Frequently asked questions How much will the advice cost?
There is no fee for advice with the Saga Equity Release Advice Service. So you can find out how much cash you could release and whether a plan would be suitable for you at no additional cost whatsoever.
Am I eligible for equity release?
To be eligible for equity release, you will normally need to be at least 60 and own your home. In the case of a joint application in most cases, both applicants should be aged 60 or over.
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 the suitability of the product and the lender. Your specialist adviser will explain things fully and recommend products that are best suited to your circumstances.
Can other people live in the house?
Yes, but most lenders will require anyone living permanently in the property to sign a form in acknowledgement of the equity release plan.
Will equity release affect my benefits?
All equity release plans will reduce the value of your estate and might affect your entitlement to state benefits. The Saga Equity Release Advice 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. You will be made aware of any potential state benefit entitlement and advised how to claim any further available benefits.
How much money will I get?
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. For a guide to the maximum amount you could potentially release from your home, try our online calculator.
Can I apply for equity release if my property has an outstanding mortgage?
A number of plan providers are happy to arrange an initial cash lump sum to be used to repay the outstanding mortgage on the property and/or any other debt you wish to repay. This will inevitably reduce the total sum that can subsequently be accessed. Think carefully before securing other debts against your home.
What are the risks involved in equity release plans?
Equity release is not suitable for meeting short–term borrowing requirements and the implications of committing to this type of product need to be considered. Your equity release adviser will help you consider all options.
Taking an equity release plan reduces the value of your estate, so this may reduce any Inheritance Tax liability you have. However, you should not use this type of scheme for tax purposes without first seeking professional advice.
Taking Equity Release may affect your entitlement to state benefits; your adviser may be able to advise on this.
If you opt for a Home Reversion Plan the title in your home transfers to the company that provides the Reversion Plan, and you are required to give up the deeds. If your property increases in value you will only benefit from the increase on the proportion that you still hold. With a Lifetime Mortgage, on the other hand, you continue to own your home and benefit from any increases in its value. For both Home Reversion Plans and Lifetime Mortgages, you will continue to be responsible for the upkeep of your property.
In some circumstances, such as if you were to downsize to a smaller property, a part or full repayment of the equity released may be required.
If the plan is in both names then it will continue until the death of the last surviving person, if they move into long term care or if you sell the house and move into rented accommodation. However, if the property and plan are taken out in a sole name only, the property would have to be sold and your partner would have to find somewhere else to live.
If the amount required to repay your mortgage ends up being more than the eventual value of your property upon sale, most equity release providers cover the loss and they have absolutely no claim upon any other assets in your estate. This is called a ‘no negative equity guarantee’ and is offered by all SHIP (Safe Home Income Plans) members. Your adviser will confirm whether your Equity Release Plan has such a guarantee.
Equity release plans are long-term commitments designed to be paid back only when you die or move permanently into care. If the plan is repaid prematurely there could be a substantial early repayment charge. Different lenders calculate these charges differently. The amount concerned will be detailed in the provider’s plan documentation.
What is the tax position?
Any lump sum you receive will be tax-free. If you arrange for the capital sum to go directly into an annuity or savings account, 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 continue to be responsible for paying any council tax. Your adviser can help you understand what you will have to pay and any implications.
What about inheritance tax?
Equity release plans will reduce the value of your overall estate for inheritance tax if some, or all, of the money is spent, enabling you to benefit from the equity in your property whilst you are alive. You should discuss any concerns you may have about your estate with your family or a specialist adviser.
What about insurance and maintenance?
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.
Do I still own the property?
If you have taken out a lifetime mortgage, the property remains in your name, as it would with a conventional mortgage. However, if you have taken out a home 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).
Could I be forced to leave my home?
The Saga Equity Release Advice Service will only ever recommend plans which enable you to carry on living in your home until the last plan holder dies or permanently enters long-term care.
What is the situation if I, my spouse or partner, or both of us, need long-term care?
If there are two people named on the plan 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 plan holder has to go into permanent care, it is usual for the property to be sold and the equity release plan repaid.
For more information about the financial aspects of long-term care, speak to one of Saga’s specialist care funding advisers. Call 0800 096 8703.
What is the situation on my death?
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 home 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.