SAGA — Doing things properly

To be eligible for equity release, you will normally need to be at least 60 and own your home.

Also, your property needs to be worth a minimum amount, which varies with different lenders. The ownership status (leasehold or freehold), property type and even construction are all factors that will influence which product from which lender is most suitable for your needs. The specialist adviser working for you through the Saga Equity Release Service will explain things fully and only recommend products that are right for you.

Yes, but most lenders will require anyone aged under 55 living permanently in the property to sign a form in acknowledgement of the equity release plan.

The Saga Equity Release Service offers a full review of your state benefit entitlement to ensure that for any money raised, any corresponding reduction in entitlement to state benefits will be clearly identified, discussed and taken into account.We will also ensure you are aware of your full entitlement to state benefits and explain how to claim any further benefits to which you are entitled.

This will depend on a number of factors, the main ones being your age and the value of your property. The older you are, the greater proportion of your home’s value can be released. The amount you can borrow, and the way in which you can borrow it, will depend on the plan you choose.

You may even be able to take a lower amount initially and borrow further amounts in the future – often referred to as a ‘drawdown facility’. Since you only pay interest on the outstanding amount from the time you first borrow it, this could save you money in the long run.

A number of plan providers are happy to arrange an initial cash lump sum that can be used to repay the outstanding mortgage on the property. This will inevitably reduce the monthly income and total sum that can subsequently be accessed.

The risks will depend upon the type of equity release plan you choose. A rolled–up interest loan will continue to increase, as you are not paying any interest until the property is sold – you could finish up owing more money than your home is worth. To avoid this, there should be a guarantee that the repayment amount will never exceed the sale proceeds of your property. Saga’s Equity Release Service only includes plans with this guarantee. With a reversion plan, you sell a percentage of your property to a reversion company in return for an income and/or a lump sum. When the property is sold the agreed percentage belongs to them. You or your heirs will not benefit from any future rise in house prices on this percentage.

Providing you are releasing capital from your main home, any lump sum you receive will be tax–free. If you arrange for the capital sum to go directly into an annuity, the income derived will be subject to income tax and would be taken into consideration when calculating entitlement to means–tested benefits. Also, whatever type of arrangement you undertake, you will have to continue paying council tax. Your adviser can help you understand what you will have to pay and any implications.

Equity release plans will reduce the value of your overall estate for inheritance tax if some, or all, of the money is spent. This can enable you to benefit from the equity in your property whilst you are alive, instead of losing out to the taxman on your death. You should discuss any concerns you may have about your estate with your family or your Saga adviser.

You will need to make sure that you have appropriate buildings and household insurance. You are also likely to be responsible for maintenance and repairs, unless the provider has a plan with a repair and maintenance section to the contract. Ask your adviser for more information if necessary.

If you have taken out a lifetime mortgage the property remains in your name, as it would be with a conventional mortgage. However, if you have taken out a reversion plan, the reversion company will own all or part of your property (although you can continue to live there for the rest of your life).

The Saga Equity Release Service will only ever recommend plans which entitle you to carry on living in your home until the last resident dies or permanently enters long–term care.

If there are two of you living in your home and one of you either requires care in the home or has to go into residential care, your equity release plan will not be affected.

If the last remaining occupant of your home has to go into permanent care, it is usual for the property to be sold and the equity release plan settled.

For more information about the financial aspects of long-term care, speak to one of Saga’s specialist care funding advisers. Call 0800 056 7997.

On your death (or that of your partner, should they outlive you), the property will be sold. If you have taken out a lifetime mortgage, the proceeds from the sale will be used to pay off the original loan plus any accumulated interest. Any remaining funds will form part of your estate. If you have taken out a reversion plan, the property will belong either in total or in part to the reversion company. In this case, your estate will receive the appropriate proportion of the sale proceeds.

If you are outlived by a spouse or partner, since the equity release plan applies to all residents living permanently in the property, the arrangement will continue with them.