If you’re over 55 and own your own home, there’s an option that gives you an influx of cash and, potentially, a more comfortable retirement income. Equity release has been available for decades, but it was often seen as a controversial, unregulated product due to people losing their homes or ending up much worse off than pre-equity release.
Now, equity release has seen a revival in the UK, generating upward of £6.2 billion in 2022. This isn’t to say there aren’t risks or big decisions to be made, but now could be the time to explore how much equity release could do for you.
Read on to learn more about how it all works, Bower Home Finance, and the equity release options we facilitate.
Learn How Much Equity You Have
The simplest way to explore property equity is to determine how much of your home you own. If your home is worth £500,000 but still has £100,000 left on the mortgage, your home equity is £400,000. Once your mortgage has been paid off, you’ll have 100% equity.
Once you’ve got a figure, you can start looking at equity release. The greater your percentage, the more options you’ll likely have to release equity. The two options for equity release are a Lifetime Mortgage and a Home Reversion.
This equity release product works by taking out a mortgage against your main residence while retaining ownership. During the lifetime mortgage, you can make repayments and pay interest or let the monthly interest roll up. The loan amount and any built-up interest are paid back by selling the property when the last borrower dies or when they move into long-term care.
Some lifetime mortgages now offer you the option to pay up to all the interest, while some let you pay off the interest and capital.
Like a traditional mortgage, these options vary from lender to lender.
Alternatively, you can choose to use a home reversion provider. In return for part or all of your home, these equity release products either pay you a lump sum or regular monthly payments. When you choose this option, you can continue living in the property until the remaining borrower dies on the condition you maintain and insure.
Usually, this option gives you between 20% and 60% of the market value of your home. Once the home reversion plan is completed, the provider effectively co-owns your home.
How to Release Equity from Your Home
The first step when releasing equity is to consult a professional. They’ll review the value of your property, your existing mortgage, and whether you meet the qualifying criteria. The criteria for equity release include:
- Age – Typically 55 or older, there’s a minimum and maximum age for equity release.
- Property Value – There is a minimum value for homes.
- Applicants – You can have up to two applicants.
- Ownership – You must own and use the property as your primary residence.
- Location – Homes in England, Scotland, and Wales usually qualify – Northern Ireland can be trickier.
- Property Construction – Typically, your home needs to be of “standard construction”, i.e. bricks or stones
- Property Condition – Your home should be in good condition; a valuation will confirm this.
Once you’ve confirmed the above with an equity release provider, they’ll work to find a solution that works. Releasing equity can be a simple process, and your advisor will walk you through the fine details, timeline, financials, and any implications from the agreement.
Before contacting a home equity release provider, you can find out how much your home could hold with our equity release calculator. This can also help avoid issues such as negative equity and ensure that when you’re releasing cash, it will benefit you.
Making the Decision
At Bower Home Finance, we offer first-rate advice about the types of equity release. Our financial support and advice ensure that you make the right decision about a potential equity release mortgage and can access this tax-free cash in one lump sum without stress. Loans secured in this way make more financial sense than taking on other debts unnecessarily.
Tapping into your property’s value holds enormous benefits, including regular payments into your bank account that provide much-needed retirement income. It avoids borrowing money, and the interest rate can often be locked or limited to protect you moving forward. All equity release work is undertaken by a professional team with a financial adviser assigned to your case.