Equity Release Criteria & Rules You Must Know

Question 1

Who Qualifies For Equity Release?

Answer

To be eligible for an equity release plan, you have to meet specific requirements like:

Be aged 55+ (lifetime mortgages) and 65+ (home reversion plans). The youngest borrower’s age will form the basis of the equity release plan.
Your estate should have a value of £70,000 and above.
Your property must be located in the UK.

Question 2

How old do you need to be for equity release?

Answer

For a lifetime mortgage you (or both of you, if you’re borrowing jointly) need to be at least 55 years old. For a home reversion plan you (or both of you, if you’re taking out a plan jointly) need to be at least 65 years old.

You must own property in the UK, which must be your main residence.

Question 3

Do You Have To Be 55 For Equity Release?

Answer

Yes, you have to be 55 and above. Many plan providers also have an upper age limit, which is usually 85 years. So, depending on your provider, you have to be aged 55 years and above to access a lifetime mortgage and 65 for a home reversion scheme.

Question 4

Can One Release Equity if They’re 54?

Answer

For equity release plans, the older you are, the more cash you can release from the value of your property. However, those under the age of 55 are at a disadvantage. You can’t release any equity if you’re below the recommended age of 55. If you do, then you’ll have to contend with certain restrictions.

Nonetheless, you shouldn’t worry since there are specific options you can consider, like re-mortgaging or taking out a secured loan. Secured loans, for instance, have a longer repayment term than unsecured loans, thus giving you more time to straighten out your finances and get the loan paid off.

So before you throw in the towel, make sure you consult your financial adviser and decide what’s the best financial move you can make if you’re not yet eligible for an equity release plan.

Question 5

Can Equity Release be Refused?

Answer

Yes, it can. If you don’t meet the expected requirements, then the plan provider may refuse to make you an offer.

For instance, if you don’t have building insurance, then some plan providers won’t offer you an equity release plan. They’ll require you to have insurance for the full reinstatement value, which should be index-linked to keep in line with inflation.

If you don’t meet the minimum age requirement, your home’s value isn’t at least £70,000, and ensure that your home is in pristine condition, then the plan provider may also refuse to offer you the plan.

Some plan providers also take into account factors like personal health, and if you have a pre-existing medical condition, they’ll consider this. If your medical condition is likely to reduce your life expectancy, then they’ll increase your limit.

You must also be honest about such factors since it can invalidate your plan if they find out you provided any fraudulent information after you’ve passed on, thus leaving your loved ones with a nasty financial mess to clear up.

Question 6

How Does One Qualify for a Lifetime Mortgage Scheme?

Answer

With a lifetime mortgage plan, you take out a loan secured on your estate which doesn’t have to be repaid until you pass on or go into long-term residential care.

It frees up some of the wealth you have tied up in your property, and you can continue to reside there. Qualifying depends on your age (which is usually 55+), if your estate is worth at least £70,000 and is located in the UK, and your overall health.

Question 7

What’s the Maximum Age for a Lifetime Mortgage?

Answer

Typically, there’s no maximum age for applying for a lifetime mortgage. However, most plan providers have a set age limit.

When you take out the mortgage, most lenders usually set the maximum age at between 65 and 80. However, when the mortgage term ends, it’s often a maximum age of 70 to 85.

Question 8

Can You Release Equity with a Mortgage?

Answer

Yes, you can. You can qualify for equity release even if you haven’t paid off your mortgage in full. A portion of the released funds will simply have to be used to cover your outstanding mortgage.

You might find yourself struggling with a cash shortage. If you’re property rich but money is tight, equity release can provide some much-needed release.

A lifetime mortgage scheme gives you access to money locked up in your home to use as needed – even when you still have an outstanding mortgage.

Question 9

Can I Sell if I Have Lifetime Mortgage?

Answer

Yes, if you purchase a new property of roughly the same value. If you have a lifetime mortgage, you borrow money against the value of your property and then reimburse this, plus interest, when you pass on or move into permanent care.

If you want to sell, your lender should be able to transfer the lifetime mortgage to your new home, hence it’s required that your new home is of the same, or similar value.

Question 10

Can I Take Out an Equity Release Plan for a Second Home?

Answer

Yes, you can.

Purchasing a second home is something that most people dream about, and by taking out an equity release plan, you can finally access the funds you need to buy a second home.

For legal purposes, though, you have to either be the sole occupants of your new second home or let it out for a maximum of four weeks consecutively. You must also use the estate for a minimum of four weeks every year, and should have no formal agreements or an Assured Shorthold Tenancy in place.

You can also use the funds you release to offer a deposit on other properties unrelated to you, like helping a loved one get on the property ladder.

Question 11

Does Equity Release Require Credit Checks?

Answer

For most schemes, you won’t have to make any repayments, so many providers will not perform a credit check.

Question 12

Do You Need Good Credit Score for Equity Release?

Answer

You may be able to qualify for a HELOC if you have a score of between 660 and 700. However, if you have poor credit, your provider will charge a higher premium, and the equity release firm may demand that and other financial factors—like your overall arrears —be in extra great shape.

The principal aim of equity release is to enable you to convert some of the value built into your property to cash, and as such, it’s possible to do this even when you have an outstanding pledge on the residence. However, the terms would need to be on a lifetime basis, and not on a fixed-term basis, as was previously the case.

Question 13

Can You Get Equity Release with Bad Credit?

Answer

Unlocking the equity tied up in your home when you have bad credit can be challenging – but isn’t impossible.

Since equity release, unlike traditional mortgages, rarely comes with monthly repayments, your credit history is less of a factor. You can certainly get approved, regardless of your credit history.

The principal reason is that you have security in the form of what you’ve already paid towards your present mortgage.

Question 14

Do I Need a Solicitor for Equity Release?

Answer

Homeowners considering a ‘lifetime plan’ to free equity from their property will need to be represented by a solicitor and will have to speak to a financial advisor before releasing equity, according to the Equity Release Council.

Question 15

Can I Sell My House and Still Live In It?

Answer

Yes, you can. With a reversion scheme, you can use all or a fraction of the value of your residence in return for a single lump sum of cash or, income every month, or both.

Your home, or the fraction of it you release equity from, now belongs to the reversion firm. However, you’re allowed to carry on residing (rent-free), in it until you pass away or move out permanently.

Question 16

How Frequently Can You Release Equity?

Answer

The frequency depends on:

the existing terms,
the outstanding balance,
if the property value has increased.

Lenders will use a combination of you and your partner’s ages, the property valuation, and the loan-to-value tables, to help them determine whether you can release any more funds.