Equity Release

Read Our Guide to Equity Release

Many people in Scotland have wealth built up in the form of "equity" in their houses.  "Equity" is the term used to describe the difference between the market value of someone’s home, and the total amount of any loans secured on it.  Consequently the equity in someone’s home, when they have paid off their mortgage, is effectively its market value less any sale expenses.  With many almost unbroken years of house price inflation behind us, this means that many folk in Scotland, particularly those near or past retiral, own a substantial financial asset – their house.  Typically their mortgages will have been paid off in full or very nearly so, by retiral age.

However, with increasing longevity and the reduction of pension returns many of those same people find that they are not as well off financially in retiral as they would wish.  Consequently to meet people’s financial aspirations in retiral, a number of financial institutions have created financial products called Equity Release Schemes, designed effectively to turn part of that high house value into useable cash for the house owner.

These products fall into two categories "Lifetime Mortgages" or "Home Reversion Schemes".  The first type is just a mortgage but with the difference that repayment of the loan and the interest is not made by the house owner during his or her lifetime, but out of the sale of the house after death.  The second type is a scheme whereby part of the house is sold to a financial institution at a discounted price with the house owner obtaining that price, and again that share of the value of the house is only recovered by the financial institution after the death of the householder.  Whilst part of the house has been sold a "liferent" is granted to the owner allowing lifetime occupation of the house.  In each type of scheme the effect is to release money to the house owner for use during that person’s life, with repayment being effected only after death.

There are all sorts of variations of these schemes, but they are increasing in popularity very quickly.  At Caesar and Howie we have made it our business to become familiar with the legalities relative to these products, to enable us to assist clients who wish to release equity from their homes.  In addition we have forged links with regulated financial advisers who are authorised to advise on those products which are regulated by the Financial Services Authority. 

If you wish to find out more about these schemes, please contact Carmen McIver or Michelle HeenanĀ  01506 815900

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