What types of equity release plans are there?
There are two types of equity release plans: home reversion (though far less common nowadays) and lifetime mortgages.
The equity release option we offer is a lifetime mortgage.
Our lifetime mortgage, Lifestyle Flexible Option, offers you the option of either taking a one-off cash sum or taking a one-off cash sum and setting up a cash reserve to draw money from in the future.
How does a lifetime mortgage work?
A lifetime mortgage is a type of equity release that allows you to access some of the equity that’s tied up in your home. It’s a long-term loan that’s secured on your property.
Even though it’s a mortgage, you don’t have to make regular repayments. The loan and interest will be paid back in full, usually by selling your property when you (and your partner if it’s a joint lifetime mortgage) die or move into long-term care (remember – Terms and Conditions apply for this).
You’re charged interest on the amount you borrow as well as on the interest that’s already been added, so what you owe back rises quite quickly. Taking out a lifetime mortgage cuts down the value you have in your home and any inheritance you leave. Your tax position and any entitlement you have to welfare benefits could also be affected.
Is equity release safe?
Yes. Equity release is regulated by the Financial Conduct Authority (FCA).
The FCA is an independent organisation and it reports to the Government, helping to make sure the financial products offered to the public are fair and meet certain standards.
We’re a long-standing member of the Equity Release Council – an organisation set up in 1991 to help protect people taking out equity release. We make sure we meet the standards set out in their Statement of Principles.
How long does equity release take?
You’ll need to get legal and financial advice when you take out equity release, so the time it takes to finish your application can vary. Typically, once we get your lifetime mortgage application it takes about 8-12 weeks before you get your money.
How does equity release affect benefits?
Taking out equity release (a lifetime mortgage) cuts down the value you have in your home and the amount of any inheritance you leave. Your tax position and any entitlement to welfare benefits you have could also be affected.
It might affect your entitlement to means-tested welfare benefits, like council tax benefit, pension credit, and certain health benefits. But your adviser will understand your personal situation and can explain this to you.
Can I move house with equity release?
If your new property meets our lending criteria at the time and we agree that you can, then you can happily move house and take your lifetime mortgage with you when you go.
If your new home is worth less than the current one you may need to pay back some of the loan and interest. And if your new property doesn’t meet our lending criteria, you might be able to use downsizing protection, your adviser will be able to tell you if you’re eligible. Downsizing protection means you’ll repay the lifetime mortgage, but with no early repayment charge. So you’ll repay your lifetime mortgage, then the loan is closed and you can buy your new property. This is available on lifetime mortgages applied for on or after 8 April 2019. Terms and conditions apply.
If your new property doesn't meet the lending criteria and you’re not eligible for downsizing protection, you might not be able to move to this specific property.
How much can I release?
You can only release a certain percentage of the value of your home, and this varies depending on your individual circumstances. It'll be based on a number of factors, such as how old you are, the type and value of your property, and whether you take out our inheritance guarantee.
Our lifetime mortgage gives you the option of either a one-off cash lump sum or a cash lump sum with an agreed cash reserve that you can withdraw money from as and when you want. But your adviser will be able to give you a personalised view and talk you through the features of your lifetime mortgage.
What’s the interest rate?
There's no set figure.
Our lifetime mortgage interest rates are based on your individual circumstances such as your age, property value, health and lifestyle details, and how much cash you’d like to release. When you speak to an equity release adviser, they’ll arrange to give you a personalised illustration which will show you your interest rate.
Unlike a regular mortgage, you don’t make any monthly repayments with a lifetime mortgage. So, they have a higher rate of interest which builds up on your loan each year. Interest is charged on the total borrowing and any interest previously added, which quickly increases the amount you owe (compound interest).
We add the compound interest to your balance once a year.
Are there any fees?
Your equity release adviser will give you a personalised illustration of how your lifetime mortgage will work, and that’ll show you any fees you need to pay. You can also get a copy of our Equity release Tariff of Charges from your equity release adviser, by visiting www.aviva.co.uk/adviser/documents/view/pf01459c.pdf, or calling 0808 239 3968.
Can I take out more later?
You might be able to borrow more later if your home goes up in value or you don’t borrow the full amount that’s available to you at the start, subject to our lending conditions at the time. The interest rate is calculated on any extra amount that’s released when we get your application.
The terms and conditions that apply to any additional borrowing will be the ones applicable at the time – they might be different from those that applied to your previous borrowing.
Do I still own my own home?
Yes, and you continue to live in it until you die or go into long-term care, subject to our terms and conditions. You need to make sure that you keep the property in good shape, and it’s still your responsibility to insure your property and pay any bills, like utilities and council tax – in the same way you do now.
Can I end the lifetime mortgage early?
Our lifetime mortgages are designed to last for the rest of your life, so it might not be right for you if you’re planning to pay it off early.
You can end your lifetime mortgage early by paying off the loan and the interest, but you might have to pay a pretty big early repayment charge to do so. We offer fixed percentage or gilt index early repayment charges, and you have to choose one when you set up the lifetime mortgage. If you want some more information about how our early repayment charges work, we have a booklet about each.
You can get a copy from your equity release adviser, by giving us a ring on 0808 239 3968, or downloading your own copy from our website:
For gilt index early repayment charges explained visit www.aviva.co.uk/adviser/documents/view/pf011612c.pdf
For fixed early repayment charges explained visit www.aviva.co.uk/adviser/documents/view/pf011601c.pdf
What happens when it’s time to sell the house?
A lifetime mortgage can be repaid in any way really, but it’s usually using money from selling the property. If you go into long-term care, then either you or your solicitor sells the house. If you die and have a Will in place, it'll be sold by an executor looking after your estate – if there's no Will, administrators will sell it. Any money that’s left over after the lifetime mortgage has been repaid belongs to you or your estate.
Where can I get independent guidance?
You can find out more about equity release from the Equity Release Council, which we’re a member of too, and MoneyHelper.
Do I have time to change my mind?
Rest easy knowing that we won’t ever rush the equity release process and you’ll have plenty of time to think about your options. Family members are welcome, and in fact encouraged, to come to your meeting(s) with your equity release adviser so they know what’s going on too, and you won’t be pressured into signing anything.
You can pull out during the application process, as long as it’s before you sign the contractual agreement.