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Do I quality for equity release?

“Equity Release” is a financial term currently gaining momentum in retirement planning conversations for residents of the United Kingdom. Through equity release, providers or lenders can offer a way for older homeowners in the UK to get cash by tapping into the value of their residential property. Its provisions allow seniors to live in their homes without repayments. The provider gets paid only after the homeowner passes away and when the home is sold.

Do I Qualify for Equity Release?

If you can answer “yes” to all of the following questions, then you meet the basic requirements for participation in the lifetime mortgage equity release plan available in the UK.

Do you own your own home and live in the UK?

Does your property have a valuation of at least 70,000 pounds?

Do you have a significant amount of equity in your home or do you own it outright?

Are you 55 years of age or older?

The Criteria for Equity Release Approval

1. Your Age Requirement

You need to be 55 years old or older to apply. However, the older you are, the more home equity you can release and the greater your cash payment becomes. A few lenders actually require a minimum age of 60 for equity release applicants.

If your home is jointly owned and you submit a joint application, then the younger homeowner must be 55 as well. Yet, as with any rule, there are often exceptions.

Some equity release providers will allow a joint application if the person under age 55 is removed from the property deed. At least a few others will consider difficult or unusual circumstances and allow you to apply if you have reached the age of 50.

It is important to note, however, that equity release providers make calculations for loan approval by considering the age of the youngest individual on the application.

2. Your Home Ownership Requirement

If you own a home in the UK and you live there, be aware that your locale does not automatically mean you can apply for equity release. Lenders can set their own standards for where you must live to be eligible. In addition, local specifications can affect an equity release provider’s criteria for acceptance.

Generally, though, if you live on the mainland, there are a number of lenders ready and willing to take your application. In Northern Ireland, there are currently two providers servicing this area.

If you live on one of the islands, you may be excluded from equity release. For example, lenders bar the Isle of Man. There are some, however, that service the Isle of Wight. Checking with lenders to determine the areas they service ahead of the application process can save you much time and effort.

3. Your Home Valuation Requirement

Either at the time you contact a lender or after you submit an application, equity release providers will check the valuation of your home by using a variety of tools including housing market forecasts, the selling price of properties comparable to yours, the previous sale price of your home and online data about your specific area.

Additionally, a representative will make a home visit to determine if your home is of standard construction, free of clutter and free of needed repairs. Should your home be in disrepair, a lender could decide not to move forward with your application or require you to fix the problem before the loan process continues.

Although there is a minimum valuation of 70,000 pounds to qualify for equity release, there is no maximum. So, some providers will consider pricier properties. Others will not do so due to the financial risk involved. If you own a home valued at 1,000,000 pounds or more and you are interested in equity release, you may be able to find help from one of the larger providers in the UK.

4. Your Home Equity Requirement

Equity release is available to those homeowners in the UK whose property is debt-free or to those who have built a fair amount of equity in their homes. If you have a mortgage, it does not have to be paid off at the time you apply for equity release. However, you are required to release enough equity to cover the mortgage debt.

Keep in mind that one of the many services solicitors offers is contacting your financial institution to take care of your debt. If you choose, they can handle this matter for you.

Once your mortgage is paid, the additional equity you release can now be converted to a cash loan. Many equity release lenders set the minimum loan amount at 10,000 pounds; yet, there are also those that adhere to a higher baseline-15,000 pounds. Some even set it as high as 100,000 pounds.

Taking a good look at your financial goals can help you determine how much cash you should request from your lender. Additionally, talking honestly about your finances with an equity release provider or a counsellor can help you make the right decision for both you and your loved ones. Once you receive your equity release cash, it is tax-free money. You can spend it any way you wish.

Other factors to consider

Yes, there’s your credit report history. And there’s good news here.

Some equity release lenders conduct a limited credit check on applicants. Others will investigate credit history but will be very lenient on their loan decisions. Most don’t ask about income or expenses unlike providers of retirement interest-only (RIO) or retirement mortgages.

The main reason for these procedures is that property owners are not required to make repayments like they would if they had a traditional mortgage. So, homeowners with marginal or poor credit should not hesitate to apply for equity release. Most lenders are mainly concerned with helping you obtain your financial needs.

The only bad news is that if you have declared bankruptcy, you will not be able to obtain equity release.

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