Equity Release Northern Ireland – Detailed Guide

Learn the basics about equity release (Northern Ireland) right here. We explain how equity release works for residents of Northern Ireland and answer the most asked questions by locals. Let’s begin with what equity release really is. 

What is equity release and how does it work?

Equity release is a method of borrowing for senior homeowners. It allows the homeowner to release some of their home equity as a tax-free loan that does not require any monthly repayments. The loan amount (and any interest added) is repaid in one payment from the sale of the homeowner’s property after they die. Alternatively, it is paid back in full through the sale of the home after they move out of their home and into residential care. 

There are two methods of equity release, namely a home reversion plan or lifetime mortgage. You should only consider either through a company that is authorised and regulated by the Financial Conduct Authority. And one that is preferably a member of the Equity Release Council. 

Is equity release available in Northern Ireland?

You can get equity release plans across the UK, including Northern Ireland. To qualify to apply for equity release (Northern Ireland) you will need to be at least 55 years old and be releasing equity from your habitual residence rather than any investment or holiday property. 

Does equity release have to be paid back?

Equity release in Northern Ireland does not have to be paid back on a monthly basis like most other (secured) loans. But it does eventually get paid back in full through the sale proceeds of your home after death or after moving into long-term care. This makes it an appealing method of funding your retirement on the Emerald Isle. 

What is the catch with equity release?

The drawback of using equity release plans anywhere in the UK is that they can become expensive. Both a lifetime mortgage and home reversion plan can end up costing more than double the amount of equity you release. 

If you are paying this back after death with nobody of significance to inherit your estate, the cost will not be of major concern. But if you have family who will seriously benefit from your estate, then an equity release plan becomes a harder decision.

How does a lifetime mortgage work?

A lifetime mortgage in Northern Ireland works by giving the homeowner up to 60% of their home equity as a tax-free lump sum or drawdown facility; this money is subject to a fixed rate of interest each month. Just like the loan itself, the interest doesn’t need to be repaid each month either. The loan amount and accumulating interest gets added together at the time of repayment and taken from the property’s sale proceeds. 

How does a home reversion plan work?

Home reversion plans are not as popular as a lifetime mortgage, but they remain an option that some people prefer. They can give the homeowner up to 80% of their equity as a drawdown or lump sum amount, which is not charged with any interest whatsoever. The catch is that the homeowner must agree to give the lender an even greater percentage of their property’s future sale proceeds. For example, taking out 30% of your equity could mean having to give the lender 70% of the future sale proceeds. The debt becomes huge instantly- but it doesn’t keep growing over time unless your property increases in value. 

Can you make repayments on equity release?

Many lifetime mortgage companies in Northern Ireland will allow the homeowner to make voluntary repayments on the interest charged. This may or may not be worthwhile and is best discussed with your financial adviser. 

The general idea is that by making interest repayments, the lifetime mortgage debt will not keep growing at an alarming rate. If you make 100% interest repayments each month then the debt owed will always be equal to the loan amount taken out. This will mean your estate beneficiaries receive more of the sale proceeds of your home after you die. 

What is the early repayment charge on an equity release?

Because equity release plans are designed to last until you die, they have some of the highest early repayment charges on the loan market. An early repayment fee is an amount of money you have to pay the lender if you pay some or all of your loan earlier than planned, i.e. before you die or move into care. 

Most of the time, the early repayment charge becomes an issue if you want to downsize to a less-valuable property. Although you can probably take your lifetime mortgage with you to the new property, you may need to repay some of the loan early in order to do so. As some of the loan is being repaid earlier than agreed, this could trigger an early repayment charge. 

To avoid this issue, you should look for an equity release plan that includes a downsizing clause. This is a special clause within the credit agreement that states that you will not be charged any early repayment fee in the event that you simply downsize to a new home and need to pay off a small amount of the loan within the process. 

Some lenders even write off all their early repayment charges if you downsize after a certain period. For example, Nationwide Bank will not charge any early repayment costs if you downsize after five years of taking out the lifetime mortgage. 

Equity release schemes in Northern Ireland

There are a vast number of equity release providers in Northern Ireland, made up of specialist companies and high-street banks. You may want to start searching the big banks and international providers, such as Aviva, More 2 Life, LV and Nationwide. 

If you are having difficulty comparing equity release in Northern Ireland, an equity release adviser can often provide additional services to help you locate the best deals. 

Equity release solicitors in Belfast

You will need a solicitor to help you with your equity release application and to ensure you have received legal advice as part of the process. There are a number of excellent solicitors specialising in equity release cases in Northern Ireland, especially in Belfast.

You should do your own research to find the right firms for you, keeping in mind that the company must have at least four active lawyers to be able to provide equity release services. One of the best options is Donnelly & Kinder. Their all-female team specialise in equity release legal advice and are situated just outside of the centre of Belfast.