Equity release - your questions answered
How does equity release work?
Equity release is a way to access some of the money tied up in your home without having to move. Many people enjoy that equity release means you can continue to live in your home until you die or move into full time care.
There are two main types of equity release
- The most popular type of equity release is a Lifetime mortgage. Like a traditional mortgage, a lifetime mortgage is a loan secured against your home. The loan does not usually need to be repaid until you die or move permanently into residential care. There are different types of lifetime mortgage available your Mortgage House adviser will be able to go through these in detail.
- The less popular type of equity release is a Home reversion plan. This plan allows you to sell part (or all) of your home to a ‘reversion company’ while you continue living in it. The reversion company then gets a share of the proceeds when your home is sold.
Who can get equity release?
Most people over the age of 55 who own their own home are eligible for equity release. Different lenders have different conditions about you and about your property.
In terms of your property they will look at
- the size of your mortgage
- the value of your property
- the type of property (house, flat, studio etc)
- the condition of the property
There are some types of property that may be difficult to release equity against. The Mortgage House adviser will be happy to go through restrictions in more detail.
In terms of you as the mortgage holder the lenders will look at
- The age of the youngest mortgage holder must be over 55
- Your property must be based in the UK and worth at least £70,000
- Some mortgage holders with a bad credit history may not be eligible
- Your overall health and lifestyle will be taken into account and may influence the amount of equity you can receive and the interest to be paid
Whether equity release is an option for you depends on a few things.....
Your age
For a lifetime mortgage, you (or both of you if you're borrowing jointly) generally need to be at least 55 years old. However, some lifetime products are now available from 50 years old.
For a home reversion plan, you (or both of you if you're borrowing jointly) need to be at least 60 years old.
Your home
You must own property in the UK, and it must be your main residence. Your property also needs to be in reasonable condition and over a certain value. There may also be restrictions on the type of property accepted.
You might still qualify for equity release if you have a mortgage or other loan secured against your property – but it will depend on the value of your home and the amount you owe. You'll have to pay off any outstanding mortgages or loans secured against your home at the same time as taking equity release.
Your family
Equity release can be complicated if you live with any dependents. To stay living in the property with you, they might need to sign a waiver confirming they understand they don't have the right to keep living in the property if you die or move into permanent care.
Equity release could also affect someone coming to live with you in the future. If a family member or friend moves in after you take out equity release, they'll have to sign a waiver releasing any rights to the property.
Any dependents, family or friends should get independent legal advice before moving in or signing a waiver.
