Equity releases are becoming an increasingly popular way to unlock money from your home without having to sell. But what happens to your equity release plan when you die?
Equity Release: What is it?
Equity releases allow you to unlock some of the money in your property by offering you a loan of up to 60% of the value of your property.
When Can I apply for Equity
Typically you can apply for equity releases once you are over the age of 55. However, the earlier you try to unlock equity from your home, the more it will cost in the long run due to interest on the loan. There are some equity release loans that allow you to make voluntary payments towards the balance. Normally you can pay up to 10% of the initial mortgage balance to help keep the loan under control.
How much can I unlock?
This will depend a lot on your age, your life expectancy, and the value of your property. As we mention above, it can be as much as 60% of the value of your property.
Does the money come with conditions?
Only one – any mortgage on the property must be settled using the equity release. After that, once you have unlocked the equity, it is yours to do with as you please.
Will my spouse be able to live in our home when I die under equity release?
If the mortgage on your home was in both of your names, then your spouse will be able to stay in your home once you’ve passed away. If it is not, then your spouse will have to sell the property to repay the equity releases once you’ve died. This is a situation where an executor may consider paying off the balance of the equity releases with funds from the estate instead of selling the property.
What Normally happens when you die
Usually, when someone dies, the home is sold and the money that remains after paying off the estate agent, the solicitor, is then used to pay off the equity release loan. Anything that remains after that is put with the rest of the estate and settled as per the will.
However, if there is enough money in the estate to pay off the equity release loan without selling the house, the executor may choose to pay off the balance of the equity release loan and keep the property as an asset for the estate.
This will depend on the type of equity release you have opted for. Some equity release schemes will take the property upon your death regardless of whether the loan can be repaid or not.
Most equity release schemes also offer a guarantee against negative equity. This means that those who inherit your estate won’t have to pay back more than the value of your home.
Need help with your own arrangements? Contact us today to see how we can help you make the best out of putting your affairs in order.
