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Equity Release Scotland | What You Should Know
Equity release is a popular product for retired homeowners across the UK, with an increasing number of people enjoying a more financially secure retirement by releasing the money locked in their homes.
Subtle differences in culture and rules in Scotland, however, mean that there are some specific pros and cons with equity release in Scotland that can affect your decision.
Thankfully, we’re here at Clifton Private Finance to make sure you’re as informed as possible.
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Equity Release and Lifetime Mortgages - An Overview
Here's a brief recap of the equity release products in the UK and how they work:
- Equity release represents a range of products that are designed to unlock the capital tied up in your home.
- Equity release includes lifetime mortgages, drawdown mortgages, home equity lines of credit (HELOC), retirement investment-only mortgages (RIO), and home reversion plans.
- It accrues interest over the lifetime of the loan, which must be repaid as part of the debt at the end of the term.
- Provides money in retirement for large-scale purchases, debt consolidation, home renovations, downsizing, or to help family members.
- Equity release can help as part of inheritance tax (IHT) planning.
- These products typically have no repayment schedule during your lifetime and are repaid with interest in full when you pass away, usually through the sale of your home.
- Many equity products are flexible, allowing for partial repayment, staged equity release, ‘ringfencing’ to protect inheritance, and security for spouses.
- Regulated, with protection in place to make sure you make a fully informed decision.
- If you take out equity release, you will be secure in your home for your lifetime, with no threat of eviction or repossession.
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Freehold vs. Leasehold Flats with Equity Release in Scotland
In Scotland, flats are often freehold, rather than the leasehold structure that dominates in the rest of the UK.
This problem for many flat owners in England and Wales is lessened in Scotland, where the majority of flats and retirement homes are freehold. This is a benefit for Scottish homeowners who are more likely to secure an equity release deal with lower interest rates as a consequence.
The Problem of Location
Scotland is home to some of the most idyllic locations, from cottages tucked away in the splendour of the Highlands, to island retreats enjoying peace and tranquillity from the bustle of city life.
While these rural properties are desirable for those seeking a quiet country life, they present a problem when considering equity release and underwriting:
Equity release is designed to be repaid when the owner and occupier of the property passes away. The house is sold and the money used to repay the loan and the interest that has been accrued during its term.
With this exit strategy in mind, it is important to the lender that the property can be sold quickly and efficiently, receiving the full market value without extensive time on the market. Importantly, the property must be in good condition with adequate utilities and access to amenities to help ensure its viability for sale.
Of course, most homes in Scotland are not remote cottages or small-holdings that might cause concern for lenders. Houses in established towns and cities have little problem meeting market value when sold and are easily accepted as suitable by lenders.
A candid and realistic appraisal of your property and advice from experts at Clifton Private Finance is essential when evaluating your home for an equity release plan. Approaching niche lenders will help, as their specialist nature means they are more able to evaluate a property with an open mind and understanding of its true saleability.
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The Impact of Property Construction
Much as the three little pigs found the greatest success with a brick-built house, the same is true when looking for equity release.
By providing you with equity release, lenders are investing in your property and are looking for familiar and trusted construction to secure the borrowing. This means that brick is more readily acceptable than timber framed buildings.
Lenders like to stick with what they know and there hasn’t been enough time to properly evaluate the longevity of timber framed buildings.
Compared to hundreds of years of using brick and stone reliably, the relative newness of timber and SIP (Structural Insulated Panel) construction draws concerns. These worries are made worse considering issues in recent years where timber-framed properties have deteriorated and required remedial construction work.
The move towards timber framed and SIP homes is a particular focus in Scotland that is not uniform across the UK.
Key things to consider include:
- Ensuring at least one ‘leaf’ or element of the walls of the property is brick or block construction.
- Establishing whether structural load bearing elements are reliant on a timber frame.
- If the majority of the building has been made of SIP construction.
Speak to the equity release team at Clifton Private Finance to discuss your building construction and how it impacts your chances of leveraging your home for a capital lump sum.
If possible, we can help match you to a flexible lender who has the necessary understanding to provide an equity release option to suit.
Planning for Equity Release in Scotland
For the majority of Scottish retirees, these few finer nuances of difference between Scotland and the rest of the UK have little impact. At Clifton Private Finance, we can find you an equity release solution that meets your needs and provides you with the cash boost you need to enjoy a happier retirement.
If you are in a niche situation, as a leaseholder, inhabitant of an off-the-grid rural home, or someone with a timber framed property, or if you are looking to buy or build a home in Scotland with a view to considering equity release later in life, then why not give us a call. A quick chat with our specialist equity release team will reassure you and put you on the right path to meet lenders’ criteria.
