How Does Equity Release Work?

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 how equity release works can be confusing, especially if you do not have access to the right information. You may be wondering how does equity release works in uk?

Moreover, considering the numbers of hours researching, and the expenses that come with professional consultations, getting by this financial plan can be a daunting task.

Well, by checking out this guide, you can finally get to know this without breaking a sweat or your bank.

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Unlocking the Equity Tied Up in Your Property

There are over ten ways to release equity1 from your estate. 40% of homeowners in the UK opt to sell up and downsize to a smaller home. 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 with your children?

That is when you turn to equity release.

Primarily, equity release is accessible to proprietors where the youngest spouse or partner on the deeds is at least 55, or in other 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 an age-related ascending percentage of the value of the estate. In other words, the older you are, the more cash you can release!

For instance, if one is aged 65 is in perfect health, and has a property value of £500,000, you could get a maximum of 30% of the property value. It would then mean a maximum equity release of up to £150,000 with a plan provider like Aviva or LV.

It gets better:

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

Consequently, if the same person is 65, but he/she was a smoker with high blood pressure, Type 2 diabetes and a history of heart attacks, it means that they could get more, probably from £180,000 up to £190,500 with the enhanced lifetime mortgage2 scheme.

The 2 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 on your home, you could still be eligible – the catch is this has to be the first thing to cross off on your ‘debts’ list once you release the cash.

When you have cleared your mortgage and have more cash, then you have the right to spend it as you wish – 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 mortgages3  (the most popular option) and home reversions4  schemes, which you can find out more about in ‘Types of Equity Release Schemes.’

How Does Equity Release Work in the UK?

It’s a straightforward process.

When you’ve done in-depth research and carefully considered your options, then you can get the ball rolling on equity release and how does it work.

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

Here are the steps you can expect:

  • 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 adviser5 – you can do this over the phone or in person. They will guide you with your questions appropriately in your decision and whether it’s the best solution for you. They will confirm the advice you will get to you in writing before you make any further decisions.
  • Plan for a follow-up meeting – talk through the advice you got from your adviser. You will have the chance to ask any other burning questions you might have and make sure that you’re ready to proceed with the process.
  • Fill in your application with the help of your adviser. The might even offer to submit the application on your behalf, and if the equity release company acknowledges it, then your provider will give you a valuation.
  • Head to the solicitor’s office – talk to him/her about your offer and get independent legal advice. They will look at all the legal details and walk you through them. After they scrutinise the proposal and you accept, your equity release will be set up for you.
  • 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’ve received proper guidance along the way, and when it’s done, you’ll have access to the cash you need for 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, the least number of weeks is around 8-12, from when they receive your application to the day your solicitor sends you your cash.

Common Questions

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

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 then make an informed decision. It would be best if you also kept in mind that taking out a lifetime mortgage scheme reduces your inheritance, 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, lifetime mortgages and home reversion plans, then be sure to click here not only see how much equity you can release but to talk with an expert for free!

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Do you have questions about equity release? read our Equity Release Questions and Answers, make sure you also ready about pitfalls of equity release

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John lawson rndlg

John Lawson

John advises business, individuals, and organisations on pension planning. As you’ve probably realised by now, we’re invested in helping people like yourself understand a little bit more about how equity release options work.

How Much Can You Release?

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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