Are you eligible for Equity Release?
The amount of equity you can release depends on several factors such as age, property value and property type.
To apply for a lifetime mortgage, you’ll need to:
- 1) Be aged 55 or older (for joint applications, all applicants must be over 55).
- 2) Own a home within the UK (excluding the Isle of Man and the Channel Islands) worth £75,000 or more (this varies from lender to lender).
- 3) Be able to borrow at least £15,000.
- 4) Live permanently in your home. The property must be your main residence and shouldn’t be unoccupied for more than six months at a time.
- 5) Be mortgage-free, or have only a small mortgage on your property. Any outstanding mortgage debt must be paid off from the money you receive.
How much money could you unlock from your home?
If you qualify, you can normally release between 20% and 60% of your home’s value if you meet the requirements. This varies from person to person and is determined by various factors, including the value of your home and your age.
What impacts how much equity I could release?
When determining your figure, providers consider the following two factors:
- How much your home is worth – your equity release company can arrange for a professional valuation of your home.
- Depending on your age and fitness, how long you’re expected to live after taking out your plan. If it’s a joint application, the youngest applicant’s age and health would be considered.
- Whether you have any pre-existing medical conditions or you smoke etc.
Providers will usually weigh the following considerations when determining a lifetime mortgage is acceptable for you:
- The materials used in the design of the house and whether or not it is a listed structure are all factors to consider.
- Property condition
- The debt protected by your home, such as a revolving credit card balance or an outstanding mortgage (this will need to be paid off first)
What can affect the maximum percentage?
The youngest homeowner’s age has the greatest influence on the maximum percentage you can release; however, it is not the only factor.
Medically underwritten equity release plans
A medically improved equity release plan will help you get more money out of your home.
A lender will weigh up your health and lifestyle when approving a medically underwritten lifetime mortgage. The lender will ask you a series of simple questions and consider how your responses will affect your life expectancy.
If the lender thinks you will live a shorter life than the average person, they will expect to be repaid earlier and treat you as older therefore give you a higher amount.
The effect on the maximum amount available for medically enhanced plans, as seen in the grid above, can be important.
Equity release plans with cash-back
Cash-back is included with some equity release plans. Cash-back is advantageous since it is in addition to the loan amount and does not incur interest.
The money you get back can be used on whatever you want. It can, however, be a good way to help pay for any setup costs that come with your plan.
Depending on your release number, some lenders will give you a fixed sum.
On the other hand, some lenders will give you a percentage of the money issued—for instance, an additional 2% or even 5%.
Any cash-back that you might be eligible for is not included in our calculator or the grid above.
Request your personalised equity release report to find out which lifetime mortgages provide cash-back.
The lender could charge you an agreed fee for certain equity release plans.
The Arrangement fee does not have to be paid upfront. Most lenders allow you to subtract or add the agreement fee to your loan sum.
If you want to get the most money possible, you can add any arrangement fees to the loan but you will pay interest on this amount.
Joint vs Single
We’ve also looked at how the youngest applicant’s age determines the maximum equity release. Some lenders, on the other hand, propose different LTVs for joint and single applications. If the clients own the property individually and they are married, then they can do it in the sole person’s name.
Please don’t make the clients thing they will pay loads to set this up or that it costs lots because it doesn’t, and we are trying to attract clients do not deter them.
Another factor to consider is the effect of a married couple applying one name. This can only be done if the one person owns the property currently. If a married couple own a property jointly then the lifetime mortgage will need to be done in joint names
Most lenders demand that equity release application be submitted in joint names if the applicant is married if applicant is married.
However, there are certain circumstances under which you will want to apply under one name only, such as:
- Where the property is already owned in one name.
- Where the spouse’s primary residence is a different property.
- If the property is jointly owned, then you must do the application in joint names. You cannot do it in one person’s name.
- When one spouse is older and wishes to apply in one name to obtain more money or a lower interest rate.
Other variables can limit the number of plans available, affecting the overall amount of money you may release. These are some of them:
The amount of lifetime mortgages available may be influenced by the design of your home.
Although lenders have become much more flexible with equity release underwriting, certain property construction types still have restrictions.
All equity release lenders are concerned that your home is suitable security to be able to repay the loan when the time comes. This is because the property’s sale proceeds will be the means used to repay the loan in the future for the majority of applicants.
As a result, the equity release lender prefers to lend on homes that they expect will sell for fair market value in the future.
If you live in a home that isn’t made of bricks and stone and doesn’t have a tiled pitched roof, you might be unable to take advantage of all equity release plans, resulting in a lower overall loan amount released to you.
Equity release plans are something we advise on and arrange all over the UK. If you live on the English or Welsh mainland, you will have access to all equity release options.
There could be a decrease in the number of plans available if you live in Scotland.
Just two lenders are currently lending on properties in Northern Ireland. As a result, if you live in Northern Ireland, you should expect fewer options.
Finally, if you live on an island off the coast, you might find that certain lenders may not lend to you because of your location.
Get in touch if you’d like a more precise estimate of the sums available to you and the relevant interest rates depending on where you live.
Equity release plans have become more versatile in recent years, with new plan features being added to various lifetime mortgage products as more become available in the marketplace.
I will explore what you believe your future holds as part of my financial guidance and plan features that might be helpful to you.
You might, for example, live in a large house with high operating costs.
You want to stay in your house while you and your family live together. If there were only one of you living in the house, you might not want or be able to afford to stay and you may think about downsizing as an option.
Looking for a compromise that provides a “major life event exemption” is a nice function that might be suitable.
This exemption enables you to repay the current equity release without incurring an Early Repayment Charge within three years of the first borrower’s death or move into long-term care.
Alternatively, you may want to make payments on your long-term loan. While most plans allow you to make voluntary contributions without incurring extra fees, some do not.
As you can see, having the highest loan amount or the lowest interest rate isn’t always the best option. I’ll go over all of the features with you during our meeting and suggest a package that best suits your needs.
Click here to arrange your free consultation.
You would be allowed to have other people live with you under every equity release contract. If you have a rental agreement in place or collect income from those who live with you, the number of plans open to you might be limited.
Second / Holiday homes / Buy-to-let
Our website’s equity release calculator focuses on your primary residence properties (your main home).
But what if you buy another property and want to take equity out of it?
The good news is that equity release plans can provide you with the funds you need but you may be able to get normal buy to let mortgages if this is the case. We can look at all options for you and recommend the cheapest overall deal, so you know all options are covered
How do you calculate equity release?
This is a complex calculation and involves a lot of information so best to chat to an adviser to see what is possible given our particular circumstances.
How to use this calculator
- Use the youngest applicant’s age when applying for a joint lifetime mortgage.
- If you have your result, you can use the calculator to explore the various options for releasing the funds.
Give our equity release calculator a go.
Our calculator will help you figure out how much money you will free up by arranging a lifetime mortgage on your home. Enter your age, the type of property you own, and the approximate value of your home.
To refresh your memory, an equity release is a method of converting a portion of the value of your home into tax-free cash. A lifetime mortgage is the form of equity release we have. It’s a long-term loan that you can get if you’re 55 or older. It’s usually repaid with your home when you die or need long-term care.
Important things to keep in mind
If you decide to take a lifetime mortgage:
- That will cut down on the amount of money you’ll leave as an inheritance., It could have an effect on your tax situation as well as any benefits you are entitled to. Compound interest means that interest is applied to the amount you’ve borrowed plus any interest that has already been added.
- Remember that it’s a lifelong commitment, and if you try to pay off the loan early, you may be charged an early repayment charge . You should first consult with one of our expert advisers.
What are the benefits of equity release?
The obvious benefit of equity release is that it allows you to spend money now rather than storing it in your house. Because of the UK’s long-term increase in house prices, a substantial portion of homeowners’ capital has been poured into their home and is therefore unavailable as cash. If the value of your home has risen over time, equity release allows you to use some of that money to increase your retirement income rather than leaving it all to your beneficiaries or to pay for long-term care.
How do I set up an equity release?
Our Equity Release advisers will help you determine if an equity release scheme or lifetime mortgage is right for you or whether you should instead consider downsizing. Your adviser can also search the market for the right one for you and set it up for you. Have your solicitor review the agreement you have with the equity release company before you sign it as an extra precaution.
What does it cost to set up an equity release?
Setting up an equity release scheme comes with some costs, we will ensure you understand them all before you make an application to ensure you make the correct decision . The following expenses can be incurred:
- Valuation fees
- Legal fees
- Adviser fees
- A mortgage arrangement fee
- A completion fee (when the scheme ends)
These expenses can vary, but you can budget about £3,000 for them and your adviser will confirm what these fees are before you proceed.
What are the risks and drawbacks of equity release?
The most significant drawback of equity release is that it does not compensate you for your house’s full market value. You would earn much less money than if you sold the house on the open market. You will also have to find another place to live in that case (downsizing.
Another disadvantage of equity release is that it reduces the amount of inheritance available to your heirs. The risks vary depending on the type of scheme you select. Some people may see this as a benefit reducing the amount of inheritance tax which is payable because the lifetime mortgage is a debt on the home therefore reducing any potential liability.
The risks of a lifetime mortgage
When you take out a lifetime mortgage, you will owe more than you borrowed when the time comes to sell the house because the interest will “roll-up” on the money you owe – if the lifetime mortgage subscribes to the Equity Release Councils code, then the amount you owe will not increase to more than the house’s total value.
Another good option is having a large amount of money in your account can decrease your eligibility for benefits. As long as you live in your house, your home’s worth is not included in any means examination – but cash in the bank certainly will be.
Can I end a lifetime mortgage early?
You have the option of paying off your lifetime mortgage early, but you may be charged an early repayment Charge for doing so but this depends on when you decide to repay it and if there is an early repayment Charge on the mortgage you have taken.
If you decide you wish to move home then some lifetime mortgage providers do allow you to “port” the mortgage over to the new property, but you may have to end up paying back some of the mortgage top reduce the debt, especially if you buy a cheaper property.
Always check with your adviser or the lifetime mortgage company whether this is a feasible option for you.
The risks of a home reversion scheme
A home reversion plan is when you sell all or part of your home so that the lender can take all or part of it after you die. There aren’t many Home Reversion Plans in the UK because people like to keep their homes, which Lifetime mortgages allow them to do but Home Reversion Plans don’t.
Am I protected when using equity release?
The Equity Release Council was established to provide comfort to people if the company they were dealing with adhered to these codes and conduct of business. It would provide security for things such as the family not owing more money than the property left behind was worth . Any equity release company bearing the Equity Release Council logo must guarantee that you will remain in your home until you die or move into permanent care. They must also guarantee that you will never owe them more than your home’s total selling price, even though its value declines.
How to find equity release advice
Our mortgage and equity release advisers offer high-quality, independent equity release advice. Choosing an independent adviser means they will be able to search the whole of the market for the right mortgage for you and won’t recommend a mortgage unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.
Get in touch
To calculate the maximum loan available on an equity release plan, we require the youngest homeowner’s age and the property value. Then use our calculator to show your maximum amount available to you.
Example: At the age of 70, you could be able to release up to 45 per cent of the value of your home. The maximum amount you can release is £135,000 (£300,000 x 45%) if your home is worth £300,000.
Call us about equity release / Lifetime Mortgages Today!
To speak with us about your equity release / Lifetime Mortgage options, call us on 01273 738 072.
For any other enquiries, please get in touch via our contact us page.