Equity Release on listed buildings including Grade I & II
Yes, you are able to release equity if your property is listed. This includes Grade 1 and Grade 2 listed buildings. However, you might be restricted as to which lender you can choose to go with, as not all lenders will allow it.
Equity Release Recapped
Equity release is a type of loan that allows homeowners over the age of 55 to unlock the value of their home in either one large lump sum or through a number of smaller payments [1].
This is great for anyone who is sitting on a substantial amount of value in their property but are struggling to get by day to day with a lack of income or pension.
The most common type of equity release loan is a lifetime mortgage, which allows you to release a set amount of money from your home without ever asking you to sell up or move out.
You only have to repay the loan once you pass away or move into a care home and the interest you are charged will be fixed. Once you pass away or move out due to care needs, your home will be sold, and the proceeds will be used to pay off the loan in full [1].
If the proceeds from the sale of your home fail to cover the loan amount (for whatever reason) then your lender will step in to pay under the no negative equity guarantee.
This guarantee ensures that your next of kin(s) and loved ones are not left with the bill once you pass away.
Remember, you will be charged interest on your equity release loan. Although this interest is fixed, it will compound and snowball year on year, increasing your overall loan amount.
When you pass or away or move into a care home, the proceeds from the sale of the home will pay off the initial loan amount plus the added interest. Anything left over after paying off the equity release loan will go to your loved ones.
What exactly is a Listed Building?
A listed building is a structure that has been officially designated as a building with certain or specific architectural or historical interest.
Being a listed building means that they are on a certain register and that there are certain restrictions involved in terms of what you can change about the building [2].
Grade 1 listed buildings are of exceptional interest, meaning that there is very little you can do to change the structure in any way. This is very rare and only approximately 2.5% of all buildings are Grade 1 listed [2].
Grade 2 listed buildings are of important specialist interest and must be treated with care, although there might be fewer restrictions in terms of what you can and cannot change about them [2].
Grade 3 listed buildings are the most common and make up around 92% of all listed buildings.
They are still of specialist interest, but you might be able to extend or knock down a wall or two in the process of renovating [2].
Can you get equity release on any property?
No, not all lenders will allow certain types of properties the opportunity to release equity.
Your lender will take a number of things into consideration when they value your home and assess its equity release potential, including its location, its current market value, its condition, as well as what type of materials it is made of and what type of property it is. Each lender has different criteria.
Luckily, some lenders are open to releasing equity on a listed building, although not all are.
You might find yourself having to avoid opting for a mainstream lender if your property is Grade 1 or Grade 2 listed, and only some of the lesser known lenders, with the less attractive products and interest rates will allow you to release equity on a listed building.
Why lenders won’t allow for equity release on certain properties
For lenders, when it comes to equity release, they need to ensure that if they release the funds to you now, that they will make their money back (and then some) in the future.
Essentially, when they come to assess your property for its equity release potential, they are looking for any factors that they would deem a ‘red flag.’
These ‘red flags’ include things such as structural issues, whether or not your property is made from more flammable materials, whether it is at risk of things such as flooding or if your property has subsidence or asbestos.
Some of these issues might be able to be fixed, but an equity release provider would be cautious to release the funds on a property that might not necessarily sell for what it is worth today in a couple of years or even decades time.
Remember, your equity release loan continues for as long as you live or until you move into a care home.
So, if you release equity aged 55, your loan could continue for another 20 years. In that time, a lot can change, including your property’s value.
One of the best things for borrowers about equity release is that if the proceeds from the sale of the property once you pass away or move into care fail to cover the initial loan amount (plus any added interest) then your property will be covered by the no negative equity guarantee.
This guarantee ensures that if this happens, your lender will have to pay the difference and not you or your next of kin(s).
Properties that don’t qualify for equity release
As discussed above, not all properties will qualify for equity release.
There are a number of properties that do not qualify for equity release, including park home, shared ownership properties, commercial properties, holiday homes or Airbnb’s or even studio or basement flats.
1. Park homes
There are a number of different reasons why lenders are less keen to release equity on these types of properties.
For example, park homes are usually situated on a protected site, and the land that the park home is situated on is usually owned by someone else, meaning that the property is a leasehold.
This means that there is very little to secure the home against, so lenders will typically avoid it where possible.
2. Shared ownership properties
Likewise, equity release lenders are less likely to want to release equity when your property is a shared ownership. This is because lenders want homeowners to own 100% of their property before they release equity on it.
3. Holiday homes
Again, in order to qualify for equity release, the property you are releasing equity from needs to be your main residence. A holiday or home or a second home is not the place where you spend the majority of your time and therefore would not qualify for equity release.
However, if you are wanting to purchase a second home then you can use equity release to fund a second time by releasing equity from your main residence.
Other types of properties with caveats when it comes to equity release
For some lenders, it is not black and white. They will allow you to release equity on certain types of property although they have strong caveats. There are some examples of this below, including of course Grade 1 and Grade 2 listed buildings.
1. Properties with non-standard materials
If your property is made out of materials such as thatch, concrete, timber or steel, then your property might be considered non-standard when it comes to equity release. This means that lenders who would be open to lending to you are harder to come by and might only have a few products suitable to you.
2. Ex-council properties
Ex-council properties can be eligible for equity release, but some lenders are very strict when it comes to where they are and how long ago the discount period set by the local council ended.
3. Retirement properties
There are lots of lenders who will release equity to you if your property is a retirement property, although there are fewer than if your property was a standard property. Likewise, the lenders that are willing to release equity to you might have less products that you are eligible for.
Speak to Equity Release Warehouse
As you can see, releasing equity from your home is not always straightforward and for some people, lenders might have caveats in place depending on what type of property you live in, whether your property is made from certain materials or even whether your property is classified as a listed property.
If you are ever unsure as to whether or not your property is eligible for equity release, then you should speak to a qualified equity release adviser who will be able to point out any potential areas for concern or doubt.
Your equity release adviser will be able to recommend the best lenders for your situation and will be able to talk you through all the different product choices, including lifetime mortgages and home reversion plans.
They will never put any pressure on you to release equity and will only ever provide you with all of the information and facts that you need to make an informed decision.
References
[1] https://www.ageuk.org.uk/information-advice/money-legal/income-tax/equity-release/
[2] https://historicengland.org.uk/listing/what-is-designation/listed-buildings/
