Home > Housing Contracts > Equity Release Contracts

Equity Release Contracts

By: Garry Crystal - Updated: 3 Nov 2012 | comments*Discuss
 
Equity Release Contracts Financial

Equity release contracts often come with many pages of terms and conditions that ensure the protection of the borrower and the lender. After an equity release contract has been completed the lender will have a large interest in the borrower’s property and there will be many terms and conditions that need to be thoroughly checked over before signing.

What is Equity Release?

Equity release is a way of using a home with a small mortgage to obtain either a lump sum of cash or a regular income in the form of instalments. The company that has loaned the money will then recover it by either selling the home after the owner dies or by receiving repayment if the owner sells.

Equity release plans are usually available to older people that have a small mortgage on the property. Equity release schemes are not regulated and the contracts do come with a large number of variable terms and conditions. It is vital to have a solicitor involved when a contract is drafted. There are numerous equity release plans available, and thoroughly researching the pros and cons of each plan should be undertaken before signing.

Terms and Conditions

The terms and conditions of the equity release contract will be dependant on the type of plan that is being considered. But a number of questions should be asked before any signatures are placed on the contract. These should include:

  • What are your rights regarding moving or selling the house?
  • Will a spouse be able to live in the house after the borrower dies?
  • What are the guaranteed payments in relation to age?
  • Are any rental payments required?
  • What will the total fees be to complete the deal?
  • Will the received cash cancel out any rights to means tested benefits?
  • Is a no negative equity guarantee written into the contract?
  • Will fees be included in the actual loan amount?
  • What conditions are there for the repair and maintenance of the property?
  • Details on breaching the contract.
Only sign a contract once all of the terms and conditions have been read, understood, and agreed upon. Never sign any contract if there is any doubt over the terms and conditions. If any of the clauses are unclear ask for clarification from your own solicitor.

Hidden Clauses

Always make sure that there are no hidden clauses in the equity release contract. It could be the case that a contract may be hard to understand or the term is wrapped up in confusing language. It is a legal requirement for clauses to be easily understood by the person that is signing, not just by their lawyer. If the borrower cannot understand the clause then the contract may be deemed unenforceable in a court of law.

Equity Release Fees

There are a huge number of fees connected with equity release plans, much more so than most other financial contracts. These fees will include a set up fee, legal costs, valuation fees and insurance fees. There may also be rental fees, and fees that are applied for early repayment. In most cases these fees will be applied to the actual loan but all of these fees should be marked down in the equity release contract.

No Negative Equity Guarantee

Another important condition that should be included in any equity release contract is a no negative equity guarantee. Placing this guarantee into the contract will means that you will never actually owe more than the value of your actual home. This will apply no matter what state the stock market is in or if house prices rise or fall.

Equity release contracts are offered by a large number of financial institutions and all will have their own rules and regulations. Anyone considering this type of borrowing should shop around and look for the best deal they can find. Do not simply think that your own bank will give the best deal. Use comparison websites and always take sound financial advice from a professional.

You might also like...
Share Your Story, Join the Discussion or Seek Advice..
i am 13 and iwant to be an actress when im older i got told to get equity card how?
dj kami - 3-Nov-12 @ 9:01 AM
Share Your Story, Join the Discussion or Seek Advice...
Title:
(never shown)
Firstname:
(never shown)
Surname:
(never shown)
Email:
(never shown)
Nickname:
(shown)
Comment:
Validate:
Enter word:
Latest Comments
  • SHP
    Re: The Law & Verbal Agreements
    I have an issue with a landscape gardener and would appreciate any advice. He quoted £3445 to clear hedges, a brick wall,…
    17 October 2019
  • Loulou
    Re: Tenancy Agreements and Deposits
    I moved into a property my landlord stated he was the agent he has also signed my tenancy fraudulent as the owner of the…
    11 October 2019
  • Trishy
    Re: Title Deeds: Who Keeps Them?
    I have separated from my ex wife, the mortgage on the family home is in both my parents and our names it was my parents home to…
    28 September 2019
  • Peter Tomkins
    Re: Title Deeds: Who Keeps Them?
    3 years ago my mortgage was paid off. I received from RBS a 3-page computer print out entitled deeds for the address…
    19 September 2019
  • Melpeta
    Re: Agency Work & Contracts
    I work for an agency within a company, the agency are now taking us on as permanent but I’ve never heard of being a permanent…
    4 September 2019
  • Dudu
    Re: Title Deeds: Who Keeps Them?
    Bank lawyers where paid so that our title deed can be released. So where do I collect the title to our home we reside in the…
    1 September 2019
  • Dave Javu
    Re: Title Deeds: Who Keeps Them?
    "If there is a mortgage then the deeds will be kept by the mortgage lender. The deeds will only be returned to the owner once the…
    30 August 2019
  • Kat
    Re: Title Deeds: Who Keeps Them?
    We bought part of the property of one of our cousin, the heir of the property, we bought and paid in full almost 40 to 45% of the…
    5 August 2019
  • Alana28
    Re: Do I Have Any Rights to Stay in my Rented Shop?
    I have 2 water metres in my shop one for me they both are connected into one can i charge the water…
    1 August 2019
  • Urszula
    Re: Misrepresentation and Breach of Contract
    Hi, Can anyone help? As a retirement present for ourselves we decided to buy a boat. After searching on the…
    17 July 2019