Equity release products allow people over the age of 55 to release tax-free cash locked up in their home while continuing to live in the property. These products do not typically require repayment until after the home owners die or move into permanent care.
You will need to be at least 55 years old to access the vast majority of traditional equity release products. In this article, we take a look at what options are available to those under 55 who are considering equity release. It's important to note, however, that these are not traditional equity release products and may work differently.
Understanding equity release options for those under 55
The options for releasing equity under the age of 55 are limited. Traditional equity release products, including home reversion plans and lifetime mortgages, typically require that you are at least 55 years old, and in some cases, 60 years old, to apply.
That being said, there are some similar products on the market that could be available to you if you have yet to turn 55. For example, payment-term lifetime mortgages by providers like Legal and General are available to those aged over 50 who are looking for equity release.
In addition to this, there are equity release alternatives you could consider, such as remortgaging, interest-only mortgages, and second-charge loans, or even downsizing if you need to free up cash. We discuss all of these to help you decide which one is right for you.
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Steps to release equity from your house under 55
Equity release options when you're under 55 are limited but can include interest-only mortgages and payment-term lifetime mortgages, for example.
Applying for these products works similarly to applying for any other type of mortgage product.
How much you can borrow will typically depend on factors like how much your home has appreciated and how much you might have left to pay on your mortgage. The equity in your home will play a key role, much like it would in traditional equity release products.
If you're interested in equity release, booking a free, no-obligation consultation with a financial advisor is a good first step to help you work out what product is right for you and whether you qualify.
Considerations before releasing equity under 55
Certain types of equity release products will reduce your estate which means you will leave less behind for your beneficiaries when you die.
That being said, many products and alternatives available to younger applicants require that you pay off the balance yourself, which means the impact on your estate could be minimal as long as you keep up with repayments.
Below, we outline some of the considerations you need to think about prior to releasing equity under 55. We discuss the products available to you, as well as alternatives to think about.
Types of equity release products for those under 55
There are a few products to consider if you're looking to release equity from your home.
The main equity release style products available to those under the age of 55 are payment-term lifetime mortgages. However, these work differently from lifetime mortgages available to those aged over 55.
Payment-term lifetime mortgages are typically available to those aged 50 and above. You can borrow against your home and receive a tax-free lump sum. You are then required to pay the interest on the mortgage for a set amount of time, typically until you retire or turn 75.
Beyond this, you don't have to pay the interest on the mortgage anymore, and the lender will recoup the remaining accrued interest and the balance you owe from the sale of the home when you die or go into care.
This is one of the few products available to younger applicants which could reduce your overall estate.
Interest-only mortgages work slightly differently but are typically available to people of all ages. You borrow against your home and then pay off the interest each month.
However, at the end of the term, you'll need to pay the full balance you owe through savings, a pension or downsizing, for example. Alternatively, you may need to remortgage if this is possible.
Alternatives to equity release for younger homeowners
If you don't want to release equity from your home via a mortgage, there are other options available to you. We explore a couple of ideas below.
- Downsizing - Moving into a smaller home is a good way to release equity without taking out a loan; it works particularly well for empty nesters, for example.
- Unsecured loans - Short-term unsecured loans can sometimes work better than equity-release products for getting the money you need.
- Second-charge loans - Similar to remortgaging, second-charge loans allow you to take out a second mortgage on your property to benefit from its value; they must be repaid on a monthly basis, meaning you may have two mortgage payments per month.
- Selling other assets - If you have other assets you no longer need, selling them can be a good way to raise the cash you need.
Frequently asked questions
Below, you will find answers to some of the most common frequently asked questions about equity release for people under 55.
How do you get equity out of a house under 55?
Getting equity out of a house under 55 is possible, but you may need to consider alternatives like interest-only mortgages or payment-term lifetime mortgages. This is because traditional equity release products require that you're at least 55 years old.
What is the youngest age to get equity release?
If you're looking for a traditional equity release product like a lifetime mortgage or home reversion plan, you will typically need to be at least 55 years old. However, there are some similar products on the market, such as payment-term lifetime mortgages that could be available to younger applicants. These products do require you to make interest payments towards your loan for a set period, however.
Can you release equity at 40?
There are non-traditional ways to release equity at 40, but they typically involve alternatives like downsizing or borrowing more against your home. The vast majority of equity release products require that you're at least 55, with a small number of similar products available to younger applicants (usually aged at least 50, however).
Do you both have to be 55 for equity release?
If you're looking for a traditional equity release product and both yourself and your partner own the home, you will typically both need to be at least 55 years old to release equity from the property. For other types of products, there may be lower age thresholds or no age thresholds at all.
