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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.

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:

  • Access to tax-free cash from your home

  • Option to make no monthly payments

  • Competitive interest rates

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.

ⓘ 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.

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 lifetime mortgages 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. 

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. Find out how much you could release with our free calculator.

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 - for the life in later life.

What can equity release funds be used for?

The money you unlock through equity release is tax-free. You can use it in a number 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 four types of equity release. At Key, we offer lifetime mortgages and payment-term lifetime mortgages. Other options that Key doesn't offer are interest-payment lifetime mortgages and home reversion plans. Find out more below about the different types of equity release and how equity release works.

Lifetime mortgage

  • For homeowners aged 55+ with a property worth £70,000+
  • A loan secured against your home
  • Release some of the tax-free funds from your home's value

Payment-term lifetime mortgage

  • For homeowners aged 55-62 at application with a property worth £125,000+

  • You could unlock more than a comparable lifetime mortgage

  • Mandatory payments until oldest applicant turns 66

Interest-payment lifetime mortgage

  • For homeowners aged 55+ with a property worth £70,000+

  • Reduced cost of borrowing with monthly interest payments

  • Payments from £25 a month

Home reversion

  • For homeowners aged 65+
  • Sell all or part of your home to a reversion company for a tax-free cash lump sum
  • No longer own your home but can stay in it for life

Benefits and drawbacks of equity release

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

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 retain full ownership of your home and can stay in it for as long as you wish
  • You can make reduced or no monthly repayments with a lifetime mortgage. This applies to a payment-term lifetime mortgage after the oldest applicant turns 66, and overpayments can be made at any time, subject to criteria
  • You'll never owe more than your home's worth or pass on any equity release related debt to your family, provided terms and conditions are met
  • You have the right to move home in the future, subject to criteria

Drawbacks

Your equity release adviser will also outline the following:

  • Lifetime mortgages and payment-term lifetime mortgages are loans secured against your home and are subject to compound interest, meaning the amount you owe can grow quickly
  • There’s a period of mandatory payments with a payment-term lifetime mortgage, and your home may be repossessed if you don't keep up with these payments
  • Equity release may leave you with limited or no property equity remaining and will reduce your financial options in the future
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • These are long-term financial products and are not designed to be repaid early. If you do, early repayment charges may apply

ⓘ Did you know...

Our equity release advice relates to Key lifetime mortgages and payment-term lifetime mortgages only.

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.

How can I release my cash with a lifetime mortgage? 

You have two options when it comes to releasing your funds with 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.

✓ 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.


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

5.41% AER

Lowest rate with Key

6.25% AER

Rate most Key customers received, or less

6.42% APR

Overall cost for comparison

All rates correct as of 19th February 2024. 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 idea of how much you could release. Your equity release adviser will be able to give you more information on interest rates.


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.

Interest is added to your lifetime mortgage on a monthly or annual basis - this is dependent on your plan.

During that first period, interest is charged and added to the original loan amount. The original loan is 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 20 years

 

ⓘ Illustrative example

This example is for illustrative purposes only and uses the average release amount of £82,475 and monthly equivalent rate (MER) of 6.3% – Key Market Monitor H1, 2023. Average UK house price of £288,000 – ONS, August 2023.

 
Year Balance at start of year Interest (6.3% MER)¹ Balance at end of year² Remaining property equity³
1 £82,475 £5,349 £87,824 £200,176
2 £87,824 £5,695 £93,519 £194,481
3 £93,519 £6,065 £99,584 £188,416
15 £198,778 £12,891 £211,669 £76,331
20 £272,153 £17,649 £289,802* £0


* Although the balance at the end of the year is higher than the property's value, you'll never owe more than your home's worth with a Key lifetime mortgage thanks to the no negative equity guarantee.

¹ Interest rate: The rate at which interest is applied to the loan – in this case, monthly (MER). With all Key lifetime mortgages, your interest rate is fixed for life. This column shows how much interest has been added to the loan that year
² Balance at the end of the year: How much is owed at the end of the year, including compound interest
³ Remaining property equity: The difference between how much your property is worth and the outstanding balance of your lifetime mortgage



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. It's important to keep in mind that future drawdowns are subject to the prevailing interest rate. Here's an example to help you understand how this could work for you.

ⓘ Illustrative example

This example is for illustrative purposes only and uses the average release amount of £81,703 and monthly equivalent rate of 6.74% (future drawdowns will be charged at the prevailing interest rate) - Key Market Monitor Q1, 2023.

 

Mrs Lewis and Mr Davies both want to release £81,703, but opted to take it out in different ways to meet their requirements.

Lump sum case study

Mrs Lewis (Lump sum: £81,703)

Mrs Lewis decided to take out all her money in one go through a lump sum lifetime mortgage. As interest is charged on the full release amount from day one the total cost of borrowing after 15 years could be £223,915 (based on a monthly rate of 6.74%) on her loan of £81,703.

Total cost of borrowing after 15 years: £223,915

Drawdown case study

Mr Davies (Initial borrowing: £51,703, Y5: £15,000, Y10: £15,000)

Mr Davies decided to take out an initial loan of £51,703 to meet his immediate requirements, then make two further £15,000 drawdowns over time (year 5 and 10). As he took out his money in stages, his total cost of borrowing was lower as interest is only charged when the funds were released.

Total cost of borrowing after 15 years: £191,064

Over the same 15-year period, borrowing the same amount of money, Mr Davies saved almost £32,851 in interest charges compared to Mrs Lewis.
 

Back to "What's in this guide?

How much equity can I release from my property?

In the first half of 2023, Key customers could release an average of £82,475 from their properties (Key Market Monitor H1, 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?

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. This applies to a payment-term lifetime mortgage after the mandatory payment ends when you turn 66.

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 fee of £1,299 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 £1,299 is only payable on completion

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 is 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

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

Equity release costs

Here are some guides to help you understand equity release costs:

ⓘ If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.

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 and we are rated 'Excellent' on Trustpilot with 17,000+ reviews. Making 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 05 February 2024