Equity Release On Jointly Owned Property

 

Equity Release On Jointly Owned Property | April 2024

Equity release on jointly owned property offers homeowners a way to access the wealth tied up in their homes without the need to sell or move out. This process, involving a joint equity release plan, can provide either a lump sum or a steady income, depending on the homeowners’ choice. The article will help you do the following – 

1 – Understand the importance of considering equity release on jointly owned property.

2 – Learn about the key outcomes and decisions involved in the process.

3 – Discover the main topics covered, including joint tenancy mortgage, tenants in common equity release, equity release on leasehold property, and equity release on retirement flats.

4 – Recognise the benefits of understanding these topics for homeowners.

5 – Identify actions to take post-reading to make informed decisions about equity release.

Key Takeaways & Learnings From This Page on Shared Ownership Equity Release

1 – Equity release on jointly owned property allows homeowners to access the wealth tied up in their property, offering financial flexibility without the need to sell.

2 – It’s crucial for all joint owners to agree on proceeding with an equity release plan, as disagreements can halt the process.

3 – Joint tenancy mortgage arrangements require any equity release funds to first clear existing mortgage debts.

4 – Tenants in common equity release and equity release on leasehold property are options that cater to specific ownership and property types, offering tailored solutions.

5 – Equity release on retirement flats provides an opportunity for retirees to supplement their income or manage financial needs without moving out.

6 – Professional advice is invaluable in navigating the complexities of equity release, ensuring that homeowners make decisions that best suit their circumstances.

7 – Homeowners should consider the long-term impact of equity release on inheritance and potential state benefits eligibility.

Topics that you will find covered on this page

How Equity Release Works On Jointly Owned Property

All applicants apply when releasing equity from a jointly owned property. The equity release lender will consider all joint owners’ ages and health when deciding how much equity joint applicants can release.

If you have a joint tenancy mortgage on the property, the money received from the equity release loan must first be used to pay off the existing mortgage. Therefore, any remaining funds are available for you to use as you wish.

Like ordinary equity release, releasing equity from a jointly owned property can be complicated. Partly, this is because all joint owners have to agree on the equity release application. If one owner wants to release equity but the others do not, the application cannot go ahead.

Equity release products which are suitable for jointly owned property include joint lifetime mortgages. These are a type of equity release plan where the loan is only repaid when the last surviving owner dies or moves into long-term care.

Equity Release For A Joint Tenancy Mortgage 

Equity release is a way for homeowners, typically of retirement age, to unlock the financial value tied up in their property. When you choose a joining equity release plan, the application is made by all co-owners of the property.

An equity release lender provides the homeowner with a lump sum or regular payments based on the property’s value. It is up to you what to spend this money on, examples ranging from home improvements to supplementing your retirement income.

The amount of money which you can receive from an equity release product depends on several factors. These include the property value, the age of the youngest homeowner, and the specific terms of the equity release provider. Equity release plans are often a means to gain some financial freedom, as a homeowner.

However, before proceeding, it’s important to fully understand the terms and conditions. This is where professional advice from an equity release specialist can be invaluable.

The Basics of Jointly Owned Property

If it is owned by more than one person, a property is jointly owned. The joint owners hold the title deeds to the property and can be listed as joint tenants or co-owners on the land registry. With joint tenancy, the owners have equal rights to the whole property. If a joint tenant dies, their share passes to the surviving joint tenant(s).

With co-ownership or tenancy in common, each owner has a distinct share of the property. The shares may be equal or unequal. Consequently, if a co-owner dies, their share passes under the terms of their will. Therefore, not automatically to the other owners.

It is possible for a jointly owned property to also be a shared ownership property. This is where you co-own the property with a housing association, paying rent on the remaining share which you don’t own. If you are considering equity release, understanding the type of joint ownership you have is important. It affects how much equity you can release and the equity release process.

Joint Tenants vs Tenants in Common

When property is owned jointly, it can be held in one of two ways: as joint tenants or tenants in common. The distinction between these two forms of ownership is critical when considering equity release.

For joint tenants, the property is owned equally by all parties. Upon the death of one owner, their share automatically passes to the surviving owner(s) under the right of survivorship. This means that the entire property continues to be held in the names of the surviving owner(s), which can simplify the process of applying for equity release, as all parties have an equal stake.

In contrast, tenants in common each own a specified share of the property, which can be unequal. These shares can be freely bequeathed to someone other than the co-owner(s), making the equity release process potentially more complex. Upon the death of one owner, their share does not automatically transfer to the surviving owner(s) but is instead distributed according to their will or the rules of intestacy if no will exists.

The Equity Release Application Process

The equity release application process differs significantly depending on the type of joint ownership. For joint tenants, the application process is generally straightforward, as all owners have an equal interest in the property. Both or all must agree to the equity release, and the amount available to release will be based on the age of the youngest homeowner and the property’s value.

For tenants in common, the process can be more complicated. All owners must still agree to the equity release, but the amount available may be influenced by the size of each owner’s share in the property. Additionally, specific arrangements may need to be made to ensure that the equity release does not affect the inheritance of any beneficiaries named in the will of a deceased owner.

What Are The Options For Equity Release On Jointly Owned Property?

There are two main options for equity release on joint ownership property: joint lifetime mortgages and home reversion plans.

With a joint lifetime mortgage, both you and your co-owner take out a loan against the property value. The loan, plus interest, will have to be repaid when the property is sold after your death. You can, however, choose to pay interest monthly if you wish.

With a home reversion plan, you only sell a share of your property to a provider in return for a lump sum or a gradual income. You’re then able to stay in your home for as long as you like.

The equity release plan ends upon the death of the last joint owner, or when the last joint owner sells the property or moves into permanent long-term care.

Eligibility Criteria For Equity Release 

There are several criteria you need to meet to apply for equity release. 

1 – Age and Property Value

The eligibility for equity release primarily depends on the age of the applicants and the value of the property. Typically, all applicants must be at least 55 years old, though some plans may require the youngest homeowner to be at least 60. The property’s value must usually meet a minimum threshold, often around £70,000, but this can vary between providers.

2 – Property Type and Condition

Equity release providers also consider the type of property and its condition. Eligible properties include freehold houses and bungalows, and in many cases, leasehold properties with a lease remaining of at least 75-90 years. The property must be in a good state of repair, and any significant structural issues may need to be resolved before the application can proceed.

3 – Location and Outstanding Mortgage

The property must be located in the UK, and some lenders may have geographical restrictions. If there is an outstanding mortgage on the property, it must typically be paid off at the outset of the equity release, either with the equity released or other funds.

Health and Lifestyle in Equity Release

This content should be placed under a new H2 heading titled Impact of Health and Lifestyle on Equity Release. This section is essential for readers to understand how their health and lifestyle choices can influence the terms of their equity release, filling a notable gap in the current article.

1 – Health and Lifestyle Considerations

Equity release providers often adjust their offerings based on the applicant’s health and lifestyle. This can include factors such as medical conditions, smoking habits, and overall life expectancy. Applicants with certain health conditions or lifestyles that are expected to reduce their life expectancy may be able to release more equity from their homes than those in better health.

2 – Enhanced Equity Release Plans

Some lenders offer enhanced equity release plans specifically designed for applicants with health conditions or certain lifestyle choices. These plans acknowledge that the lender may expect the loan to be repaid sooner due to the applicant’s reduced life expectancy and, therefore, is willing to lend a larger amount or offer more favourable terms.

3 – Application Process for Enhanced Plans

To qualify for an enhanced equity release plan, applicants will typically need to complete a health and lifestyle questionnaire. This may include questions about their medical history, any diagnoses, treatments, and lifestyle factors such as smoking and alcohol consumption. Applicants need to be honest and thorough in these questionnaires to ensure they receive the most appropriate offer from the lender.

equity release tenants in common

Is It Possible To Access The Equity In A Shared Ownership Property?

A shared ownership scheme is where you buy a share of a property from a housing association and pay rent on the rest. You can usually buy between 25% and 75% of the property. If you co-own a property through a shared ownership scheme, you may be able to release equity from your home. However, this is highly dependent on the terms of your mortgage and permission from your housing association.

If you want to release equity out of your shared ownership property, you’ll need to contact your housing association to see if this is possible. Each housing association has its own rules about equity release, so it’s worth getting in touch to find out more.

Can You Take Out Equity Release For Properties Owned as Tenants In Common?

Yes, you can take out equity release for properties owned as tenants in common. Tenants in common means that each owner has an undivided share of the property, which can be passed on to beneficiaries in a will. However, once again, both homeowners must be over 55, and they’ll need to agree to the equity release.

How Equity Release Works On Jointly Owned Property

All applicants apply when releasing equity from a jointly owned property. The equity release lender will consider all joint owners’ ages and health when deciding how much equity joint applicants can release.

If you have a joint mortgage on the property, the money received from the equity release loan must first be used to pay off the existing mortgage. Therefore, any remaining funds are available for you to use as you wish.

Like ordinary equity release, releasing equity from a jointly owned property can be complicated. Partly, this is because all joint owners have to agree on the equity release application. If one owner wants to release equity but the others do not, the application cannot go ahead.

Equity release products which are suitable for jointly owned property include joint lifetime mortgages. These are a type of equity release plan where the loan is only repaid when the last surviving owner dies or moves into long-term care.

 

Legal Implications of Equity Release

When considering equity release on jointly owned property, it’s essential to understand the legal framework governing these financial products. Equity release schemes, including lifetime mortgages and home reversion plans, are bound by strict regulations to protect both homeowners and lenders. For properties owned jointly, all parties must agree to the equity release, which can complicate the process if one owner is hesitant or disagrees.

Financial Implications of Equity Release

Equity release can have significant financial implications for homeowners, affecting everything from your current lifestyle to your family’s inheritance. The amount of money you can release from your property depends on several factors, including the property’s value, the age of the youngest homeowner, and the health of the applicants. It’s crucial to consider how these factors can impact the equity release terms offered by lenders.

One of the key financial considerations is the impact of compound interest on the amount owed over time, particularly for lifetime mortgages where the interest can accumulate rapidly. This can significantly reduce the amount of equity left in the property for future needs or inheritance purposes. 

Homeowners should also consider how equity release might affect their eligibility for means-tested benefits, as the additional income could disqualify them from receiving certain types of financial assistance.

Age and Health in Equity Release

In equity release, the age of the joint owners plays a role in the amount which you can release. The minimum age for equity release in the UK is 55, although some providers may have higher age limits. The younger you are when you take out an equity release plan, the less money you can borrow.

The health of a joint tenant also affects how much you can borrow. Some equity release providers offer enhanced terms for people with certain health conditions or lifestyle factors. However, the equity release loan is only repaid when the last surviving owner dies or moves into long-term care. Therefore, the age and life expectancy of the youngest homeowner are key factors which equity release providers consider.

Speak To An Equity Release Advisor Or Use the Equity Release Calculator Below To Estimate How Much You Can Borrow

The UK Care Guide works in partnership with Boon Brokers, one of the UKs leading equity release specialists.

You can contact them on 0333 567 1607 , or use the equity release calculator to estimate how much you can borrow.

Here is what Boon Brokers Offer

Whole of market access
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Call Boon Brokers on 0333 567 1607 to discuss your equity release requirements.

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All equity release and mortgage advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757. 

If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation.  By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.  

The fee we receive is used to help keep this site operational and to produce new content.  

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

Comparing Different Equity Release Schemes

Your circumstances are also likely to impact which equity release scheme is the best for you. The two main types are lifetime mortgages and home reversion plans. A lifetime mortgage is a loan secured on your property. Depending on your needs, you can choose to receive either a lump sum, a regular income, or both.

The loan plus interest is then repaid when the last surviving owner dies or moves into long-term care. However, with a home reversion plan, rather than retaining ownership of your property, you sell part or all of your property to a home reversion company. You can then receive a lump sum or regular income. Furthermore, you can continue to live in the property rent-free until you die or move into long-term care.

It is essential to note that terms and interest rates vary across providers, as comparing these to find the best scheme and provider for your equity release plan is crucial. Checking if the provider is a member of the Equity Release Council is also helpful, as this offers certain guarantees. Consider any potential restrictions which each plan may place on moving homes in the future. Also, check if equity release affects any state benefits which you receive.

Does Equity Release Have To Be Taken Out In Joint Names?

You cannot take out equity release on just your share of a property you co-own. You would either need to make an application for equity release in both your names or remove one of the joint owners from the property’s title deeds and apply individually. If you are married or in a civil partnership, your partner will need to agree to the equity release. But if you’re single, you can apply for equity release on your own.

What happens to your equity release plan when one owner dies?

Unlike standard equity release plans under which if the owner dies, the plan ends with a joint lifetime mortgage, the loan continues and is repaid when the property is sold after the second person dies. With a home reversion plan, if one of the owners dies, then their share of the property is passed on to the surviving owner. 

The equity release lender will still have a claim on the property when it’s sold. However, they’ll need to make the monthly repayments on their own.

It’s also worth noting that if you have a joint lifetime mortgage, the loan will need to be repaid when the property is sold after your death. You must understand what will happen upon the death of the first borrower under the specific equity release plan you are applying for.

Can I Get An Equity Release If One Owner Has Already Passed Away?

If one owner of a property dies before taking out an equity release, the surviving owner will still be able to make an equity release application. However, they’ll need to be over 55, and they must own the property outright. They then need to apply for a new equity release plan as normal.

Risks and Rewards of Equity Release

Remember that there are both risks and rewards to equity release. Whilst it can provide a financial boost, there are also potential downsides. For instance, accumulated interest on a lifetime mortgage plan can significantly increase the amount which you owe. This is likely to reduce the amount of money left to your loved ones. 

If the last surviving owner moves into long-term care, it is also possible that your home may need to be sold to pay off the remaining loan.

Moreover, equity release can affect your tax position and eligibility for state benefits depending on the money you receive and how you choose to receive it. Another potential downside is that if you want to move house or downsize in the future, there may be restrictions or charges depending on the scheme which you have chosen.

Despite this, equity release can still provide financial freedom in retirement. It allows you to unlock the wealth tied up in your property without having to move. If the property value increases, you could release even more equity.

tenants in common equity release

Impact on Inheritance and Beneficiaries

Choosing equity release often has a significant impact on your inheritance. As interest on a lifetime mortgage is usually added to the loan, this can significantly increase the amount you owe over time. To avoid this, you should explore available options. For instance, some equity release plans offer an inheritance protection guarantee.

This is where a percentage of your property’s value is kept back to leave as an inheritance. Before proceeding with equity release, remember that it’s important to discuss the potential impact on inheritance with your family and beneficiaries.

Seeking Professional Advice on Equity Release

If you are considering equity release it can be helpful to seek professional advice. An equity release specialist can offer you a well-informed explanation of the different options available to you, as well as advise you on what is best for you. A financial adviser can assess the impact of equity release on your tax situation and eligibility for state benefits.

They can help you understand the terms and conditions of the equity release plan and the potential implications for your loved ones. Furthermore, checking the credentials of an adviser can provide the security that their advice is reliable. They should be registered with the Financial Conduct Authority, and ideally be members of the Equity Release Council.

How to Get Equity Release on a Jointly Owned Property

When releasing equity on a jointly owned property, the first step involves checking your eligibility criteria. The equity release provider will assess the age of the youngest homeowner, the property value, and any outstanding mortgage on the property. There may also be other factors considered. In addition, they will check if the property is owned jointly, or if there are more than two owners.

Next, the joint owners need to decide what type of equity release product best suits them. This may be a joint lifetime mortgage or a home reversion plan. Once the owners decide, they must make a formal application to the equity release provider. This will include providing proof of property ownership and details of the property’s value. Before proceeding with an equity release application, seeking advice from a financial advisor is advised.

Equity Release on Shared Ownership Property

If you co-own, shared ownership equity release is a type of scheme which you can use. This is an option where you co-own the property with a housing association, whilst paying rent on the share you don’t own. The amount of money you can release with a shared ownership equity release is based on the share of the property which you own. The equity release provider will also consider the property’s total value and any outstanding mortgage.

Shared ownership equity release can provide a way for co-owners to release more money from their property without selling their share. It is typically slightly more complicated than standard equity release, and fewer lenders offer this as a result.

Equity Release and the Financial Ombudsman Service

The Financial Ombudsman Service is an independent service in the UK that resolves complaints between financial businesses and their customers. If you have a complaint about your equity release provider, you can refer it to the Financial Ombudsman Service. If you have an issue with your equity release provider, you should first try to resolve the issue before making a complaint. If their response is unsatisfactory, or they do not resolve the issue within eight weeks, you should then go to the Financial Ombudsman Service.

The Financial Ombudsman Service will consider all aspects of the case, including any documents and any relevant laws or regulations. They will then decide what action, if any, should be taken.

Choosing an Equity Release Broker

Choosing the right mortgage broker is an important aspect of the equity release process. A good broker will understand your needs and circumstances, as well as be able to advise you on the best equity release product for you. Your chosen mortgage broker must be experienced and qualified. 

They should be registered with the Financial Conduct Authority, and ideally be members of the Equity Release Council. It is beneficial if they have access to the whole property market, and you may want to consider if they are tied to certain lenders.

A good broker will explain the lending criteria of different equity release providers and will help you understand the terms and conditions of the equity release plan. They can also advise you on the maximum loan you could get, as well as the potential impact on your inheritance and property wealth.

can a jointly owned property be sold by one owner

Our Final Thoughts 

This article provides a comprehensive overview of equity release on jointly owned property, highlighting the flexibility and financial benefits it can offer to homeowners.

Key pieces of information include – 

1 – The necessity for all joint owners to agree on equity release.

2 – The impact of a joint tenancy mortgage on the equity release process.

3 – The availability of tenants in common equity release for owners with distinct property shares.

4 – Options for equity release on leasehold property, accommodating those with leasehold interests.

5 – The potential for equity release on retirement flats to support financial needs in retirement.

6 – The importance of professional advice in understanding and navigating the equity release process.

7 – The need to consider the long-term implications of equity release on inheritance and eligibility for state benefits.

buying out jointly owned property

FAQs

Can you get equity release on a retirement flat?

Equity release schemes, such as joint lifetime mortgages, allow homeowners of retirement flats to access the equity tied up in their property. This option provides financial flexibility without the need to sell, offering either a lump sum or regular income. It’s essential to consult with a specialist to understand the specific terms and eligibility criteria.

H3: Can you release equity from a shared ownership property?

While it’s feasible, each housing association has its own rules regarding equity release. Homeowners interested in this option should contact their association to explore the possibility and understand the specific requirements and conditions.

What happens to a jointly owned property if one owner goes into care?

For joint tenants, the property’s ownership automatically passes to the surviving owner(s). However, for tenants in common, the share of the owner going into care can be passed under their will, potentially affecting the property’s status and equity release considerations.

Can a jointly owned property be sold by one owner?

In cases where one owner wishes to sell but others do not, the sale cannot proceed without agreement. This principle ensures that all parties’ interests are considered and protected, highlighting the importance of mutual consent in decisions regarding jointly owned properties.

Can I use equity release to buy out my partner?

Equity release can provide a lump sum that could be used for this purpose, depending on the amount of equity available and the terms of the equity release plan. It’s advisable to seek professional advice to explore this option thoroughly and understand the financial implications and requirements.

Are there any age restrictions for applying for equity release on jointly-owned property?

Yes, there are age restrictions. Typically, all applicants for equity release, including those on jointly owned property, must be at least 55 years old. The amount of equity you can release often depends on the age of the youngest homeowner, among other factors. Consulting with an equity release specialist can provide clarity on how age influences your eligibility and the amount you can release.

How does equity release affect inheritance?

Equity release, particularly on jointly owned property, can significantly impact inheritance. The debt from the equity release, especially if it accumulates over time, can reduce the amount left for heirs. Homeowners need to consider inheritance protection options and discuss the potential impact on inheritance with their family and advisers.

use the equity release calculator to see how much money you could release from your property. Takes less than 60 seconds!

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All equity release advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757. 

 

If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation.  By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.  

The fee we receive is used to help keep this site operational and to produce new content.  

 

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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