Equity Release for Terraced Houses

If you are considering releasing equity from your house but are concerned that you might not be able to due to the fact that you live in a terraced house, then you will be pleased to hear that you are able to release equity from your home.

Many of the same features apply if you were to release home from a detached property, however there are a number of things that you will need to consider.

For example, you are only able to release equity from a property that is worth £70,000 or more. Some terraced properties in the UK might not be worth this amount, so it is always worth having your property valued prior to applying for equity release on your terraced home.

What is equity release?

Equity release is a form of loan, or mortgage that allows you to release a percentage of the value of your home without having to sell up or move out. You get to release as much as 90% of the value of your home, which you are then free to spend on whatever you want [1].

Many people living in a terraced house might choose to release equity from their home to help pay for home renovations, holidays, retirement funds and even care costs.

There are two types of equity release, including lifetime mortgages and home reversion plans. Lifetime mortgages are the most popular, as you only have to repay the loan once you pass away or move into a care home, when the house will be sold and the loan repaid through the proceeds. Home reversion plans involve selling a percentage of your home to a lender in exchange for your equity [1].

In order to qualify for equity release, you have to be aged 55 or over, own your own property worth at least £70,000 and have paid off the majority, if not all of your pre-existing mortgage.

Can You Get Equity Release on a Terraced House?

Yes, you are able to release equity from your terraced house. The property should be in good condition, favour bricks and mortar construction and ideally should be a freehold property, although some leaseholds will be eligible.

Your home should be made out of standard materials, as some non-standard materials such as concrete, steel, timber or tin or thatched roofs will not be considered by some lenders [2].

When applying for equity release, your lender will also consider your credit history, your overall health as well as the condition of the property.

Can I use equity release on an ex-council terraced house?

Yes, you are able to release equity on an ex-council terraced house, as most lenders will allow this. However, some lenders do have stricter criteria when it comes to ex-council houses and some lenders do not accept them at all.

For example, if the property is now valued at less than £70,000 then most lenders will reject it. Some lenders have even been known to up their minimum property value to £100,000 or even £120,000 on the basis that the property is an ex-council house.

How to check if my property is an ex-council house

Some people might be unaware if their property is an ex-council house or not. The easiest way to check if it is an ex-council house is to check the deeds of the property. You can submit a search with the Land Registry here.

Advantages of Equity Release for Terraced House Owners

There are numerous advantages to releasing equity from your home, even if you live in a terraced house. For example, you get to remain living in your home for as long as you want, and no lender ever has the right to ask you to leave or sell up until you pass away or move into a care home.

Likewise, you do not have to repay a penny until this point. There are also no mandatory monthly repayments if you opt for a lifetime mortgage, as you only pay through the proceeds of the sale of the home once you pass away or move into care.

You can use the money you receive to pay for a whole host of things, such as home improvements, a holiday, to pay off any debt or to gift to your loved ones or grandchildren.

Potential Challenges or Limitations

However, there are a number of limitations involved. For example, the value of your property will be based on market demand, and an agent might deem the value of your property lower than the market value.

Likewise, opting for equity release means that your loved ones might receive less inheritance, as the proceeds from the sale of your home pay off the loan amount.

You are also charged interest on your loan, which will compound over time and add to the overall loan amount.

How Much Can You Release from a Terraced House?

The amount you can release from your home will be based on a number of factors, including the value of your home, its condition and your health. Your age will also have a large impact on how much you can release, as the older you are, the more likely you are to be able to release a significant amount.

Typically, you can borrow up to around 40% of the total value of your home, or, more accurately, to the value of your equity in your home, so discounting the amount owned by the bank under your mortgage. This is particularly impactful if you need equity release to pay off an interest-only mortgage.

Also, the older you are, the more you can typically borrow under an equity release agreement. So if you’re in your eighties, you can typically release more compared to someone in their sixties or seventies.

Lender Criteria for Terraced Houses

There are a number of lending criteria that you should consider before applying for equity release. Below are some questions to ask yourself:

• Are you aged 55 or over?
• Have you paid off the majority if not all of your pre-existing mortgage?
• Is your property made from standard materials, such as bricks, blocks and tiles?
• Is your property worth £70,000 or more?
• Is your property in a desirable location, and what are other properties in your area being valued at?

Alternatives to Equity Release on a Terraced house

If you do not qualify for equity release on your terraced house, then there are a number of alternatives available to you. For example, you might be able to take out a traditional loan, remortgage on your current property or even sell up to downsize your property [3].

You might also be eligible for a retirement interest only mortgage, which will allow you to gain access to some cash whilst only having to repay the interest on your loan each month [3].

If you are struggling for income during retirement age and are worried, then you should also speak to your local authority about what type of benefits, grants or schemes you might be eligible for [3].

Steps to Take Before Applying for Equity Release on a Terraced house

There are a number of steps you should consider before applying for equity release on your terraced property. For example, you should seek independent legal advice from an equity release solicitor, and get your house valued.

You should also speak with your family and loved ones about the impact opting for equity release might have on them, especially anyone who might be expecting to receive any inheritance once you pass away through the sale of the house.

It is also recommended that you shop around and do as much research into equity release as possible, and speak to an equity release specialist, like the one at Equity Release Warehouse.

FAQs about equity release on a terraced house

Below, we answer questions around equity released on a terraced house:

1. Will equity release affect my state benefits?

Yes, if you receive means-tested benefits, then applying for equity release might have an impact. You should speak to your local authority or equity release advisor for more advice and support if you are concerned.

2. What happens to my home after I die or move into care?

Once you pass away or move into a care home, your property will be sold and the proceeds from the sale of this property will pay off the equity release loan in full, hopefully including any compound interest.

If your property proceeds do not cover the loan in full, then you will be protected by the no negative equity guarantee, that means that your lender will step in and pay any shortfall.

As you can see, there are a whole host of benefits when it comes to releasing equity from your terraced house, including being able to gain access to some much needed cash, and being able to spend the money on home improvements, renovations, loved ones or a better lifestyle in later life.

There are many different lenders and schemes out there, which can be tricky to navigate. This is why it is always recommended to speak to a qualified equity release adviser about your situation, in order to make an informed decision.

Speak to our friendly and helpful team by calling us on 0330 058 1579 or by visiting us online at www.equityreleasewarehouse.com for a free quote or consultation.

References

[1] https://www.ageuk.org.uk/information-advice/money-legal/income-tax/equity-release/

[2] https://www.equityreleasecouncil.com/what-is-equity-release/faq/why-are-some-types-of-property-not-acceptable-to-equity-release-providers/

[3] https://www.thetimes.com/money-mentor/mortgage-property/equity-release/equity-release-alternatives