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equity release

So, if you’re a homeowner aged 55 to 95, and want to find
out more about equity release, it’s easy - just ask ERIC.

Frequently Asked Questions

We have put together a list of the most commonly asked questions regarding equity release.

To find out more information, please click a question below:

1 - What is equity release?
Equity release allows you to convert some of the equity in your property to a tax-free cash lump sum or a regular income without your having to sell up and move out and without the need to make any monthly payments.

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2 - Will I have to make monthly payments?
No, unless you choose an interest only lifetime mortgage. Lifetime mortgage plans may suit you if you have a regular source of income and can therefore afford to pay interest on a monthly basis. The benefit of this is that the amount of the loan does not increase. It may be possible to pay all of the interest or a proportion dependent on what you can afford. To discuss interest repayment options ask ERIC on 0800 077 6885.

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3 - Can I use the money for anything I want?
Yes, as long as it's legal! Most of our clients use the money to pay off outstanding debts and mortgages, make home improvements, buy holidays, cars, or help family, or simply to make life a bit more comfortable.

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4 - How much money can I raise?
This is dependent on your age and the value of your property and varies between different products. The minimum loan is generally 10,000 pounds and you need to be able to raise enough to pay off any outstanding mortgage plus any other loans secured on the property. The largest lump sum will be available from a home reversion plan. To find out how much you could raise ask ERIC on 0800 077 6885.

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5 - Can I live in my home for the rest of my life?
Yes, you and anyone else named on the agreement have security for life.

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6 - How long does it take to get the money?
It can be as little as 3 or 4 weeks once we have received your application, but normally it will take 6 to 8 weeks. If there are complications or if your solicitor is not familiar with equity release it may take longer. Our support team will keep you updated at every stage of the process.

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7 - What's your best interest rate on a lifetime mortgage?
Interest rates vary between the different plans available and the different lenders. Just like a conventional mortgage these change frequently. Generally interest rates will be slightly higher than conventional mortgages but this is because the rate is fixed for the life of the plan.

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8 - Can I do equity release if I have a mortgage?
Yes. As long as we can raise enough money on the lifetime mortgage or Home Reversion plan to pay off the mortgage and any other loans secured on the property.

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9 - What fees are payable upfront?
At ERIC we don't charge any upfront fees and you are under no obligation to proceed at any stage of the process. If you do apply for a plan you will need to pay for the valuation on your property, usually between 200 and 300 pounds. Some plans may include a free valuation, and often we are able to help you make the payment upfront or allow you to pay it in instalments. All other fees will be taken out of the amount released.

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10 - How much will it cost me to set up?
Set-up fees will vary depending on the chosen plan. There is normally an application fee, an advice fee, a valuation fee and the solicitor's fees to consider. Most of this will be subtracted from the amount released so that there is very little you will have to pay upfront. Some plans may offer special discounts, cashbacks, free valuations or help with legal fees; your advisor will explain the options available to you. For details of our current special deals ask ERIC on 0800 077 6885.

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11 - Can I lose my house? Will it ever be repossessed?
No. Both Home Reversions and lifetime mortgages have safeguards.

If you take out a home reversion you have guaranteed lifetime occupancy under the lease agreement and a copy is registered at HM Land Registry. Provided you comply with the terms of the agreement, you and anyone else named in the agreement has guaranteed occupancy for the full term of the lease.

If you have a lifetime mortgage and even if the total amount of the loan plus any interest exceeds the property's value your house cannot be repossessed as long as you have maintained it and complied with the mortgage agreement.

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12 - Can I move?
You can move at any time with a lifetime mortgage. With some lenders you can transfer the loan to your new property or you can repay the loan from the sale proceeds. As long as it's suitable security, you then start a new loan which is secured on your new property. However, you should bear in mind that these plans are intended to be long-term and if you move the loan may have to be repaid with any early redemption charges and fees.

The lease agreement from reversion providers usually include a clause that allows you to move provided that the alternative property is suitable security. Each company has different conditions so you should check these before you go ahead with the plan.

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13 - If I die can my partner still live in the property?
Yes. Anyone named on the lease agreement or mortgage has the legal right to continue to live in the property until they voluntarily decide to leave it or until their death.

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14 - How does a part reversion work?
You sell only part of the equity in your property. You still own the remaining equity so you or your family get the benefit of any future appreciation in the value of the part you retain. At a later date you can sell the reversionary interest in the part you retained or leave it to your family.

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15 - Will I be able to leave something for my beneficiaries?
On a simple roll-up lifetime mortgage the debt increases over your lifetime. If you die and the debt is still below the value of your property, the excess will be left to your estate. In a home reversion plan you sell a percentage of your property, and no matter how long you live, the percentage that remains unsold will be left to your estate. It is possible to guarantee an inheritance, even with a roll-up mortgage plan. To find out more ask ERIC on 0800 077 6885.

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16 - What rent do I pay if I have a Home Reversion plan?
Reversion plans are designed to give you guaranteed lifetime occupation of your property. To give you full legal protection, you will be granted a lease which is normally for 99 years. The lease will usually state that an annual rent is payable. The rent will be only around 12 pounds a year.
In most cases, the rent is neither requested nor collected, but you may feel more secure if you pay it each year by cheque or standing order. If the rent is not paid for any reason, you will have many opportunities to pay it. You would not forfeit your lease on non-payment and occupancy would not be affected by a delayed payment.

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17 - Will the valuer be independent and be familiar with the area?
Valuers are usually appointed from independent chartered surveyors who are local or familiar with your area. Recent house sales in your area are taken into account when making the valuation.

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18 - Do we have to use a solicitor from your list? Can I use my own solicitor?
We offer a list of specialist solicitors for you to choose from if you don't want to use your own. These solicitors are independent of us but as specialists they are often able to complete the work faster and for a cheaper price.

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19 - How will the money be paid?
The money can be paid directly into your bank account or can be paid by cheque if you prefer.

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20 - Can we keep our deeds?
Since October 2003, all property transactions and subsequent interests in property are recorded at HM Land Registry. Instead of physically holding the deeds, anyone with an interest in land or property will simply receive a certificate stating their interest.

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21 - Who is responsible for maintaining the property if I take a Home Reversion plan?
Although you no longer own the property or only own part of it, you remain responsible for maintaining the property just as you do now. The amount you receive has been calculated after allowing for this.

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22 - Who pays for buildings and contents insurance?
As a condition of the plan you must continue to insure the building. With some plans, you continue to pay the premiums and ensure that the interests of the plan provider are noted on the policy. With others, the plan provider will arrange the buildings insurance and then bill you for the premiums. Your equity release plan does not affect your contents insurance.

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23 - Can I increase my loan later on?
Some plans offer a further advance facility. Your property can be re-valued at a later date and subject to its value and the equity available you can apply for an additional tax-free cash lump sum. The timescale and amount available varies from plan to plan. If you are interested in drawing down on cash amounts in the future then why not consider one of the drawndown lifetime mortgage plans. Ask ERIC on 0800 077 6885 to discuss your requirements.

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24 - What happens if I want to repay the lifetime mortgage loan?
Equity release plans are intended to be long-term commitments, not short-term loans. The loan plus any interest which has been added is generally repayable on death of the last plan holder or on moving into long-term care. Some lenders will not accept partial repayment of the loan. Normally, if full repayment of the loan is made within a certain period of time an early repayment charge is payable. The amounts and periods vary from plan to plan, but with some, the amount can be substantial. Ask ERIC on 0800 077 6885 if you are considering early repayment.

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25 - What happens if my house is worth less than the money owed at the end?
All the plans we recommend are from lenders who subscribe to the SHIP (safe home income plan) code of practice or its equivalent. What this means is that if the loan increases to higher than your properties value the difference is written off. You can never owe more than your property is worth, therefore you never have to worry about leaving debts to family members after you have gone.

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26 - If my family wants to keep the house when I pass away, can they pay off the plan?
Yes they can. Just as with a normal mortgage, the loan can be paid off by the estate rather than having the property sold.

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27 - How long do our relatives have to remove our possessions on our death?
Your relatives will be given 28 days to clear your possessions from the property in the case of a reversion. If for any reason this is insufficient, an extension would normally be agreed.

If you have a lifetime mortgage, depending on the plan, up to 18 months. Interest will still be added until the property is sold. If it is not sold within the allotted time, the lender may repossess and sell it.

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28 - Will it affect my benefits?
Money that has no purpose and is left in you bank account will inevitably affect your means tested benefits. When thinking about equity release it is important to have a purpose for any money you may raise to prevent it sitting idly in a bank account. Our advisers will be able to assess if there is a likely conflict with your benefits you are receiving and take this into account when advising on the best method of equity release. It is always very important to get specialist advice to make sure you do not end up worse off financially by losing benefits so ask ERIC now on 0800 077 6885 for advice.

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29 - What happens if I get married in the future?
If you take out equity release you are guaranteed security in your home for the rest of your life but a future partner will NOT be named on the agreement and therefore will not have security if anything were to happen to you. If you are intending to get married after taking out a plan you should contact a specialist adviser who may suggest a new equity release plan to replace the old ensuring the security of your partner should anything happen to you.

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30 - I have a carer, companion, tenant or a member of my family (not my partner) living with me. Can I still apply?
Yes. Some reversion companies will accept applications in these circumstances. However, anyone who is living in your property and is not named in the agreement will not have the right to live there after your death or after you leave the property. They will have to take independent legal advice and then sign a 'disclaimer' that precludes any right of occupation after your death or if you leave the property.

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31 - Can I do equity release on a house I rent out?
No, it is not currently possible to do equity release on properties that are rented out. Call 0800 077 6885 to speak to an ERIC adviser for more information.

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32 - Can I do equity release on a house I want to buy?
Yes, it is possible to arrange equity release as part of a home purchase. Call 0800 077 6885 to speak to an ERIC advisor for my information.

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33 - Is Sale and Rent back another form of equity Release?
No. Sale and Rent back does release equity from your property but it is not equity release as defined by the Financial Services Authority. Until recently the Sale and Rent back market was completely unregulated and as a result some firms offering sale and rent back used unsavoury practices. Sometimes they marketed their plans as equity release to mislead customers into thinking their plans were regulated by the Financial Services Authority and this caused confusion both in the general public and the media. Fortunately this sector has now been regulated.

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34 - What happens if the plan provider is declared bankrupt or the company ceases to exist?
This will not affect you in any way. No matter who inherits or buys the reversionary interest or mortgage on your property from the original plan provider they are legally required to honour the terms of your lease or mortgage agreement. This specifically states your legal right to occupy the property for the full term of the lease.

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35 - Can the lender ask for their money back?
The lender can only ask for the money back if you have died or move into long term residential care.

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36 - Is ERIC a member of SHIP?
In 2013 SHIP (Safe Home Equity Plans) was incorporated into the Equity Release Council (ERC). The Equity Release Council retains the SHIP standards for Equity Release plans, and all our advisers are members of the Equity Release Council. More information about the council can be found at www.equityreleasecouncil.com.

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