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Equity release

Equity release allows you to unlock some of the tax-free funds from the value of your home. It's one way you can take control of your later life finances.

Key, for the life in later life.

Am I eligible?

You could be eligible if you're:
  • A UK homeowner aged 55+
  • With a property worth £70,000+
Calculate now
Equity Release explained video backdrop

Transcript

When it comes to equity release, we all have questions.

What, for instance, is it exactly?
Equity release is a way for homeowners over 55, whose property is worth at least £70,000, to release tax-free cash from their homes. It is an increasingly popular way for people in, or approaching, retirement to boost their finances.

And will we still own our home?
Yes – and with Key’s plans you can stay in it for as long as you like.

Will we have to make monthly repayments?
No, not unless you want to. The loan, plus rolled-up interest, will be paid back when your plan comes to an end.

Could our family inherit the debt?
No – all of Key's plans come with a ‘no negative equity’ guarantee, so you’ll never owe more than your home is worth and there’ll never be a debt for your family to take on.

How much can we release?
This depends on your age, how much your house is worth and your general health. On average, Key customers have had access to £90,000.

What do people usually use the money for?
Key customers spend the tax-free cash on many different things, such as repaying existing debts, travel and home improvements.

So, what’s different about Key?
Because Key takes a personal and honest approach to equity release, it's good to know we can answer all your questions in a way that's right for you. By ordering our free expert guide, using our free online calculator, or by calling us.

Key - equity release that’s right for you.

Get started with Key's award-winning equity release service

✓ What Key's equity release comes with:

  • Option to make no monthly repayments

  • No negative equity guarantee 

  • Retain 100% home ownership

Calculate now

 We'll explain to you:

What is equity release?

Equity release is a way for homeowners to release some of the tax-free funds from the value of their home. It can play an important role in helping you take control of your later life finances. Equity release is available to UK homeowners aged 55 or over with a property worth at least £70,000.

Equity release explained

At Key, we believe you should live your later life the way you want it. We understand that means different things for different people. Equity release is a complex product with a lifetime commitment so may not be right for everybody. Watch our video to find out more about equity release and see if it could be an option for you.

Transcript

When it comes to equity release, we all have questions.

What, for instance, is it exactly?
Equity release is a way for homeowners over 55, whose property is worth at least £70,000, to release tax-free cash from their homes. It is an increasingly popular way for people in, or approaching, retirement to boost their finances.

And will we still own our home?
Yes – and with Key’s plans you can stay in it for as long as you like.

Will we have to make monthly repayments?
No, not unless you want to. The loan, plus rolled-up interest, will be paid back when your plan comes to an end.

Could our family inherit the debt?
No – all of Key's plans come with a ‘no negative equity’ guarantee, so you’ll never owe more than your home is worth and there’ll never be a debt for your family to take on.

How much can we release?
This depends on your age, how much your house is worth and your general health. On average, Key customers have had access to £90,000.

What do people usually use the money for?
Key customers spend the tax-free cash on many different things, such as repaying existing debts, travel and home improvements.

So, what’s different about Key?
Because Key takes a personal and honest approach to equity release, it's good to know we can answer all your questions in a way that's right for you. By ordering our free expert guide, using our free online calculator, or by calling us.

Key - equity release that’s right for you.
ⓘ Did you know...

Wondering what equity is in a house? It's the value of your home minus any existing mortgage or debts secured against it.

What can equity release funds be used for?

The money you unlock through property equity release is tax-free. You can spend it in a variety of ways, such as:

Equity release could help you live the later life you want. See how much you could release from your property with our quick and easy calculator.

Calculate now

 

How does equity release work?

There are two types of equity release: a home reversion plan or a lifetime mortgage. Find out more below about the different types of equity release and how equity release works.

You have two options when it comes to equity release:

  1. Home reversion: where you sell all or part of your home to a reversion company for less than market value. In return, you get a cash lump sum, with no interest to pay on the money released, and no monthly payments to make. When the plan ends, the home reversion provider takes its share of the sale proceeds. You need to be 65 or over to qualify.

  2. Lifetime mortgage: all our equity release advice relates to Key lifetime mortgages only - a loan secured against your home. It lets you access some of the tax-free funds tied in the value of your home while retaining full ownership. You need to be 55 or over to qualify.

Features of a lifetime mortgage

You always own your home

You could access the funds you need now and keep full ownership of your home. This could be to help loved ones or make home improvements, for example.

Choose how you get your funds

You can release funds from your home in a lump sum or a series of smaller amounts following an initial release. There are also flexible features available, such as voluntary ad-hoc repayments. You can choose which features are suitable to you.

No monthly repayments

There are usually no monthly repayments to make. This is because the loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care.

What are the different types of lifetime mortgages?

You have two options when it comes to a lifetime mortgage. You can choose a lump sum lifetime mortgage, or a drawdown lifetime mortgage.

With a lump sum lifetime mortgage you could release tax-free funds from your home as a single amount.

✓ Lower interest rates
You may get a lower interest rate with a lump sum lifetime mortgage compared to a drawdown lifetime mortgage. This could help reduce your total cost of borrowing.

✓ Interest rates don’t change
Your lump sum lifetime mortgage has a fixed interest rate for the life of your mortgage.

ⓘ May be more expensive
Compound interest will roll up on the money you’ve released. This means you will end up owing more if you take all your available cash in one go.

ⓘ Limited ability to release further funds
With a lump sum lifetime mortgage, you can’t release further funds unless you apply for a further advance. If you do, this is subject to the lender’s criteria, your age and your property’s value at the time of application. It's important to note this is not guaranteed. This also requires advice and is subject to fees.

A drawdown lifetime mortgage lets you release your tax-free money in smaller amounts. This is after an initial lump sum.

✓ Release funds when needed
A drawdown lifetime mortgage offers more freedom than a lump sum plan. This allows you to release money when you need it.

✓ Save on interest
You could potentially save a considerable amount in interest with a drawdown lifetime mortgage. This is because interest only accrues on the funds released.

ⓘ A drawdown facility isn't guaranteed
Your lender may have the option to withdraw your drawdown facility.

ⓘ You don't know what interest rates will be like in the future
If you choose to make a drawdown, the funds will be subject to the prevailing, fixed interest rate at the time. This may be higher than your original interest rate.


Benefits and drawbacks of equity release

It's important you have all the facts available to make the right decision for you.

Equity release benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life.
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish with a Key lifetime mortgage.
  • You can choose to make reduced or no monthly repayments to suit your circumstances.
  • You’ll never owe more than your home’s worth with a Key lifetime mortgage.
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges.

Equity release drawbacks

Your equity release adviser will also outline the following:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly.
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
  • Equity release may leave you with limited or no property equity remaining.
  • Equity release will reduce your financial options in the future.
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply.

What interest rates are available for equity release?

Lifetime mortgage interest rates vary depending on your plan and circumstances.

With a lifetime mortgage, the interest accrues, then rolls up and adds to the loan. This is also known as compound interest. The interest rate you get will be specific to your circumstances and fixed for the life of the loan.

Representative example

5.98% AER

Lowest rate with Key

6.96% AER

Rate most Key customers received, or less

7.26% APR

Overall cost for comparison

All rates correct as of 3rd December 2023. This is based on customer data from the last 60 days, apart from Key's lowest rate. Interest rate received and plan features are subject to eligibility. Ask for a personal illustration.

Interest rates explained

  • AER stands for Annual Equivalent Rate. It shows what the interest rate would be if the interest compounded each year.

  • APR stands for Annual Percentage Rate. It's the cost you pay each year to borrow money, including fees, expressed as a percentage.


Our equity release calculator will give you an illustrative rate based on the details you put in.


Calculate now

How does compound interest work?

Unless you choose to do so, there are no repayments to make on a lifetime mortgage until the plan comes to an end. As a result, you pay interest not only on the loan itself, but also on the interest already added to the loan. But there are ways you could reduce the total cost of borrowing of your lifetime mortgage.

Whether interest is added to your lifetime mortgage on a monthly or annual basis is dependent on your plan. But during that first period, the interest is charged and added to the original loan amount - the sum of tax-free cash you unlock from your home’s value. 

  • Following this, interest is then calculated and charged on what you owe at the time. This is the original loan amount plus interest; not the amount you initially borrowed.
  • This new, larger amount of interest is then added to your loan. This cycle continues until the plan comes to an end.
  • This means a larger amount of interest adds to your lifetime mortgage each period.
  • The interest rate at the start of your plan determines how quickly the interest grows. This will impact the total cost of borrowing over the term of the loan.

An example of how compound interest accrues over 15 years

Product Balance at the start of the year MER¹ Interest added² Balance at the end of the year³
Year 1 £81,703 6.74% £5,681 £87,384
Year 2 £87,384 6.74% £6,075 £93,459
Year 3 £93,459 6.74% £6,497 £99,956
Year 15⁴ £209,360 6.74% £14,555 £223,915

Initial release amount of £81,703. Plan subject to a fixed interest rate of 6.74% MER (Monthly Equivalent Rate).
¹ All Key lifetime mortgages have interest rates fixed throughout the life of the plan
² Interest is charged on the balance as at the start of the year, not the original amount
³ The balance at the end of the year including compound interest
⁴ This cycle continues throughout the life of the plan


Back to "What's in this guide?"

How could a drawdown lifetime mortgage reduce my cost of borrowing?

You could potentially save thousands over the course of your plan with a drawdown lifetime mortgage. This is because you only pay interest on the funds you release. Here's an example to help you understand how this could work for you.

ⓘ Illustrative example

This example is for illustrative purposes only. There are two customers with access to a lifetime mortgage facility of £81,703 at an interest rate of 6.74%. Future drawdowns are subject to the prevailing interest rate. Key Market Monitor Q1, 2023.

Customer A

Customer A decides to take £81,703 in one go through a lump sum lifetime mortgage. Interest is charged on the full release amount from day one.



(Orange bar)

Customer B

Customer B takes an initial loan of £51,703 to meet their immediate requirements. Interest is only charged on this lower release amount. Customer B then decides to make two further £15,000 drawdowns over time. Their total release amount is now £81,703.

(Blue bar)

Customer B saves £32,851 in interest charges
While Customer B still borrows the same £81,703 over 15 years, their total cost of borrowing is lower. This is because they take their money in stages. As a result, interest is only charged when they release their funds.

Customer B saves almost £32,851 in interest charges over the total life of their plan. This example is over 15 years but it could be longer or shorter. Axis shows total cost of borrowing.

How much equity can I release from my property?

So far this year, Key customers could release an average of £79,981 from their properties (Key Market Monitor Q1, 2023.). This is through a lump sum or a drawdown lifetime mortgage.

ⓘ Did you know...

The amount of equity you could release is based on your age and the value of your property. Some lenders also base this on your general health and lifestyle choices.

Some points to consider:

  • You'll need to release at least £10,000
  • The older you or your partner are, the more money you may be able to release (based on the age of the youngest applicant)


Your release amount is tailored to you
Above all, the amount you release is always personal to you. Why not use our free calculator and get an idea of how much you could release?

You have two options
Lifetime mortgages and home reversion plans are the two ways to release equity from your home. Key offers lifetime mortgages only for equity release, so you'll always retain ownership of your property.

Lifetime mortgage
A lifetime mortgage involves taking out a loan that's secured against your home. It's typically repaid when you or the last remaining applicant pass away or go into full-time care.

Home reversion
A home reversion plan involves selling your home (or a portion of your home) to a home reversion provider for less than market value in return for the funds.

If you (and any other joint homeowners) are at least 55 years old, you could release equity from your home. When you think the time is right for you, you can use our calculator to see what you could release. You can also give Key a call and we can let you know what your options are.

As each application is different, the timeframe isn't guaranteed. With Key, it usually takes around 6 weeks from applying to unlocking your tax-free funds.


Is equity release safe?

All our plans meet the Equity Release Council standards. They come with several assurances, including:

Downsizing protection

Downsizing protection applies after five years of taking out your plan. This means if you need to move home but your new property doesn't meet the lender's criteria, you can repay your loan in full without an early repayment charge.

No negative equity guarantee

All our plans come with the no negative equity guarantee. This means you’ll never owe more than your home is worth. It's important to note that a lifetime mortgage may leave limited or no equity in your property and it will reduce your financial options in the future.

Plans tailored to your needs

Your adviser will search for the most suitable existing plan with specific features and protections. This makes sure you get an equity release plan that's right for you.

You always own your home

You could unlock thousands of pounds tax-free to help fund what's important to you in later life. At the same time, you'll still own your home.

You should always think carefully before securing a loan against your home to repay existing debt. We offer specialist equity release advice to help you to understand your options. Our fixed advice £899 fee is only payable on completion, so you can find out if it's right for you without it costing you a penny. More on equity release protection.

Equity release is regulated.

We're also an Equity Release Council (ERC) member. We only recommend plans that meet ERC standards. Our equity release products come with a range of safeguards and protections.

On top of this, our equity release advisers hold specialist equity release qualifications.

It's important to research and get expert advice before you release equity. This is to make sure it suits your specific needs and circumstances.


What does equity release cost?

The cost of your equity release borrowing will depend on a few factors.

As well as getting expert equity release advice from us, you’ll need to know the average fees for equity release. 

The initial costs you pay to release equity depend on your provider and your product.

When you’re working out the cost of equity release, there are four fees that you may need to budget for. Here, we guide you through what these different fees are.

Surveyor's valuation

  • If applicable, this is usually paid with the application

Solicitor's fees

  • This is usually paid when you receive your tax-free funds on completion

Lender's application fee

  • If applicable, this is usually paid when your plan begins, and you receive your tax-free funds

Our advice fee

  • Our fixed advice fee of £899 is only payable on completion

There's nothing to repay on your lifetime mortgage until you or the last remaining applicant die or move into long-term care. You may choose to pay off some of or all the monthly interest that accrues over the life of the mortgage. This is something to considerif you have the financial means as it can reduce the amount that you owe in the end. Otherwise, the interest accrues and adds to the loan in the form of compound interest, meaning the amount you owe can grow quickly.

A plan usually ends when you or the last remaining applicant pass away or move into long-term care. At the end of a lifetime mortgage plan, your home is usually sold. That's when the loan and rolled up interest repaid using the proceeds. Any remaining funds then pass to your estate.

You can rest assured that none of our plans will see you owe more than your home is worth. With Key's equity release plans, there's no risk of passing on any equity release debt to your loved ones. It's important to note that there may be limited or no property equity remaining.

You should consider early repayment charges
A lifetime mortgage is a lifetime commitment. Repaying early may mean having to pay early repayment charges. Our early repayment charges are fixed so that you know exactly what to expect.

You have the option to repay early
Our flexible features do give you the option to make voluntary, ad-hoc payments. This is between 10-12% of the initial amount that you borrowed each year. This reduces the size of the loan on which you're charged interest. Making repayments means you'll repay less overall.

Speak to your equity release adviser
Your adviser can explain how early repayments work. They can help you to make informed decisions on what's right for you at the time.

Am I eligible for equity release?

If you're thinking about releasing equity from your home, check if you're eligible. You can check this by using our free online calculator.

To take out an equity release plan with Key, you must be a UK homeowner:

  • Aged 55+ (including all joint applicants)
  • With a property worth £70,000+
ⓘ Did you know...

If you're not eligible now, why not try our later life mortgage finder? It may be that we can still help you take control of your finances in later life.


Back to "What's in this guide?"

How to release equity from your home

To help you understand the process, we’ve put together these simple steps. They highlight what your journey to equity release could be like:

Use our free calculator

Check your eligibility and how much cash you could release tax-free from your home. Try our equity release calculator.

Speak to an adviser

Book an appointment with a qualified equity release adviser at a time that's good for you. Find out what to expect from your equity release advice appointment.

Assess your options

If you want to learn more, your adviser will recommend the most suitable product. They'll provide a personalised illustration and answer your questions.

There are a few other steps on your equity release journey with Key:

Complete an application
When you're happy to go ahead, you'll complete an application with your adviser. An independent RICS-registered surveyor will then value your property.

Review your offer
Next, you'll receive a lifetime mortgage offer. This will contain full terms and conditions to review with an independent solicitor.

Receive your funds
With the legalities taken care of, you'll receive the funds from your solicitor

Is equity release right for me?

Equity release helps homeowners across the UK take control of their finances. It means they can live the later life that they deserve.

Explore how Key could help you put the life in later life. Request your free, comprehensive guide today.

Your other options

Before deciding on equity release, it's important you're aware of your other options.

Here are some more alternatives that may be more suitable for you:

Equity release costs

Knowing the costs associated with equity release and how to manage them is important.

Here are some helpful guides to give you a better understanding:

Here are some other later life finance options which Key doesn't offer but may be more suitable for you:

  • Home reversion

  • Downsizing

  • Unsecured lending

  • Using existing assets

  • Support from friends or family


Back to "What's in this guide?"


Why choose Key as your equity release adviser?

Before you release equity, it's a regulatory requirement to get specialist advice. So why should you choose Key as your equity release company?

We're regulated experts

Key is regulated and a proud member of the Equity Release Council.
 

Trusted award-winners

We've won 80+ awards. 17,000+ excellent Trustpilot reviews makes us the UK's most trusted equity-release specialist.

Highly experienced

We have over 25 years' experience. We've helped more than a million customers with tailored equity release advice. Once we've taken the time to understand your needs, we’ll have a sound idea of what the right plan is for you.

Customer stories

 
ⓘ Did you know...

Over a million customers have benefitted from our expert advice, experience and professionalism. We're rated 'Excellent' on Trustpilot. Check out the great things our customers have to say about our equity release plans.

Michael and Carol

64 & 63, approaching retirement

"All the worries and the stresses have gone now. We can just look forward to having a nice relaxing retirement…We’re planning to go away on a couple of cruises."
Read more on Michael and Carol

Watch more of our customer stories

What if I already have an equity release plan?

You can find out if you could release more funds with your current plan. You can also check if switching to a different one may suit your needs better. Your equity release adviser will check if early repayment charges will apply.

If you're looking to switch to Key or want to discuss your existing equity release plan, we're here to help.

Existing Key customer

Call us on 0808 252 9170 to talk about your plan

Switch to Key

Call us on 0808 252 9170 to switch to Key

Lines open 9am-5:30pm Monday-Friday and 9am-2pm Saturday


Back to "What's in this guide?"

Equity release FAQs

"The decision to release equity from your home is a big one. We know you may still have some burning questions, too, so here are the answers to the queries that we get asked the most."

- Rachel East, Key Divisional Head of Advice

Still can't find the information you’re looking for? We're only a phone call away.

Yes, you can move home if you have released equity from it, as long as the new property meets our lending criteria. Your lifetime mortgage can move to your new home. You might have to pay some of the funds back if the property is cheaper than your current property. Your equity release adviser can help with your options if you want to move home.

Unless you want to, you don't have to make monthly repayments like with a regular mortgage. Usually your home is sold when you or the last remaining applicant pass away or move into long-term care. Your loan and rolled-up interest get repaid using the proceeds. Any remaining funds then go to your estate.

Unless you move into long-term care, your lifetime mortgage usually ends when you or the last remaining applicant pass away. At this point, your home will usually be sold. The proceeds are then used to repay the lender, with anything left over going to your estate.

If you go into long-term care and the lifetime mortgage plan is in your name, your home will typically be sold. This is to repay the loan and its interest. If your plan is in joint names, your plan will end when the last person passes away or goes into long-term care.

In the first situation, any money left over from the sale of your home could go towards paying your care costs. You can also use the funds that you release from your home to pay for care costs and home adaptations. This may help you stay in your home for longer.

Read our equity release articles

Equity release isn't something you should rush into. Read our RetireWise articles to learn more about how it works and whether it's right for you.

How does equity release work?

 

How long does equity release take?

Is equity release safe?

Page last updated: Monday 18 September 2023