Equity release allows the older generation to release some of the money from the value of their home through a series of instalments or one lump sum. Statistics show this is extremely popular as 150,653 over-55s have chosen to relase equity from their homes.
In the first quarter of this year alone a staggering 23,395 chose to cash in on the value of their homes. This is a 21% increase compared to the previous year.
In a new survey of over 55s, Henry Dannell discovered that 39% of over 55s who have equity release are unaware of what would happen to their plan if they passed away.
Intentions behind taking out an equity release plan
The mortgage broker reveals that 33% of respondents decided to take out a plan to fund renovations or improvements to their home and garden.
17% took out a plan to make a mortgage repayment, 16% took out a plan to fund general debt repayments, and 14% opted for equity release to ‘gift’ money to a family member or loved one.
12% chose to fund major purchases, such as a car, with the equity release, and 7% used the money to pay for an overseas getaway.
Although customers display that their intentions behind taking out an equity release plan were clear, there was much uncertainty regarding what would happen if they moved to long-term care or passed away.
Key details equity release customers need to know
Equity release plans can be settled in full before death. Customers who decide to repay their plan before the agreed end date may be subject to an early repayment charge.
Equity release plans must be paid upon death. Direct beneficiaries must inform the lender that the equity release customer has passed away and, will be given 12 months to repay the plan.
The sale of the property usually funds the plan, but other methods can be used to make the payment if desired.
To settle a plan, loved ones will need to provide a reference number. This will be used to inform the lender the equity release customer has passed away. A copy of the death certificate and the probate document will also need to be provided.
For the surviving partner to continue living in the home, the mortgage or home reversion plan must be written in both names.