Equity release guide

What is equity release?

Releasing equity means accessing money tied up in your home from age 55, without having to move. The most common type is a lifetime mortgage, where you keep owning your home and the loan, plus interest, is usually repaid when your home is sold after you pass away or move into long-term care.

Our equity release page explains the two main types, how lifetime mortgages work, the protections that come with them and the alternatives. Below are the more specific questions people ask about their own situation.

What do we need to know to look at equity release?

Several things help us understand your situation. That starts with the ages of everyone on the plan, your home’s value and type, any mortgage you still have and what the money is for. Your health, your income and whether you’d like to leave an inheritance all matter too, so we can compare every option fairly.

Plans, criteria and features differ between providers, so these details decide which options could suit you.

Can you get equity release if you still have a mortgage?

Yes, many people use equity release to repay a mortgage they still have, such as an interest-only mortgage reaching the end of its term. The existing mortgage is usually repaid from the money released, so the amount available needs to be enough to clear it, depending on the provider.

Another way to repay an interest-only mortgage is a retirement interest-only mortgage, with monthly interest payments instead of the loan growing. Many of the people who speak to us about equity release go on to choose a retirement interest-only mortgage instead.

Can you use equity release to help family?

Yes, some people release money to help family, for example with a deposit on a first home. The amount you can release depends on your age, your home’s value and sometimes your health, and some providers ask what the money will be used for and who is receiving it.

Because the amount owed on a lifetime mortgage can grow over time, releasing money now reduces what may be left to your family later. Many people find it helps to talk it through with their family first, and they’re welcome to join the call with us.

Can equity release affect your benefits?

It can. Releasing money from your home may affect your entitlement to means-tested benefits, now or in the future, depending on how much you release and what you do with it. We look at this with you before anything goes ahead, so you understand how it could apply to your situation.

Taking money in smaller amounts over time, known as drawdown, is one way some people manage how much they hold at any one time. Whether it suits you depends on your circumstances and the provider.

Can you get equity release on a flat or leasehold property?

Yes, depending on the property and the provider. The length of the lease, the type of building, the property’s value and how it’s built are all taken into account. Certain flats and non-standard properties have restrictions with some providers, and the property needs to be your main home.

Can you get equity release with bad credit?

Yes, there are providers who will consider homeowners with credit issues, but it all depends on your credit profile and the details of each issue. Because monthly payments aren’t required on many lifetime mortgages, providers focus mainly on your age, your home and its value, alongside your credit file.

Any existing debts secured on your home, such as a mortgage or secured loan, usually need to be repaid from the money released. Our bad credit mortgage guide explains what we need to know about different credit issues.

What happens to equity release when you die?

Once the last person on the plan passes away or moves into long-term care, the home is usually sold and the loan, plus the interest added over time, is repaid. Whatever is left goes to your estate. Your family can also repay the plan from other money if they would like to keep the home.

Plans from members of the Equity Release Council include a no negative equity guarantee, so your estate will never owe more than the sale price of the home, even if the loan has grown larger than that. For joint plans, it carries on for the surviving partner.

Can you switch or repay an equity release plan?

Yes, switching to a different plan or repaying early is possible, although early repayment charges can apply depending on the plan and when you leave. Many newer plans allow penalty-free payments within set limits, and charges are waived in some situations, such as moving into a relative’s home for care.

When rates or circumstances change, comparing your current plan with what’s available can show whether a switch would be worthwhile once any charges are taken into account.

How does equity release compare with a retirement interest-only mortgage?

The main difference is monthly payments. A retirement interest-only mortgage means paying the interest each month, so the amount owed stays the same. On a lifetime mortgage, payments are usually optional, so interest can be added to the loan and the amount owed grows over time.

Features depend on the individual provider or lender and your circumstances.

What documents do you need for equity release?

Most providers ask for photo ID, proof of address and your latest mortgage statement if you still have a mortgage. Details of your income and any benefits help us compare your options, and some plans ask for health information if they take health or lifestyle into account.

How does equity release work, step by step?

There are usually six steps: talk through your plans and alternatives with an adviser, receive a personalised illustration, apply to the provider, have your home valued, complete the legal work with a solicitor, then receive the money as a lump sum or in smaller amounts over time.

1. Talk through your optionsA free call with Harry or Lois to compare equity release with the alternatives. Family are welcome to join.
2. Personalised illustrationA document showing the features, costs and risks of the plan, including how the amount owed could grow.
3. ApplicationWe submit your application to the provider whose plan fits your situation.
4. ValuationThe provider arranges a valuation of your home.
5. Legal workA solicitor completes the legal work and explains the plan to you before you sign.
6. Receive the moneyAs a lump sum, or an initial amount with a reserve to draw on later.

Equity release questions, answered