Equity release for over 55s explained in 2024

An equity release mortgage is designed to last for life. You are not required to make any monthly repayments, still have the freedom to move home and you can release equity if you have an existing mortgage on your property. You just need to repay the outstanding debt with the money you release.

There are two types of equity release to choose from: the more popular lifetime mortgage and the home reversion plan. Here’s a close look at how each plan works:

Lifetime mortgage – with this option you need to be over 55 years of age, a loan is secured against your property which is repaid from the sale of your home when you die or move into permanent care. Unless you choose to, there are no monthly repayments to make and you continue to own 100 percent of your property value. This means you will benefit from any increase in property prices.

The interest charged on a lifetime mortgage is compounded, so you pay interest on the interest already accrued. This means the loan will grow at a faster rate compared to a standard mortgage. However, the Equity Release Council’s ‘no negative equity guarantee’ ensures that you will never owe more than the value of your home.

Home reversion plan – with this option you need to be over 65 years of age and agree to sell all, or a percentage of your property. There is no interest charged however the lender will typically pay you less than the market value for your home.

You can remain living in your home rent free for life or until you move into permanent care, but you will no longer be the sole owner. This means you will only benefit from any increase in house prices on the percentage of property you own.

In 2023 the average UK equity release customer borrowed around £100,000 or 25% of their property value but the amount of equity you can release will depend on your own personal circumstances including your age and the value of your property.

An equity release mortgage will impact the value of your estate and could affect any benefits your currently receive, so it’s not the right choice for everyone. Before going ahead you should seek professional advice, consider the pros and cons and discuss the alternatives.

It is also important to talk to family to ensure they are happy with whatever you decide.

Your eligibility for equity release will depend on several factors. This will include your age and the value of your property but ultimately the requirements will be dictated by your providers lending criteria.

Typically to qualify for a lifetime mortgage the following should apply:

• You or the youngest home owner must be at least 55 years of age.
• Your property must be your main residence and located in the UK or Northern Ireland
• The value of your property should be at least £70,000
• The property must be habitable and in good state of repair

The lending criteria for a home reversion plan is similar to an equity release mortgage however the minimum age is 65 years of age.

To understand more on how to qualify, read our guide on what else can affect your eligibility for equity release?

Equity release is a Financial Conduct Authority (FCA) ‘advised product’ which means that all companies offering this service must provide advice. This can either be via the lender themselves, an Independent Financial Adviser (IFA) or an equity release broker.

The advice they provide should answer any questions you may have and include a review of your personal circumstances, the benefits and risks and any alternatives available to you. As Martin Lewis always says, it’s important to consider all of your options including downsizing first before making any decisions.

Anyone advising on equity release mortgages must be qualified to do so. Choosing a specialist adviser who is a member of the Equity Release Council (ERC) means you will go through a structured financial advisory process, however be aware that the adviser may only provide advice on the products they offer.

A qualified IFA or specialist mortgage broker that has access to more than one lender means you can compare equity release plans across a range of providers, not just individual companies. This will give you a much broader view of the best and most suitable company for you.

It’s important to remember that by choosing a lender who is a member of the EHC, you are protected by their rules and safeguards. Therefore avoid equity release companies who don’t have their seal of approval.

To help you understand more about equity release and answer any questions you may have, we work in association with Age Partnership. They offer initial free no obligation help and advice and have agreed exclusive plans with leading lenders that you may not be able to get elsewhere.

Alternatively you can find details for other specialist brokers, IFAs and providers on the Equity Release Council’s ‘find a member’ website.

If you have any questions and or require advice please call us on 0800 133 7656 or request a call back – there is no obligation to proceed and there are no costs for this advice*.