Am I Allowed To Spend The Money On Anything I Want?
Equity release companies will usually ask for information on how you wish to spend your home equity which is usually gathered on the application form. However, the tax free cash from a lifetime mortgage or home reversion can actually be spent on anything you wish. The only insistence a lender can play on how the proceeds are spent is when there is any secured lending on the property such as a mortgage or secured loan.
Additionally, some lenders who do credit checks & ascertain that applicants have CCJ’s or defaults can insist this adverse credit is repaid on completion of the equity release application process. This will usually require a signed undertaking & evidence that the solicitor will pay these off on their behalf. Usually, no equity release lender will allow any other form of secured lending on the property other than theirs.
It is the equity release adviser that should also provide guidance on how the plan should be structured towards the clients requirements. For example, it maybe the case the applicant wants to go for a large release but has no justification for the size of the tax free lump sum. Although its not for the adviser to say they cannot take this amount, it is their responsibility to guide the client towards only taking as much as they initially require. With the availability of drawdown lifetime mortgages, the cash can be taken in stages rather than all at once.
Research on how equity releases are spent show that home improvements tend to be the main spend for the over 55’s, whilst debt consolidation such as mortgage repayment & clearing credit cards runs close behind. Next come the lifestyle changes people want in their lives which can include holidays, new car or caravan and rising in popularity is gifting to the children in helping them onto the property ladder.
