What is equity release and what does it mean for me?

By Anita Jaynes on 4 August, 2022

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Simply put, an Equity Release allows you to liquidate the value of your or your parents’ home without you having to sell the property and move out. When the owner passes or moves into another permanent residence, such as a care home, the property is sold, and the equity release is paid back.

Equity release might seem overwhelmingly complicated to an untrained eye, but this guide will inform you about the basics of Equity Release and when and how to use it.

What is Equity Release?

Equity release falls into two main categories: Lifetime Mortgages and Home Reversion Plans. Lifetime Mortgages are by far the more popular choice as Home Reversion Plans require you to sell part or all of your property for your desired amount. 

Lifetime Mortgages are similar to regular mortgages in that they are a loan against the value of the property. Older homeowners are entitled to borrow larger sums. What’s more, there is no time limit or end date to the loan as it’s only repaid once the owner passes away or moves into alternative accommodation. 

If you’re looking into liquidating the value of your property, use an equity release calculator to find out how much you could receive. It’s quick, free, and entirely secure. 

Who is eligible for equity release? 

All providers have different requirements, but individuals usually have to be 55 years old or older to be eligible. 

All other mortgages or debt secured against the property must be paid off either from the Equity Release or before you start the application. Some providers also have a minimum property value threshold of £70,000.

Make sure to also check your credit history. Usually, it shouldn’t impact your application because you aren’t required to make regular payments, but if you already have arrangements with creditors like IVA, CCJ, or Debt Management Plan, that might affect your eligibility. 

What is the process involved in equity release?

It usually takes about 8 weeks for an equity release to complete and for the funds to be available. However, depending on certain circumstances, it can take a few months. 

The process is split into a few defined steps:

  • Fill out an equity release application form and send it with all the relevant legal documents
  • Submit your applications to the lender
  • Lenders and surveyors will conduct a property valuation
  • A review of the formal mortgage offer 
  • Discussions with your solicitor surrounding equity release legal advice and signing of the mortgage-deed
  • Address any further questions from the lender’s solicitors about your application
  • Completion and the receiving of funds. 

What are the advantages of equity release?

To get full legal advice about what an equity release could mean for you, seek advice from a certified and professional equity release adviser. In most cases, equity releases can provide tax-free lump sums alongside your regular income, allowing you to maintain ownership of your home and transfer your equity release to another property should you wish to move.