Questions to Ask About Equity Release
Questions to put to an adviser or provider before releasing money from your home: what the interest will come to, what the fees are, what happens if you move or go into care, and what your family will be left with. For homeowners in later life and for the relatives helping them decide.
The questions
Open any question for the note
Which type of plan are you recommending, a lifetime mortgage or a home reversion, and why that one for me?
Why ask it
The two work differently: one is a loan secured on the house, the other sells a share of it outright. An adviser who cannot say plainly why yours suits your circumstances better than the alternative is reading from a product sheet.
How much could I release, and how much do I actually need?
Why ask it
Taking more than you need starts interest running on money that then sits in a savings account earning less. A useful answer separates what the valuation permits from what your plan requires.
What is the interest rate, and is it fixed for the life of the loan?
Why ask it
Fixed for life is usual on lifetime mortgages, but variable rates exist and behave very differently across twenty years. If it is variable, ask what upper limit applies, and treat the absence of one as a reason to stop.
Can you show me the amount owed after ten, fifteen, and twenty years if I make no payments?
Why ask it
This is the most revealing page in the paperwork. Rolled-up interest can roughly double the debt over the period many borrowers go on living in the house, and seeing the figures changes more minds than any explanation.
What fees are payable before completion, and which do I lose if I withdraw?
Why ask it
Valuation, legal, and arrangement fees are quoted separately and add up. Ask specifically what happens to each if the survey comes back badly and you decide not to proceed.
Does this plan include a no negative equity guarantee?
Why ask it
Without it, a fall in house prices can leave your estate carrying a shortfall on top of losing the property. It is a standard feature among Equity Release Council members, so vagueness on this point is worth pressing.
Can I make voluntary payments, and how much can I pay each year before a penalty applies?
Why ask it
Paying the interest as you go is what stops the balance compounding. Most plans allow some repayment, often a set percentage of the balance a year, and that limit decides whether keeping the debt flat is realistic for you.
What are the early repayment charges, and how do they change over time?
Why ask it
These can run for years, and some are linked to gilt yields, which makes them impossible to predict. Ask for the actual figure at year five and year ten rather than a description of how the mechanism works.
Can I take this as a drawdown facility rather than one lump sum?
Why ask it
With drawdown, interest accrues only on what you have taken. For someone topping up income across a decade rather than paying for one large job, the difference in total interest is large.
If I use drawdown, can the provider withdraw the reserve later, and what rate applies to money I take in future?
Why ask it
Reserve facilities are not always guaranteed for life, and later withdrawals may be priced at the rate on the day rather than today's rate. An unqualified yes should be checked against the offer document.
Is the plan portable if I move, and which properties would you refuse?
Why ask it
Portability is usually conditional. Sheltered and age-restricted housing, flats above commercial premises, non-standard construction, and some ex-local-authority property are commonly excluded. Ask for the exclusion list, not the principle.
What happens if I go into long-term care, or if one of us does and the other stays?
Why ask it
Most plans end when the last borrower dies or moves permanently into care, which forces a sale. Couples in particular need to establish what a single move into care triggers while the other is still living there.
How would this affect pension credit, council tax support, or any other means-tested help I get?
Why ask it
Released cash sitting in an account can push you over capital thresholds and cost you support worth more than the money you released. Spending it quickly is not a way round this and can be treated as deprivation of capital.
Is there any tax to pay on the money I release?
Why ask it
The release itself is not normally treated as income, but what you do with the money can have tax consequences, and interest earned on it is taxable in the usual way. Ask for this in writing rather than as reassurance.
On a cautious house price assumption, what would be left for my family?
Why ask it
Ask for the projection under modest growth, not an optimistic one. Relatives are rarely surprised by the idea of equity release and often surprised by the size of the remaining figure.
Can I protect a percentage of the property's value for my beneficiaries?
Why ask it
Some plans allow a fixed share to be ring-fenced in exchange for releasing less now. Whether it is offered, and what it costs in reduced borrowing, shows how much flexibility the product actually has.
Would you go through this with my children or whoever will deal with my estate?
Why ask it
Disputes about an unexpected inheritance happen after you are no longer there to explain the reasoning. One meeting with the family present usually settles it, and an adviser who resists that is a poor sign.
What alternatives did you consider and rule out, and why?
Why ask it
Downsizing, a retirement interest only mortgage, a loan within the family, or unclaimed benefits are the obvious comparisons. If nothing was weighed and dismissed, you are being sold a product rather than advised on a decision.
How are you paid for arranging this, and does it vary between products?
Why ask it
Commission is usually paid by the lender and can differ from plan to plan. Asking shows whether the recommendation could move with the fee, and any adviser worth using will answer without discomfort.
What does the contract require of me, and what would count as a breach?
Why ask it
Plans typically require you to insure and maintain the property, keep it as your main residence, and tell the lender if someone else moves in. Breaching those terms can in principle make the loan repayable, so read this clause closely.
How to use these questions
Practical guidance for the conversation itself
Before the meeting
Write down what the money is for
A specific purpose and a figure, for example a new roof at a stated cost, keeps the conversation anchored. Advisers can only work with what you tell them, and an open-ended request tends to produce a larger loan than you needed.
Check what you are already entitled to
Attendance allowance, pension credit, and council tax reductions go unclaimed regularly, and a benefits check costs nothing. It sometimes removes the need to borrow at all, or reduces how much you take.
Use your own solicitor
Equity release requires independent legal advice, and you can choose who gives it rather than accepting a firm suggested by the broker. Ask the solicitor to explain the early repayment charge and the occupancy conditions in their own words.
Do not decide in the first meeting
Take the illustration home and read it when nobody is waiting for an answer. Nothing about a genuine offer requires a decision that day, and pressure to sign quickly is itself information.
Talking to family about it
Show the projection, not the concept
Relatives usually accept the reasoning and struggle with the numbers. Handing them the twenty-year balance figure and the estimated remaining equity moves the conversation past whether you should to how much and which plan.
Be clear whose decision it is
Adult children sometimes have an interest in the outcome, and being honest about that early keeps the discussion straight. The house belongs to whoever owns it, and expected inheritance is not the same as an entitlement.
Consider whether the family can lend instead
A private loan documented properly can be cheaper than compound interest over twenty years. It also brings its own risks to relationships, so it needs a written agreement, not an understanding.
What tends to go wrong
Taking the maximum available
The figure an adviser can arrange is not a recommendation. Interest compounds on the whole amount from day one, whether or not you have spent it.
Assuming you can undo it easily
Early repayment charges and the cost of arranging the plan mean the first years are expensive to exit. Treat it as a long-term arrangement, because that is how it is priced.
Overlooking the person who is not on the deeds
A partner or relative living with you may have no right to remain when the plan ends. Establish their position in writing before completion, not afterwards.