Equity release is becoming increasingly popular with people aged over 55, as it offers a way to supplement retirement income, make home improvements or simply free up some extra cash.
The equity release process can seem complicated and daunting, but our step-by-step guide will help to make things clear.
Remember, before making any decisions it is essential to seek professional financial advice to ensure that equity release is the right choice for your individual circumstances.
Equity release is a way of releasing equity, or the value, from your home while you continue to live in it.
Typically, equity release is managed through a lifetime mortgage.This type of mortgage is a loan secured against your home, providing access to the equity release funds.
The first step is submitting an equity release application. This is where you detail your intent to borrow money against the value of your home.
Once this is complete, the equity release provider will assess your application, taking into consideration the current market value of your property and any existing mortgages which you may have.
After these steps, you can choose to receive the equity release funds through various options. Some homeowners opt to receive a lump sum, whilst others prefer regular payments. Both options release tax-free cash, with the choice depending on the individual’s financial needs and circumstances.
The equity release process is regulated by the Equity Release Council.
They ensure that all equity release products meet certain standards to protect the homeowners. The no negative equity guarantee is one such standard, ensuring that you will never owe more than the value of your home.
This is regardless of how much equity you release, or how long the process takes.
Here is a detailed step-by-step breakdown of the typical equity release process:
The first step is to research different equity release schemes and products. This includes understanding the differences between lifetime mortgages and home reversion plans. You should look at interest rates, fees, inheritance protection options, etc. from different providers.
It is highly recommended to take professional financial advice from an impartial equity release advisor before committing. They will take your personal circumstances into account and advise which, if any, options are best suited to you. There may be a cost for this advice service.
Based on your research, the advice you receive, and your individual needs and circumstances, choose an appropriate equity release product. Your advisor can help recommend products.
Complete an application with your chosen equity release provider. Be prepared to go into full details about finances, health, family situation etc. as the provider will complete a full review before approving your application.
If approved, the legal process begins including property valuations, sending the offer pack, appointing solicitors, checking for title deeds and transferring documents. This ensures everything is legitimate and above board.
Arrange a date for completion when the equity released funds will be made available to you. This is done via secure transfer once all legal processes have been fully tied up. The product T&Cs now take full effect.
Contact your provider if circumstances change. Make voluntary repayments if desired or repay interest if required. The provider will also be in touch periodically or for valuations. Review options over time.
There are certain criteria which need to be met to qualify for equity release. One such criteria is the minimum age requirement. In the UK, equity release providers require applicants to be over 55 years old. Outside of the UK, this may differ slightly.
Another factor in your eligibility for equity release is the value of your home. The higher the market value, the more equity you can potentially release. Additionally, the property must be your main residence and in good condition. The location of your property can affect market value, meaning that it will also be considered by some providers.
Another criteria is to own your home outright, or have some equity in it. If you have a mortgage or loan secured against your home, this doesn’t disqualify you. However, you must use the money released to first pay off the existing mortgage, as well as any remaining loans secured against your home. The remaining funds can then be used as you wish.
It’s also worth noting that your income and credit history are not typically considered in the application process. For those with less-than-perfect credit scores, this makes equity release a viable option.
It is worth noting that some providers may set additional eligibility criteria, such as a minimum property value threshold. Therefore, before applying, always check the specific requirements.
The two main types of equity release schemes are lifetime mortgages and home reversion plans. Whilst you are able to access the equity in your home through both options, they are slightly different in their execution.
Lifetime mortgages are the most common equity release scheme, making up over 90% of the market. This is where you take out a mortgage secured on your home, whilst also retaining ownership. Interest accrues over time, which is repaid alongside the original loan amount when the last borrower moves into long-term care or passes away.
Home reversion also allows you to live in your property until you die. However you don’t retain ownership of the property. Instead, home reversion involves selling a portion or all of your home to a reversion company. In return, you receive a lump sum or regular payments, whilst continuing to live in the property rent-free until you die. The percentage you retain is fixed, regardless of changes in property prices.
The UK Care Guide works in partnership with Boon Brokers, one of the UKs leading equity release specialists.
You can contact them on 0333 567 1607 , or use the equity release calculator to estimate how much you can borrow.
Call Boon Brokers on 0333 567 1607 to discuss your equity release requirements.
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All equity release and mortgage advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757.
If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation. By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.
The fee we receive is used to help keep this site operational and to produce new content.
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
There are a few things that can slow down an equity release application, such as:
It’s critical that you have all of the necessary documents and that you know what to do before you begin your application. Being truthful about your circumstances will also aid in the smooth running of this lengthy process and help you in easily releasing equity from your home.
There are a few things that can speed the equity release timescale, such as:
If you are well prepared and you know what exactly you want out of releasing equity, it will be easier to get through the application and the process will go more quickly. Having all the required documentation ready and to hand will also help to speed up the process.
When considering equity release, seeking advice from a specialist equity release adviser is recommended. These advisers are experts in the field, providing you with personalised guidance based on your unique financial circumstances.
An adviser can help you to understand how much equity you are able to release and how this could impact your future finances. They will also explain each equity release product’s potential risks and benefits.
This includes details on early repayment charges, as well how interest rates can affect the total amount you owe.
During the application process, a financial adviser can also be helpful. They can help you to fill out the application form correctly, whilst also liaising with the equity release provider on your behalf. This is likely to save you time and minimise the stress associated with the process.
Remember that it is important to choose a financial adviser who is registered with the Financial Services Register. This ensures that they adhere to the industry’s standards and regulations.
Furthermore, be sure to use an equity release adviser who is qualified to Level 4 or above. This is because lower qualified advisers may not offer suitable products or fully explain the implications.
Before proceeding with equity release, seeking independent legal advice is important. This is because equity release is a legal process.
Consequently, receiving informed legal advice from a solicitor can help you to understand the implications of releasing equity and ensure that your interests are protected.
Equity release may also have an impact on your will. This is because releasing equity could potentially reduce the value of your estate, which could affect any inheritance you plan to leave. Your solicitor can advise you on how to reduce this risk, and what might be the best plan for your future.
There is also the impact of early repayments to consider. If you decide to repay the loan early, there may be an equity release cost to this.
Therefore, you may receive a large charge as a result. Your solicitor can help you to understand these charges, as well as avoiding them where possible.
Lastly, your solicitor will oversee the completion of the transaction. They will ensure that all paperwork is in order and that the funds are transferred to your nominated bank account.
From your application to releasing your funds, the timeline of this process is typically between 6-12 weeks. However, this can change depending on various factors such as the complexity of your situation and the efficiency of your advisers and the provider.
Before you apply for equity release, it is recommended to seek advice from a financial adviser. This involves an initial consultation, followed by a detailed analysis of your financial situation. The adviser will then recommend the most suitable equity release product for you.
Once you have considered your options, you can carry on with the rest of the application process, as detailed above.
Before you make the decision to choose this financial strategy, there are risks involved with equity release which are worth considering.
One of the main concerns is the potential for the debt to grow quickly, due to the compound interest. This increased debt could significantly reduce the value of your estate and the inheritance you can leave.
Another risk is the early repayment charge. If you decide to pay off the loan earlier than agreed, you could face considerable charges. Consequently, it is best to understand the terms of your equity release scheme fully before proceeding.
There’s also the risk of negative equity, although this is less of a concern now due to the no negative equity guarantee. This guarantee ensures that you’ll never owe more than the value of your home.
The most significant impact of equity release is typically the reduction to the value of your estate. If you are planning to leave inheritance to your loved ones, this is likely to have an impact.
Therefore, before proceeding, It’s important to discuss this with your family and your adviser.
Releasing equity could also affect your eligibility for means-tested benefits. These benefits are based on your income and savings.
If you release a lump sum from your home, it could push your savings over the limit and you could potentially lose your benefits.
Depending on the type of equity release product which you choose, you may be able to minimise the impact on your state benefits.
For instance, if you choose to receive regular payments, it is likely that there will be less impact than if you receive the release as a cash lump sum. To understand the implications, it’s important to discuss this with your adviser.
Equity release is not the only option for accessing cash in retirement, as there are several alternatives to consider.
Downsizing is a popular option, which involves selling your home and buying a cheaper one. Consequently, this frees up some cash in the process. However, this option might not be suitable if you’re attached to your home or community.
Another alternative is renting out a room in your home, providing a regular income without having to move. However, it’s important to consider the practicalities and potential disruptions to your lifestyle.
You could also consider borrowing money from family or friends. Whilst this could be a cheaper and more flexible option, it could also lead to disagreements and strain relationships.
Finally, you could consider taking out a personal loan or increasing your mortgage. However, these options could come with higher interest rates and might not be feasible if you’re not in work.
Regularly reviewing your equity release plan with your adviser is a valuable way to ensure that the equity product you have still meets your needs. It is also useful to check up on any changes in interest rates.
During the review, you can discuss any changes in your circumstances, as well as exploring if any more suitable products are available. For instance, if interest rates have dropped, it might be worth considering switching to a product with a lower rate.
It’s also worth discussing the impact of the equity release on your estate and any inheritance you plan to leave. If your home has increased in value, for instance, you might want to consider repaying some of the loan to reduce the impact on your estate.
Other than providing a better idea of your current financial status, regular reviews also offer an opportunity to discuss any concerns you may have. Your adviser is there to help you to make the most of your equity release plan, ensuring that it continues to meet your needs.
Understanding how an equity release application works can relieve some of the stress from the process. By seeking professional advice from an independent financial adviser, you can get guidance on the steps involved and understand the equity release benefits and costs.
A financial adviser will also be able to advise you on the best quity release scheme for you. You will then apply to an equity release provider, who will assess your application and the value of your property.
Here, an equity release calculator may be helpful, as it gives you an estimate of how much equity you could release.
Once your application has been approved, you will receive a formal offer. The provider will release the equity when you accept it, which you can take as a lump sum or monthly payments.
An independent financial adviser plays an important role in the equity release process. They provide well-informed equity release advice tailored to your specific circumstances. This includes explaining how equity release works, its potential benefits, and any associated costs.
Whilst there is an advice fee, this is usually worth the expense. They can help you to make an informed decision, ensuring that you choose a product which matches your financial needs.
Selecting an advisor registered with the Financial Services Register will guarantee that they adhere to industry standards and regulations.
An equity release mortgage, or a lifetime mortgage, is the most popular type of equity release scheme.
With a lifetime mortgage, the loan is secured against your property. You can opt either to make monthly interest payments, or to let the interest roll up and be repaid alongside the loan at the end of the mortgage term.
An advantage of an equity release mortgage is the “no negative equity” guarantee. This ensures that the amount to repay will never exceed the market value of your property. Consequently, this feature makes equity release safe and provides security to homeowners.
When considering this financial route, seeking equity release advice is very useful. A specialist adviser provides insights into the complexities of the equity release process, including the benefits, potential risks, and costs involved. They can give you a well-informed perspective of how much equity you can release, the impact on your estate and inheritance, and the effect on your means-tested benefits.
A specialist adviser will also guide you on the best way to release money from your property. Furthermore, they can offer advice on how best to manage the released equity, ensuring that you make the most of the tax-free cash.
Taking equity release can be an advantageous financial strategy, particularly for those struggling with debts. By releasing equity from your property, you can pay off existing loans and reduce monthly payments.
Consulting a debt adviser is recommended to provide further advice on whether equity release is the right step for you. They can explore other debt solutions and help you to understand the potential impact on your financial situation.
For instance, they can explain how taking equity release may affect your eligibility for means-tested benefits, or your future borrowing capabilities.
Equity release typically takes between 6 to 12 weeks, yet it can vary depending on several factors. The complexity of your financial situation, the efficiency of your equity release advisor, and the provider’s processes will all have an impact on this timeline. The timeline may also be influenced by the property value and whether a new property survey is required.
Depending on the equity release product and the provider that you choose, the equity release costs you are required to pay will vary. Costs include arrangement fees, valuation fees, and solicitor’s fees. For the services of a financial advisor, there may also be an advice fee.
If you do choose the more popular option of a lifetime mortgage, you will also have to pay interest on the loan. The interest can be paid monthly, or alternatively rolled up and paid at the end of the mortgage term. When deciding whether to release equity, it’s important to assess all of these costs.
Yes, you can use the funds from an equity release loan to buy a new property, offering a useful way to move to a more suitable home for your retirement. The amount you can borrow will depend on the value of your current property, as well as the terms and conditions of the equity release provider.
However, it is important to remember that there are costs and implications involved. If you moved to a property that doesn’t meet your providers criteria, for instance, you may have to repay the loan. Consequently, it’s advisable to discuss this with an equity release advisor before making a decision.
Releasing equity may affect your means-tested benefits, depending on your financial circumstances and how you choose to receive the tax-free cash. Your means-tested benefits are assessed based on your income and savings. Therefore, releasing a lump sum of tax-free cash from your home could push your savings over the limit. This would result in the loss of some or all of your benefits.
However, if you choose to receive regular payments instead of a lump sum, there may be less impact on your benefits. before proceeding with equity release, it’s important to seek advice from a financial advisor who understands means-tested benefits
Yes, having building insurance is necessary when taking out an equity release loan. This is because the loan is secured against your property, meaning that the provider needs assurance that their investment is protected. The building insurance policy needs to cover the full rebuilding cost of your property.
Before letting you release the funds, you may also need to provide evidence to the equity release provider. Therefore, it’s best to arrange building insurance as early as possible to make the equity release process as efficient as possible.
Where applicable, the adverts for Boon Brokers on this page have been signed off as a Financial Promotion by Boon Brokers Limited, to ensure that they are in compliance with Section 21 of FSMA. Boon Brokers Limited is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757.
The Age Partnership equity release calculator has been approved and provided by Age Partnership. Age Partnership is a trading name of Age Partnership Limited, which is authorised and regulated by the Financial Conduct Authority. FCA registered number 425432.
Get fee-free equity release advice from Boon Brokers.
Call : 0333 567 1607
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If you take out a product from Boon Brokers, we will receive a fee for introducing you to them.
Unlike most equity release advisors, Boon Brokers do not charge any fees! Have a free consultation to see how they can help.
You can speak to Boon Brokers on the number below and discuss your options
0333 567 1607
Use the equity release calculator and see how much money you could receive.
You can book a call back from for an equity release specialist, who can call you when it's conveniant
All equity release advice is provided by Boon Brokers Limited, which is authorised and regulated by the Financial Conduct Authority (FCA). The Financial Services Register number is 973757.
If you take out a product with Boon Brokers, we will receive a fee for introducing you to them. Boon Brokers provides advice for free and without obligation. By contacting Boon Brokers through us, the cost of any equity release product would be the same as if you had contacted them directly.
The fee we receive is used to help keep this site operational and to produce new content.
Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.
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