FAQ's
Here we list some frequently asked questions and issues you may wish to consider
When would the loan need to be repaid?
The outstanding amount is repaid on death (with a couple on the death of the last survivor) or following a move into permanent long-term care.
Can I transfer my plan to an alternative property?
All SHIP approved plans are portable; this means they can be transferred to a new property, subject to the approval of the plan provider.
How much money will I owe the provider when the plan finishes?
Home Reversion Plan
When the property is sold the provider will retain the percentage of the sale proceeds as agreed at the outset of the plan.
For example if you originally sold 40% of your property to a provider, then they will retain 40% of the sale proceeds when the house is sold.
As we cannot predict the future value of your property we also cannot predict the exact long-term cost associated with this plan. Property prices could be higher or lower than they are today.
Lifetime Mortgage
The amount payable will be the initial amount borrowed plus the interest accrued during the life of the loan. Your adviser should provide a Key Features Illustration produced by the lender confirming exactly what will be owed each year for the rest of your life.
All SHIP plans carry a “no negative equity guarantee”. This means that the amount owed can never exceed the value of your property.
How much money can I borrow via an equity release plan?
Home Reversion Plan
The amount you can borrow depends on the value of your property, percentage of the property sold, age, sex, health and whether you are single or a couple. The older you are when you start the plan the more you will usually receive for the share of your property sold.
Lifetime Mortgage
The amount you can borrow depends on the value of your property, your age and sometimes health. The older you are the greater the cash sum that can be released. Most lenders will release a set percentage based on your age. E.g. A 60 year old could release 20%, a 65 year old 25% and so on. The amount available varies between lenders.
Who would be responsible for the maintenance of my home?
With both home reversion plans and lifetime mortgages you are responsible for the maintenance of your property to a reasonable standard.
Could entitlement to means-tested benefits be affected?
Yes, depending on the amount borrowed and purpose of the release.
Your NHFA Adviser will complete a full benefits assessment before making a formal recommendation. We will discuss the impact equity release may have on any means-tested benefits you receive.
What impact would changing house prices have on my plan in the future?
Home Reversion Plan
You and the home reversion company share any increases or decreases in the value of your property. Your exposure will only be on the share of the property you have retained.
Lifetime Mortgage
You retain the full benefit of any increases in the value of your property.
If the value of your property falls, the amount of capital available after the loan has been repaid will also decrease. As all SHIP plans carry a “no negative equity guarantee”, the amount owed can never exceed the value of your property.
What impact will equity release have on my on inheritance tax liability?
Home Reversion Plan
A home reversion plan could reduce your inheritance tax liability, as the proportion of the property you sold would fall outside your estate for tax purposes.
Lifetime Mortgage
A lifetime mortgage could reduce your inheritance tax liability as the amount outstanding on the loan is deducted from the value of your estate before your tax liability is calculated.
Will I still be able to leave an inheritance?
Home Reversion Plan
If you sell your entire home then there would be no cash due from the eventual sale of the property. However, if you only sell part of your property then the value of the share you retained could be used to provide an inheritance.
As we cannot predict the future value of your property we also cannot predict the amount that could be available as an inheritance. Property prices could be higher or lower than they are today when the property is eventually sold.
Lifetime Mortgage
The amount of inheritance available will be the difference between the proceeds from the sale of the house and the amount outstanding on the loan when it’s redeemed.
If your plan has a lifetime fixed interest rate you have the certainty of knowing exactly what your future debt will be. What we cannot predict is the future value of your property as property prices could be higher or lower than they are today when the property is eventually sold. Therefore we cannot predict what inheritance will be available.
Would I still own my home?
Home Reversion Plan
The deeds and therefore ownership of the property would be transferred to the home reversion provider.
You would retain a beneficial interest in any part of the property not sold to the home reversion company.
Lifetime Mortgage
You maintain 100% ownership of your property.
What fees are involved with setting up a plan and when must they be paid?
There are four main costs associated with setting up any equity release plan.
Survey Fee – This is payable at the start when you submit your application. The amount usually depends on the estimated value of your property.
Application Fee – This is payable directly to the lender when your loan completes. This can either be paid from the funds released or added to your loan. This fee is typically £595.
Legal Fee – All SHIP members insist that you receive independent legal advice from a solicitor. Your solicitor should offer a fixed fee for this service of between £400 and £500.
Advice Fee – This is the fee NHFA charge for assessing your suitability for equity release, making a recommendation and handling your application to completion. Our advice fee is fixed at £500 and is only payable when the funds are released. If you do not proceed no advice fee is payable. NHFA Ltd will also retain any commission paid by the lender for arranging the plan.
Can I lose my home?
Providing you adequately maintain your home and fulfil the terms of the agreement, SHIP members guarantee lifetime tenancy in your property regardless of what happens to future interest rates, property values or investments.