Equity Release Option 2 Family Capital

We suggest there are five core options when considering equity release of capital from property.

In order of priority, after downsizing (option 1) to a smaller property has been discounted.  See Option 1 Downsize

We suggest the next consideration should be accessing Family Capital or ‘family equity release’ by borrowing money from family.  There are several pros and cons to family capital/borrowing rather than going to an equity release company that you should consider before deciding to proceed or indeed moving on to consider equity release companies and products.

Pros

• Save interest that would be paid to an equity firm or accrue on a roll-up lifetime mortgage or selling more of a share of the property under a home reversion scheme.
• Keeping the property and all the capital within the family.
• Keeping future property growth within the family.
• If no interest is being charged, perhaps a gradual increase in the share of ownership in lieu of no interest charged.
• No advice fees, equity release application fees, property survey fees and equity release legal fees.
• No running up debt on equity release lifetime mortgage or loss of equity if selling a share of property under a home reversion scheme.
• If capital gains tax does become payable, with rates at 20% (basic rate taxpayer) and 24% (higher rate taxpayer), this is cheaper than 40% inheritance tax if IHT was subsequently payable on the estate.
• No moving fees.

Cons

• There will still be legal fees for an agreement to protect both the property owner and the family ‘lending money/buying the share’.
• Legal fees for the family to register their interest as propriety share owners in the Proprietorship Register or creditors in the Charges Register at HM Land Registry.
• Family may not have capital available.
• Family may not want to lose access to their own capital.
• Capital gains tax may become payable when family members secure their share of the property and then sell up when they could be investing in more tax efficient areas.

There may be many other factors that influence a decision to access family capital or not.  If you considered all the options and family equity release is not for you, it is time to think about Options 3, 4 and 5 for equity release products:

Option 3 RIOM Option 4 Lifetime Option 5 Reversion

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