compiled all the required information for the legal pack, we will liaise with the lender’s solicitors and respond to any further questions they may have. Once they are satisfied with the documentation and replies provided, the transaction can move forward.
6. Completion
Once the lender’s solicitors confirm they are satisfied, we can agree a completion date for the funds to be released.
On completion we will:
- Receive the equity release funds
- Repay any existing mortgages or secured loans on the property
- Pay our legal fees and disbursements
- Register the lender’s mortgage charge at the Land Registry
Any remaining balance will then be transferred to you on the day of completion.
Timescales
Most equity release transactions take around 6 to 8 weeks to complete. However, registration at the Land Registry may take slightly longer.
Conclusion
Equity release can be a helpful way to access funds later in life. However, it is a long term financial commitment, which is why it is important to be fully informed before proceeding.
Our role as solicitors is to ensure that you understand the legal and practical implications, that the lender’s requirements are met, and that the transaction progresses smoothly from start to finish.
If, after receiving financial advice and discussing the decision with your family, you decide that equity release is the right option for you, we will guide you through each stage of the legal process. We will answer any questions you may have and ensure that you feel comfortable with the documentation you are signing.
Once the equity release transaction has completed, we will confirm the registration of the lender’s charge and provide you with copies of all relevant documents for your records.
We’re here to help
If you would like to discuss equity release in more detail, or need clarification on any part of the process, please contact us and one of our experts will be more than happy to help.
Get in touch today to arrange a meeting with one of our team, call us on 0800 118 1500 or complete the form below.
Disclaimer
The contents of this blog or any other published by Talbots Law cannot be considered as legal advice. You should take no action without prior consultation with a qualified solicitor or legal professional. The contents of this blog refers to the process in England and Wales.
This blog was written by Donna Butler, Technical Support Lawyer, in our Residential Property team.