Equity Release Jargon Buster Part 2

Part 2 of our A to Z guide should clarify some of the most commonly questioned words and phrases about equity release.

Part 2 of our A to Z guide should clarify some of the most commonly questioned words and phrases about equity release.

16 – Joint policyholder

Equity release plans continue until the money is repaid or until the last policyholder dies or moves into long term care. By having a joint plan means that your spouse or partner would not need to move home if they outlive you or you move into care. 

17 – KFI (Key Facts Illustration)

A document provided by the lender which breaks down the terms and conditions of your plan. All lenders must provide a KFI in the same format, so that if you have two KFIs you can easily compare them. 

18 – Lifetime Mortgage

This type of equity release plan works by you borrowing, a percentage of your home’s value, and is secured against your home. 

19 – LTV (Loan to Value)

Refers to the percentage of a property’s value which is being borrowed. For example, if £30,000 were borrowed against a property with a value of £100,000, we would say the LTV was 30%. 

20 – Lump Sum

Most equity release plans will allow you to take your money as a one cash amount which is known as a lump sum. 

21 – Means Tested Benefits

Some benefits offered by the Government are only paid to those who can demonstrate their income and capital is below specified limits. In order to establish who does and doesn’t have the ability to support themselves in these instances, the Government will assess their means. 

22 – No Negative Equity Guarantee

This feature of most lifetime mortgage equity release plans means you will never owe more than the value of your property. 

23 – Offer Document

Once a case is accepted by the lender and a valuation has been completed, an Offer Document will be issued to all concerned parties. This gives a thorough breakdown of the plan, including any changes which have occurred since the KFI was issued. 

24 – Prevailing Rates

Prevailing rates refer to the interest rates available at the time you come to draw down on a reserve facility. These could be higher or lower than your initial interest rate. The prevailing rate available at the time you come to draw down will be applied to the extra funds being released. These funds will therefore accrue interest at a different rate to the initial release. 

25 – Portable

All of the plans recommended by Age Partnership are portable. This means that should you wish to move home and the property meets the lender’s criteria, then the plan can be moved with you. The plan is then secured against the new property. However, depending on the values of the properties it may be necessary for you to repay part of your existing plan. 

26 – Property Survey (Valuation)

Once your application is received by the lender a property survey will be completed to ensure the estimated valuation is accurate and, in turn, the amount of funds which can be released in line with the LTV agreed. This survey is completed by an independent and unbiased chartered Surveyor. 

27 – Retentions and Undertakings

If the surveyor identifies what they consider to be essential works in the property, they may recommend the Lender retains some of the funds until said works are completed. The Lender may opt to do this or they may simply place an ‘undertaking’ as a condition of your offer, stipulating that the works must be completed within a set period of time. 

28 – Right to Remain

This guarantees that you are able to continue living in your property until the termination of the plan, generally in the event of your death or moving into long term care. This is, however, subject to you following the conditions of the plan (e.g. keeping the property in a good state of repair). Please refer to your T&C’s for further details. 

29 – Up/Down Valuation

Should the property be valued higher or lower than the amount estimated, it may be referred to as an ‘up’ or ‘down valuation’. Depending on the amount you require and the maximum LTV offered by the lender, this may result in changes to the amount which can be released or the rate at which interest is charged on the plan. We will always contact you, should this be the case, to explain any changes. 

30 – Waiver of Occupancy

This is a document which may need to be signed by anyone aged 17 or over, who is permanently residing in the property and isn’t party to the equity release plan being proposed. It confirms that, should the condition of a termination of the plan be met (i.e. all parties pass away or move into long term care), the occupant’s right to reside there will cease. This is so that the property may be sold and the plan repaid. 

Equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. To understand the features and risks ask for a personalised illustration.

Equity release requires paying off any existing mortgage. Any money released, plus accrued interest would be repaid upon death, or moving into long-term care.

Things to consider

We provide informative impartial advice covering your options as well as explaining how equity release will affect potential inheritance and how your entitlement to means-tested benefits could be affected now or in the future.

We provide initial advice for free and without obligation. Only if you choose to proceed and your case completes would a typical fee of £1,695 be payable.

Equity release requires paying off any existing mortgage. Any money released, plus accrued interest to be repaid upon death, or moving into long-term care.

If you would like to discuss your plans or just want an informal chat please feel free to either give us a call on 0800 085 1786 or 07905 585670, email us enquiries@harbourequityrelease.co.uk.

Harbour Equity Release is based in Poole, Dorset. As well as providing a national service via the telephone or via video conference we also serve the local surrounding area on a face to face basis including Blandford, Ferndown, Parley, Verwood, West Moors etc.


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