Can we take out Equity Release as tenants in common?
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My husband and I own our home as tenants in common, which we chose as we met and married late in life and have families from previous marriages. The house is a beautiful cottage on the north Norfolk coast so it’s worth just over £500,000, we believe. Money is a bit tight at the moment so we would like to look at Equity Release. Can we do that jointly with the house owned the way it is, or will we need to take out separate contracts for our share of the house?
Diane Fish of Smith & Pinching responds:
Owning your home as tenants in common means that you can each leave your share of the property to whoever you like in your will. The alternative form of joint ownership is known as joint tenants, where ownership automatically passes from one of you to the other when the first partner dies.
If a property is co-owned, a lifetime mortgage (the most common form of equity release) must be in both names, irrespective of how it is owned. You can take out a joint lifetime mortgage under ownership as tenants in common but there may be limitations on what you can do after the death of the first partner, so do check the terms before signing up.
Lifetime mortgages are designed to run until the last co-owner of the property dies and the lifetime mortgage provider can’t ask for any kind of repayment until after the second partner has died. However, if you or your husband have left your share of your home to someone else in your wills, this may cause issues when it comes to executing the provisions you’ve made.
I suggest you discuss the situation with both an independent equity release adviser and your lawyer to ensure that your respective Wills can be executed successfully when you die.
Taking out a Lifetime Mortgage will mean that the value of the estate you leave to your family when you die will be reduced. It may also affect your entitlement to any means tested benefits both now and in the future. Equity Release can be more expensive when compared to a normal residential mortgage. In addition, you will still be responsible for maintaining the property.
This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration. There will be a fee for Equity Release/mortgage advice. The precise amount will depend upon your circumstances, but we estimate that it will be a minimum of £1,100. Any opinions expressed in this article do not constitute advice.
For more information, please visit www.smith-pinching.co.uk