Equity release allows people over the age of 55 to benefit from the appreciation of their home by releasing some of the cash via a tax free loan secured against their property. They don't have to repay this loan and can continue living in their home until they die. The money owed is then repaid from the sale of the property. However, the exact amount that can be released from a property varies.
What factors impact how much equity I can release?
There are several factors that impact how much equity you can release from your home including your age, the value of your home, your existing mortgages and whether you have any other secured loans. We take each in turn below.
Your age can influence the amount of equity you can release
In most cases, you'll need to be at least 55 years old to access an equity release product. If you are eligible, your lender will carry out a valuation and let you know how much you can borrow. In the UK, this is usually no more than 60% of the maximum value of your home. So if your home is worth £100,000, you could be eligible to release up to £60,000.
Typically, a 55-year-old will be able to release less equity than a 75-year-old. The exact amount of equity you can release varies depending on the provider you choose as well as other factors. That being said, comparison sites suggest that the maximum amount of equity you can release at 55 is around 25% of the total value of your home. There could be exceptions to this; for example, some providers may take medical conditions that could shorten your life into consideration. For simplicity, the general rule is, that the older you are, the more equity you can release.
Your home must be worth at least £70,000 to release any equity
The amount your home is worth also impacts how much equity you can access. The property must be worth at least £70,000 for you to be eligible to release any equity. Different providers will have different minimum valuations. In addition, many providers will have a minimum you must take out. Providers like Aviva, for instance, require that your home is worth at least £75,000 and that you take out an equity release loan of at least £15,000.
Other mortgages and secured loans can impact how much equity you end up with
Many equity release providers allow you to take out a product even if you already have an existing mortgage on your property. However, you may be required to use some of the funds to pay off your mortgage in full, including any early repayment charges. As such, if you already have an existing mortgage, you may end up with less money than you'd hoped after you've settled your debt.
Equity Release ReviewFree Equity Release Consultation
Our partner Unbiased will arrange for a qualified, FCA-regulated adviser to contact you.
- Discuss if equity release is the right option for you
- Understand how much equity you could release from your home
- Free, no obligation consultation
What is the maximum amount of equity you can release from a property?
Your age and property value will dictate the maximum amount of equity you can release from a property. Different providers will have different rules around this. However, the type of product you choose will also play a role in the equity you can release. Lifetime mortgages and home reversion plans, for example, have different rules around this.
With a lifetime mortgage, you can typically only release up to 60% of the total value of your home in the form of a loan. Someone in their mid to late 50s may struggle to find a provider that'll offer more than 25% in the form of an equity release loan. The loan comes with an interest rate which compounds during your lifetime. The loan is then repaid out of the sale proceeds of the property.
With a home reversion plan, you essentially sell a portion of your property to the provider. In some cases, you can sell the whole property to your provider. You get a lump sum at the time of the sale, but you can keep living in your property until you die or move into care. Your provider is paid back when the home is sold. They then receive an amount proportionate to their stake in the property.
The catch with this type of arrangement is that home reversion providers don't pay you the true value of your property. Instead, you will get somewhere between 20% to 60% of the true value of the property depending on factors like your age (the older you are, the more you get). As such, while with a home reversion plan, you can technically sell your entire property, you're unlikely to get more than 60% of the value back with this plan.
How to get the most possible equity from your home
The exact amount of equity you can release will depend on the deal you get as well as the valuation of your home. However, there are steps you can take to ensure you get the best possible deal and the best possible valuation of your property.
It's always worth using online equity release comparison sites to review deals which are available to you based on your circumstances. This way, you can find the best deals on the market so you can get the cash you need and the product you want. Lifetime mortgage comparison sites can also help you compare deals with different interest rates so you can get a competitive rate on your equity release loan.
The amount you can get will also be dictated by the valuation of your property. While there are many aspects of the valuation that will be out of your control - such as how much neighbouring properties have sold for - there are aspects you can control. Of course, fitting a new kitchen or tacking on an extension is likely to add value to the property. But there are simpler ways to improve your property's valuation. We cover some low-cost ways to boost your property's value in our article on ways to increase the value of your home over the weekend.
Tips when applying for equity release
Once you have compared various equity release products and taken steps to boost your property's value, it's time to shortlist some equity release deals and begin the process. Here are some initial steps you may want to consider.
Choose a regulated equity release provider
All equity release providers are regulated by the Financial Conduct Authority (FCA) for your peace of mind. It's also worth ensuring your provider is a member of the Equity Release Council which provides further safeguards for individuals. For example, products which fully meet the Equity Release Council's guidelines offer a no negative equity guarantee which means that if the lender can't recover their loan from the proceeds of the sale, then the rest of the loan will be written off. This means the rest of your estate will be unaffected.
Talk to your family about your plans
Ultimately, it's your choice what you do with your property and what you leave behind to your family. But it's always worth having a discussion with your family before you go down the equity release route. Your estate will inevitably be reduced if you make this decision, and often quite substantially. As such, explaining your decision to your family is a good way to make them aware of what they can expect as an inheritance when you die. In addition, if you have adult children living with you, they'll often need to sign a waiver agreeing to move out when you die or move into care. Helping them understand your decision is a good way to keep the relationship positive.
Seek professional financial advice
As you can see, this is a complex area. As such, it's always worth speaking to a financial advisor to ensure you're getting the best deal. If you want more information, you can book a free, no-obligation equity release consultation via our website.
FAQs on equity release
What is the maximum equity release on a property
Typically, the maximum equity you can release via a lifetime mortgage or home reversion plan is up to 60% of the value of your home. But not everyone will be able to release the full 60%, particularly if you're looking to release equity in your 50s. The general rule is that the older you are, the more equity you can release. However, in some circumstances, for instance if you have life-limiting medical conditions, you may be able to release more.
How much equity can I withdraw from my home
The amount of equity you can withdraw from your home depends on various factors such as your age, the value of your property, and the type of product you opt for. But, typically, you won't be able to take out more than 60% of your property's true value regardless of whether you opt for a lifetime mortgage or home reversion plan.
What impacts how much equity you can release?
Various factors impact how much equity you can release. The value of your home is a key factor, as different providers have different minimum property values they work with. Typically, your property must be worth at least £70,000. You can expect to release between 20% to 60% of your property's value depending on your age and if you have any life-limiting medical conditions.
What can you use equity release for?
People use equity release funds for all sorts of purposes, such as completing home renovation projects, boosting their retirement pot, or even paying off existing debts before retiring. Equity release isn't for everyone and there may be other ways to raise the cash you need depending on why you need it. That's why it's crucial to have clear goals for the equity you want to release before you go down this route.
