The best equity release

Best Equity Release

In this article we are going to explain

  • What an equity release plan is and where you can find the best equity release
  • Some considerations and tips for choosing yours
  • Who the top 10 providers for equity release are
  • The rates of each provider

What is equity release?

If you are over the age of 55 then equity release may be right for you for a number of reasons, including:

  • treat yourself,
  • modify your home for care purposes
  • get access to large sum of cash to use
  • Top up your pension

If staying in your current property is your aim, then one of the options available to you is an equity release mortgage on your home. You can read more about the pros and cons of equity release here.  

There are two main types of equity release you can use to gain money.

Either through a “lifetime mortgage” or “Home reversion”. Both of these release some of the cash tied into your home and affect your current mortgage. These do have early repayment charges in the vast majority of cases however, so aren’t a good choice for a short-term cash injection!

You can read more here about what an equity release calculator is.  It will give you a good and general idea of what you can expect to take out as a loan.

How much can you get from equity release?

Try the calculator below and see how much money you could get tax-free.

What is a lifetime mortgage?

A lifetime mortgage is a special instrument that allows you to take a further mortgage on the house that you own, while keeping your current ownership of it. In order to do this, the property MUST be your main residence.

You also have a few choices of how to tailor the mortgage to your needs; you could choose to make repayments on the mortgage, or let the interest build up, you can also fence off some of the value of the home for your inheritance allowing your family to take advantage of some of the equity.

Each provider has their own variations on the mortgage, so it’s definitely worth shopping around for the best equity deal you can find!

Here is a short video explaining what a Life time mortgage is.

What is a home reversion plan?

While a lifetime mortgage allows you to retain ownership of the property, a reversion sells your property to a provider that then allows you to live in the property rent-free until you pass on. You can get this money back either as one lump sum, or monthly instalment payments.

It is worth noting that with this option, you will normally have a guarantee on having no negative equity.

This means that once your house is sold after you’ve passing, even if the value of the sale doesn’t add up to the original value of the loan plus agents’ and solicitors’ fees etc., you will not have to pay anything to your provider.

Here is a video that explains the advantages and disadvantages of Home Reversion plans.

What are some of the considerations of releasing equity?

While releasing equity might seem like a good idea, there are some disadvantages to consider:

  • The main consideration is that an equity release mortgage normally doesn’t give you anything close to the true value of your home. Typical values are 40-60% of the value.
  • The second biggest consideration is that if you are claiming state benefits, releasing your equity may change your entitlement status.
  • Once you’ve released equity, the property can’t then provide you with other financial benefits later in life
  • Because providers attempt to cover their possible losses in case of a market crash, many loans will have very specific terms and conditions, as well as limitations on you being able to move into certain properties
  • loans vary from provider to provider, so without careful research, you may not get the best deal possible

While it may seem an easy way to use your home to pay for your grandkids’ college or a pay off a debt, it does come with some specific advantages and disadvantages that you need to think hard about!

Here is a video that sets out some of the pros and cons of equity release.

Who are the top 10 best equity release providers?

If you decide that releasing equity is a good option for you, then here’s a handy little list of the top equity release providers for loans, along with their typical interest rates – in no particular order.

We’ve only included those that are authorised and regulated members of the Equity Release Council.

1 – Sunlife

Sunlife provide many financial, planning and insurance services to the over 50’s. As a trusted provider for those in the later stages of life, Sunlife provide a lot of information on their website about releasing equity, as well as providing you with an advisor when you first contact them.

They also know the unique challenges of being at that age, so provide more support than most. This way you can be safe in the knowledge you’re making the right decision if you do decide to release some of the equity in your home! Sunlife also has a 60 second equity release calculator.

Typical rates: 5-6% are the interest rates advertised on their website, however, these are normally the average. Your interest rate could be lower or higher, depending on your age, value of your property and other factors.

2 – Aviva

Aviva are the largest insurance company in the UK and have existed for over 320 years, so they are a pretty well established company when it comes to finances, health and insurance!

They are also What Mortgage award winners for the equity releasing loans. They only come in the form of mortgages, their minimum loan must be £15,000 and you must be mortgage-free, or have a small one on your property. Aviva are also members of the Financial Conduct Authority.

Typical rates: Aviva have very bespoke rates for their loans, however, the average appears to be 4.3% including fees.

3 – Age Co

Age Co are another company that specialises in services, advice and planning for over 55’s. They currently only offer a drawdown mortgage, which means you will not have to pay interest on the loan during your lifetime, instead the loan amount is repaid from the value of your home after your death.

Typical rates: Age Co have 2 products, on with a £1,500 cashback at 4.85% AER, and one with no cashback at 4.65% AER.

4 – OneFamily

OneFamily are a co-operative company owned and run by their customers. As a result of this, their loans are highly adaptable and can offer fixed or variable rates on lifetime mortgages and home reversion.

When you contact them regarding your loan, they will offer free, impartial advice that also compares their product against others in the marketplace which will help you stay informed. It is worth noting that taking part in one of their services brings other benefits by becoming a stakeholder in their business.

Typical rates: OneFamily’s typical rate is 5.8% APR

5 – Pure Retirement

Pure Retirement call themselves the “Experts in Equity Release”, placing themselves as specialists in the area. They make it their mission to not only provide great loans, but also to give first class customer service. They only offer a lifetime drawdown mortgage in one lump sum. They are also a member of the Financial Conduct Authority.

Typical rates: Their typical rate is 3.78%

6 – LV=

LV= are best known for their car insurance, however they are an all-cover insurance, investments and retirement services provider. They release equity in your home with two distinct loans: a flexible payment loan and a lump sum variety.

With the flexible loan, you can borrow different amounts at different times (up to a pre-determined cap).

Typical rates: LV=’s typical rate is 3.9% APR

7 – Legal & General

Legal & General are a very widely-known pensions and retirement company. They offer a few different types of equity release for you with their mortgages. You can choose to have a lump sum with no interest payments, or choose to pay the monthly interest as it accrues.

You also have the choice to draw a monthly income from your property with their income mortgage and some types of loans have no early repayment charges (Though this is negotiated at the start of the loan). Legal & General are a very well-protected and regulated company, being authorised and regulated by the Equity Release Council and the Financial Conduct Authority.

Typical rates: Legal & General offer what is likely the best equity rate on the market with 3.7% on their drawdown mortgage.

8 – More2Life

More2Life are another company that specialise in helping people release equity in their home. They also offer choices for your equity release plan including “enhanced” plans.

These plans take your medical history, conditions and overall health into account which can give you better terms including better interest rates and higher amounts to borrow.

Typical rates: 3.88%

9 – Just

Just provide retirement financial solutions of all kinds, as well as an equity release mortgage. Their loan has a fixed monthly interest that is agreed at the start of the loan. Just also provide you with a home reversion service if that is what you feel is more appropriate to your current situation. Just also offer medical enhancements to your plan if you are in ill health.

Typical rates: 5.1%

10 – Canada Life

Finally, Canada Life is a retirement, investment and protection company that has been in business in the UK for over 115 years.

They offer many different types of equity release plan including – uniquely, a second home mortgage, which lifts them up as one of the best equity releasing companies currently working. They also offer a voluntary payment plan which also negates early repayment charges.

Typical rates: 4.4% – 6%

What are some tips for releasing equity?

  • Make sure that the company you choose to use is a member of the Equity Release Council. This trade organisation ensures that its’ members adhere to the no negative equity clause, which protects you from further charges.
  • Get some advice first. As each person has very specific circumstances, the options you choose for your equity release plan should make the best of your position. You can only choose the best equity releasing loan if you’re armed with the proper knowledge!
  • Borrow the amount you need in small amounts first. Interest accrues with the loan, what this means is if you borrow a smaller amount first, you will pay less final interest. Borrow the amounts you actually need now, then borrow further amounts as you need them to save your estate interest payments in the long run.