If you're a UK homeowner aged 55 or older with a property worth £70,000 or more, then you could be eligible for equity release.
Equity release can help you live the way you want later in life but, before you make an application, you need to understand who can get equity release and whether it's the right option for you.
In this guide, we'll discuss the eligibility requirements for equity release and the different factors that can affect an application.
What is equity release?
Equity release is a category of financial products that let you release some of the tax-free funds locked up in your home. There are two types of equity release:
Lifetime mortgages – a loan secured against your home, which, along with compound interest, is typically repaid when the last remaining applicant passes away or moves into long term care.
Home reversion plans – an arrangement in which you sell all or part of your house at less than it's market value to a home reversion provider in return for cash
All our equity release advice relates to Key lifetime mortgages only - a loan secured against your home. All of the information on this page relates to Key lifetime mortgages.
What are the requirements for equity release?
The eligibility requirements for equity release are that you must be:
Am I eligible for equity release?
If you think you could match the requirements for equity release, why not use our free equity release calculator to check your eligibility?
Check your eligibility
How does age affect my eligibility for equity release?
The minimum age for equity release is 55 years old.
If you own your home with a partner, then you'll need to apply as a couple. You must both be aged 55 or older to be eligible. Lenders consider the age of the youngest applicant when calculating how much you could release.
While you may be eligible for a lifetime mortgage at age 55, the number of products available to you and the amount you can release increases as you get older.
How does the value of my property affect equity release?
Your home must be valued at least £70,000 to be considered as eligible for equity release. The higher the value of your property, the more equity you can release. The minimum amount of equity you can release is £10,000 and the maximum amount depends on your property value, as well as your age, personal circumstances and the lenders criteria.
Which types of property are eligible for equity release?
To be eligible for equity release, your property must be located in the UK. A lifetime mortgage is a loan secured against your home and includes houses, flats and bungalows.
The property itself must meet the lenders criteria. Some aspects of construction can make lenders less willing to provide you with equity release.
The lender will arrange for an independent survey to be conducted on the property to help determine the property's eligibility.
The lender will also consider the surrounding area and anything near your property. For instance, your property could be excluded from equity release if it's in too remote a location or is located in a flood zone or above a commercial premises.
If you want more guidance on how the location of your home could affect your eligibility for equity release, then get in touch with one of our expert advisers.
Does property condition affect equity release eligibility?
Lenders need your property to be able to sell when your equity release plan comes to a close. For that reason, your home needs to be in a liveable condition for you to be eligible for equity release.
If your home needs major renovations or is unhabitable in any way, then your application could be denied. An independent surveyor will assess your property as part of your equity release application and provide a valuation report for equity release purposes.
Does credit score affect equity release eligibility?
Your credit score doesn't affect your eligibility for equity release.
Lenders look at your credit score when they want to know if you have a history of repaying debts but there is no expectation for you to repay the money that you unlock through equity release (although you can choose to do so if you want). Instead, 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.
Does affordability affect equity release eligibility?
Affordability won't affect your eligibility for equity release as the loan is based on property value and the youngest applicant's age.
What are the pros and cons of equity release?
If you're considering taking out a lifetime mortgage, it's important you understand the benefits and downsides in detail.
What are the benefits of equity release?
There are several benefits to using equity release, including:
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
What are the downsides of equity release?
As with any financial product, there are pitfalls of equity release that you should be aware of. These include:
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 repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply
Reasons for releasing equity from your home
People release equity from their homes for a variety of different reasons. You could use it to:
Pay off existing mortgage or debts*
Boost your finances during retirement
Make home improvements
Pay for care while staying in the home you love
Fund that trip of a lifetime of which you've always dreamed
Help your children get on the property ladder
Contribute to your grandchildren's university fees
*You should always think carefully before securing a loan against your home to repay existing debt.
What you choose to spend your funds on could affect whether equity release is the best option for you. A specialist equity release adviser can give you more guidance on which later life lending option will be most suited to help you achieve what you want.
Things to consider
You have to get equity release advice before releasing tax-free cash from your home – please read all our information and make sure it’s right for you
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
Key offer lifetime mortgages only, which is a loan secured against your home
All our plans meet the Equity Release Council standards and come with several protections, including the no negative equity guarantee, which means you’ll never owe more than your home’s future value
However, it’s important to remember that a lifetime mortgage may leave you with limited or no property equity remaining, and it’ll reduce your financial options in the future.
All our equity release advice relates to our range of Key lifetime mortgages only, and our fixed advice fee of £899 is only payable on completion of a plan
How can Key help?
It's a regulatory requirement that you get specialist advice before taking out a lifetime mortgage, so why should you choose us to help you understand your options?
Key is regulated and a proud member of the Equity Release Council (ERC). We've won more than 80 awards and more than 16,000 customers have rated us as 'excellent' on Trustpilot.
With more than 25 years' experience providing tailored equity release advice to over-55s, we can help you understand whether equity release is the right option for you. If you'd like to discuss your circumstances with one of our expert advisers, get in touch today.