A comprehensive guide to how equity release works in the UK

Whether you want to buy a second property or access some home improvement funds, this guide to how equity release works will help you get it done.

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Trying to understand what is equity release can be confusing, especially if you don’t have access to the right information.

You may be wondering how does equity release work in UK?

Moreover, considering the numbers of hours researching, and the expenses that come with professional consultations, getting to grips with equity release can be a daunting task.

By checking out this guide, you can finally get the answers you’re looking for without breaking a sweat or – the bank.

Are You Considering Equity Release?

Unlocking the Equity Tied Up in Your Property

There are over ten ways to release equity from your home. 40% of homeowners in the UK opt to sell their homes and downsize to a smaller, more affordable one. But then again, what if you don’t want to move out of the family home you love – where you have made lots of happy memories over the years?

That is when you turn to equity release.

Primarily, equity release is accessible to couples made up of at least one partner who is at least 55, or in some cases, 60.

It enables homeowners to raise tax-free cash from the equity tied up in their property. The amount that you can release depends on a number of factors, among which is your age. In other words, the older you are, the more cash you can release!

For instance, if you’re 65 and still in perfect health, with a property value of £500,000, you could get a maximum of 30% of the property value. This would allow you a maximum equity release of up to £150,000 with a plan provider like Aviva or LV.

But wait, it gets better:

Recently, equity release firms have introduced impaired life schemes that provide ‘enhanced’ rates to those who are not as fit and healthy as they used to be. These plans increase the percentage that you can withdraw from your property.

Consequently, if your 65, but are a smoker with high blood pressure, type 2 diabetes, and a history of heart attacks, you could get more, probably from £180,000 up to £190,500 with the enhanced lifetime mortgage1 scheme.

The Two Primary Types of Equity Release Schemes

As previously mentioned, the minimum age for equity release is 55. Even if you still have a small mortgage balance, you could still be eligible – the catch is that this has to be the first thing you cross off on your ‘debts’ list once you release the cash.

When you’ve cleared your mortgage and have more cash, you have the right to spend it as you wish and – you won’t have to make any monthly repayments. You only have to pay back the loan (plus interest), when you decide to sell the house – which will typically be when you die or move out permanently (into long-term residential care).

How do equity release schemes work? There are different modes of releasing equity, but there are two primary plans: lifetime mortgages (the most popular option) and home reversions schemes.

How Does Equity Release Work in the UK?

It’s a straightforward process.

When you’ve done in-depth research and carefully considered all equity release alternatives, you can get the ball rolling and finally find out how it works.

The equity release process can vary from one individual to another, and from lender to lender. However, you need to ensure that you’ve got plenty of support along the way.

Here are the steps you must take:

  • First things first, to be sure that you’re eligible; you need to talk to an expert. You won’t have to take things any further if you don’t qualify.
  • Consult your financial adviser2 – you can do this over the phone or in person. They’ll answer your questions and guide you in your decision. They’ll also confirm the advice given in writing before you make any further decisions.
  • Plan for a follow-up meeting – talk through the advice you got from your adviser. You’ll have the chance to ask any other burning questions you might have and ensure you’re ready to proceed.
  • Fill in your application with the help of your adviser. They might even offer to submit the application on your behalf. If the equity release company acknowledges it, they’ll arrange a valuation. They’ll use the valuation to make you a loan offer.
  • Head to the solicitor’s office – talk to him/her about your offer and get independent legal advice. They’ll look at all the legal details and walk you through each item. After they scrutinise the proposal and you accept, your equity release will be complete.
  • Acquire your equity through your solicitor and finally get on with putting those plans into action!

All you have to do is to ensure that you receive proper guidance along the way, and when it’s done, you’ll have access to the cash you need to ensure you get the retirement you deserve.

How Soon Can You Unlock the Cash From Your Home?

It varies from one plan provider to another. However, for most, like Legal & General, it ranges from 8 to 12 weeks from when they receive your application to the day your solicitor sends you your cash.

Common Questions

How Do You Pull Money Out of Your House?
How Does an Equity Release Loan Work?
How Do Lifetime Mortgages Work?
How Does Equity Release Affect Benefits?
Does Equity Release Affect Your Pension?
How Does Equity Release Affect a Will?
How Does Equity Release Affect Divorce?
How Does Equity Release Affect Inheritance Tax (IHT)?
Do You Pay Interest On Equity Release?
How Long Does Equity Release Take?
What Happens When You Die With Equity Release?
Can Equity Release be Repaid Before Death?
Can I Sell My House if I Have Equity Release?
Can You Settle Back Equity Release?
Can You Settle Equity Release Early?
Can Equity Release be Transferred to Another Property?
Do You Have to Settle Annuity on Equity Release?
What Percentage of Equity Can I Release From My House?
How Much Equity Can I Release? What's the Maximum Amount I Can Get?
What Happens to Equity When You Sell Your House?
How Do I Know If I Have Equity in My Residence?
What Is The Catch With Equity Release?
Is Releasing Equity A Good Idea?

In Conclusion

Like any other financial product, equity release is not something you should rush into. So, take your time, prudently consider your options and make an informed decision. Keep in mind that taking out a lifetime mortgage can help you leave an early inheritance, but it also reduces the amount you leave behind, so it would be wise to involve your family in your choice too.

That said, if you’ve got any questions or need more information on what equity release is, check all of the equity release types and be sure to not only use our equity release calculator, but also to receive an equity release advice by talking to our expert for free!

How Much Can You Release?

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Most people are using Equity Release as a means of retaining the use of their house while also obtaining a lump sum or a steady stream of income. Get matched with an expert and check your eligibility for equity release options.

Use our free equity release calculator & see how much you can release today.

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