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How to qualify for equity release

If you’re looking for a financial boost in later life, equity release could allow you to free up money that’s tied up in your property. Whether you want a more comfortable retirement or something more specific, you can do this in a few different ways as long as you meet certain criteria.

The most common form of equity release is a mortgage that you don’t pay off until you pass away. You effectively borrow some of your home’s value in a lump sum. Across 2020, some £3.89bn of property wealth was released by new and returning equity release customers.

So who is equity release right for? Below we explain the qualification criteria and weigh up the pros and cons.

What factors determine if you qualify?

Key eligibility criteria for equity release include:

  • Being aged over 55
  • Being a homeowner in the UK
  • Your property is worth at least £70,000
  • Having little or none of your standard mortgage left to repay

There are a few finer details to consider. In terms of location, few lenders will consider properties in Northern Ireland or the Isle of Man for example, whereas the Isle of Wight is more widely accepted.

In relation to your property’s value, lenders usually expect your home to be in a good condition. You could be asked to carry out repairs before borrowing if necessary.

If you co-own a property with a partner, the youngest homeowner must be at least 55 for a lifetime mortgage. The amount you want to borrow makes a difference too – get an estimate of how much you could release by using an equity release calculator.

The benefits of equity release

The main advantage of equity release is that you can free up money to use however you want. You won’t pay tax on it either. Key reasons people use it include:

  • Paying off existing debts
  • Enjoying a more comfortable retirement
  • Making home improvements
  • Helping out younger family members
  • Treating themselves to a holiday

You don’t need to budget for repayments either if you don’t want to and you’ll never owe more than the value of your home.

Getting equity release also allows you to stay in the home that you know and love, rather than downsizing and going through the hassle of moving.

Drawbacks to consider

Getting equity release is a big decision and isn’t right for everyone.

Key drawbacks include the fact that you’re likely to be reducing the amount of inheritance you leave behind. Your debt will also be increased by interest, which could cause it to grow significantly over the years.

You might also limit your access to any existing means-tested state benefits and could be subjected to setup and exit fees.

If you’re at all unsure about equity release, it’s best to get specialist financial and legal advice before committing.

Abubakar is a writer and digital marketing expert. Who has founded multiple blogs and successful businesses in the fields of digital marketing, software development. A full-service digital media agency that partners with clients to boost their business outcomes.