How Equity Release Can Be Completed on a Property Held in Trust

If you have a valuable home, but you do not have a good amount of cash, you can release equity from your home to convert its value into accessible funds. You will receive a loan that works on compound interest, meaning the interest accumulates each year.

However, neither the loan amount nor the interest has to be paid back while you are an equity release customer. You can use the money to fund your retirement, help out loved ones, or start a new business.

Whatever you choose to put the money towards, you can lean on the fact that you will not be expected to repay it by a particular date.

The funds will be repaid when you go into permanent care, or when you pass away, unless your partner is on your equity release plan and they are still living in the home (1).

The equity release company that you are working with will sell your property and pay off the loan using the money from the sale.

What is the Criteria For Releasing Equity?

To release equity from your property, it goes without saying that your home has to be of value to an equity release provider.

The minimum value is £70,000, so all equity release properties are worth at least this amount. They must also be fully owned by the equity release customer, and in a good condition.

The customer must be 55 years old or more to take out a lifetime mortgage, which is the most common type of equity release for all homes, including properties held in trust. Home reversions require the customer to be at least 65 years old.

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How Equity Release Can Be Completed on a Property Held in Trust

It has not always been possible to take out equity from a property held in trust. Many equity release providers would not accept clients who were in this situation, which led these people to struggle with retirement finances.

If your property is currently held in trust, then you will likely need to dissolve that trust in order to take out equity release. This is because the lender will require a first legal charge over the property. The trust will mean the equity in the property is passed to the beneficiaries under the trust, which is contrary to an equity release agreement.

Dissolving a trust is not always straightforward, and you will require the services of a solicitor specialising in trust law to do this.

The solicitor will need the consent of everyone who is linked to the trust, which will be presented in the form of a signature. They will then fill out the appropriate forms and allocate the interest of the property to you.

If you cannot afford to get a solicitor at the moment, you could pay them once you have received your equity release loan. This is a common occurrence, so many equity release solicitors will allow you to do this.

Please make sure you find a solicitor with excellent reviews, who is regulated the Solicitor Regulations Authority (SRA). This will prevent you from falling victim to a scam, and it will ensure your solicitor is sufficiently qualified to give you advice on taking equity from a property held in trust.

Please call our 24-Hour Helpline: 0330 058 1579

Is it Advisable to Release Equity on a Property Held in Trust?

Think about how much money you currently have, how much you have saved for the future, how valuable your property is, what your plans are for inheritance, etc.

Generally, the positives of equity release are that you get a loan that does not need to be paid back, there are a range of plans to choose from, you can stay in your home for the rest of your life, and you do not have to downsize (which may mean moving away from family, and going through a stressful move).

The negatives tend to be that there is compound interest, there may be less inheritance left for your loved ones, and it can be difficult to get out of equity release (you may need to offer a sum of money to pay off your lifetime mortgage).

In terms of releasing equity from a house in trust compared to another house, it will be slightly more expensive as you will have to employ a solicitor to deal with the legal side of the process, i.e. in winding up the trust.

There may also be more family conflict, if there are multiple trustees. Some people are not able to pursue equity release in this situation, as their family members do not approve of it.

That being said, releasing equity from a property in trust can be very beneficial for a family’s finances. It allows them to access money quickly, which is advisable in certain situations, e.g., if you need to fund a one-off expense like a funeral, you have lost your job, or you do not have enough money saved for retirement.

Please call our 24-Hour Helpline: 0330 058 1579

How Can Equity Release Warehouse Help Me?

We can help you with the decision of releasing equity if you get in touch with us on 0330 058 1579. You can also head to our contact page and pass on your details for a callback.

Our lovely team is here to answer any questions you have about releasing equity on a property held in trust. We can also offer advice on which equity release plan would be best for your situation, avoiding compound interest, and protecting your inheritance for your children and grandchildren.

If you eventually decide that equity release is not right for you, you will have lost nothing. Our first consultation is completely free, so it is definitely worth doing if you are even mildly interested in equity release as a retirement scheme.

Perhaps you have already taken equity out of your property, and you now want to put it into trust. We can also give you advice on this if you call us, but we will recommend speaking to a solicitor on top of this, as they will be able to guide you on how to deal with the legal side of putting a property into trust.

Our advice will focus on the impact on your equity release plan.

References

[1] What is equity release? https://www.equityreleasecouncil.com/what-is-equity-release/