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Equity Release in Scotland

Lifetime Mortgage & General Equity Release Advice in Scotland

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Equity Release in Scotland

People all over Scotland are considering releasing equity from their home. Equity release in Scotland is a really clever strategy which allows people to unlock the equity that has built up in their home over the years.

When you release equity from your home in Scotland, the money that you receive will be tax-free.

You can either gain access to this money in one large lump sum, or you can choose to gain access to your money through monthly instalments.

The great thing about equity release in Scotland is that you can use your equity release money however you want.

You can use the money to pay off any debt that you might have, or you can use the equity release money to pay for health and care costs as you enter later life. You might choose to use the money on a second property, or to pay for a nice holiday or a new car.

There are a number of factors in place when it comes to qualifying for equity release in Scotland.

For example, you will need to be aged 55 or over, own your own property in the UK which is worth more than £70,000 and have paid off a significant amount of your mortgage over the many years that you have owned it.

If you are considering equity release in Scotland, then speak to a member of the Equity Release Council, where our expert advisors will use our very own equity release calculator to ensure that you get the very best deal available to you.

Please call our 24-Hour Helpline: 0330 058 1579

Can You Get Equity Release in Scotland?

The short answer is that yes, you can get equity release in Scotland. When you release equity from your home in Scotland, you are able to spend your money however you want to, and will be charged interest on any money you withdraw from your house.

As with other places in the UK, you will only repay the equity release loan when you pass away or move into long-term care. When your next of kin and loved ones sell your property, the money from the sale will cover the cost of the loan.

Across Scotland and the rest of the UK there are two main different types of equity release. These two main types of equity release in Scotland include lifetime mortgages and home reversion plans.

If you are considering equity release in Scotland, then it is important to understand the differences between lifetime mortgages and home reversion plans, some of which are explained below.

1. Lifetime mortgage

Lifetime mortgages are the most popular type of equity release in Scotland and are used by millions of people across Scotland and the rest of the UK.

With any lifetime mortgage across Scotland, you will be taking out a loan and be using your house as security on that loan.

You will remain the sole owner of your house but will be able to gain access to the equity that has built up in your property.

You are able to opt for your money in one large lump sum or can choose to receive your equity in smaller more frequent payments. It’s entirely up to you and your circumstance.

If you qualify for it, your lender might even allow you to opt for a mixture of lump sums and frequent monthly payments into your bank account.

If you want frequent payments, you might be better suited to a lifetime drawdown mortgage or an income lifetime mortgage.

It is important to remember that with a lifetime mortgage, you will be charged interest on your loan.

As with any loan, if this interest is left to build up then it will turn into compound interest. However, if you want to avoid this then you can choose to pay off some of the interest on your loan through monthly repayments.

In order to qualify for a lifetime equity release in Scotland, then you will need to be aged over 55 years old, own your own house in the UK with a value of £70,000 or more and you will need to have paid off the majority of your pre-existing mortgage by the time you come to apply for your equity release loan in Scotland.

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2. Home reversion plan

A home reversion plan is similar to a lifetime mortgage, but is slightly different. Due to these differences, it is deemed less popular than a lifetime equity release mortgage across Scotland and the rest of the UK.

When you opt for a home reversion plan in Scotland, you are choosing to sell a certain percentage and part of your much-loved home to the lender. In return for part of your home, you will be given your equity.

Again, you can choose to receive this in one large lump sum, or through a series of smaller instalments.

Home reversion plans are less common than lifetime mortgages across Scotland because they mean selling off a part of your home, and therefore potential inheritance that you were planning on giving to your family members and loved ones to the bank and lender.

This means that you lose ownership of a part of the house – even though you can remain living there without having to pay any rent.

It is also highly important to understand that when you choose a home reversion plan in Scotland, you will also be selling a percentage of your beloved home back to the lender for less than the current market value.

This means that you will get less by selling your house this way than you would if you were to put your house on the property market.

It is also really important to understand that less people qualify for a home reversion plan, as they will need to be aged 65 or over in order to qualify.

If you think you would benefit from home reversion equity release in Scotland, then speak to our team at Equity Release Warehouse for advice.

Please call our 24-Hour Helpline: 0330 058 1579

Does Equity Release in Scotland Work any Differently to The Rest of the UK?

The short answer is that equity release in Scotland works in the same way as it does throughout the rest of the UK.

However, what your equity release plan looks like will depend not on where you are in the country, but on which lender you choose to opt for. For example, the benefits and rules differ from lender to lender.

Nevertheless, the qualification criteria do tend to remain the same across most lenders in Scotland, mainly focussing on the below factors.

  • You usually need to be aged over 55 years old for a lifetime mortgage
  • You usually need to be aged over 65 years old for a home reversion plan
  • You need to be in good health, with good life expectancy
  • You will need to have a good credit history. Although having a bad credit history won’t stop you from getting an equity release plan, it might limit how many lenders will accept you
  • Your house needs to be valued at least £70,000 and needs to be in good condition

It is important to consider that if you live off of mainland Scotland, on one of the surrounding islands, then the case might be different.

This is why it is always important to speak with an equity release advisor before choosing your plan, as it might not be available to you if you live in a remote part of Scotland off of the mainland.

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How Do I Choose the Right Equity Release Plan for Me?

Choosing the right equity release plan in Scotland for you is extremely important. It is not something that can be rushed into, and you must think carefully about why you are opting for equity release in the first place.

It is important to take into consideration how much equity you really, truly need. You should not take out more money than you need to, as you will be paying interest on this loan which will quickly compound if you are not careful.

You will also need to take into account your age and your current health, as this will impact how much equity you are able to release from your home in the first place.

You will need to think carefully about whether your situation calls for a lump sum or a series of smaller instalments.

For example, if you are hoping to spend your equity release on a holiday then a lump sum might be better for you.

However, if you are hoping to spend your equity release money on a better and more comfortable lifestyle, then monthly instalments are better for you [1].

It is important to remember that you must speak to an equity release mortgage advisor before you apply for your equity release scheme, as you will need advice and support through the process.

You must also be open and honest with your equity release advisor about your current financial circumstances, which will include your motivation and reasoning for wanting to release equity from your home and how you plan on spending the equity you do receive.

Your equity release advisor in Scotland will help you choose the right equity release plan for you, and will ensure that you are likely to be accepted before applying.

You must be open to all of the suggestions that your equity release advisor suggests, even if they suggest a plan and equity release scheme you did not originally consider.

All equity release advisers across Scotland and the rest of the UK should be regulated by the Equity Release Council which helps to create and maintain standards across the equity release financial industry.

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What Can I Spend My Equity Release Money On?

One of the biggest benefits when it comes to equity release in Scotland is that you are able to spend your money in lots of different ways, and there are very few limits on what you can buy with it.

Some people might choose to spend their money on themselves. You might fancy treating yourself to a new car or a once-in-a-lifetime holiday that you have always dreamed of. Other people choose to spend the money they receive on something more practical, such as home improvements.

Home improvements are a great way of increasing the value of your property, and you might even benefit from some home improvements as you grow older.

For example, an extension might create some much-needed space, or you might choose to make your house more comfortable and practical if you suffer from ill health or old age.

Other people might choose to pay off any debt or credit cards with their equity release money, which is always recommended if you are suffering from debt in later life [1].

People have also been known to spend their equity release money on their loved ones and family.

For example, you might want to give your grandchild a helping hand when it comes to University fees or saving for a deposit on a house. Others choose to start up a new business or investment.

If you still haven’t paid off your entire mortgage by the time you apply for equity release in Scotland, then you will most likely need to use some of the money you receive through your equity release in Scotland to pay off your pre-existing mortgage. The rest you can enjoy and spend however you want to.

If you are considering equity release in Scotland and want more information on how you can spend these funds, then speak to a member of the Equity Release Warehouse team for advice and support.

Please call our 24-Hour Helpline: 0330 058 1579

What is the Negative Equity Guarantee?

With more and more people living longer and longer, the interest that adds up on your equity release scheme could one day grow bigger than the value of the property you own, depending on the current housing market’s performance.

Lots of people worry about this happening when it comes to equity release in Scotland. This is because they do not realise that equity release plans in Scotland all benefit from a no-negative equity guarantee.

The no negative equity guarantee ensures that even if the property sells for less than the amount of debt you are in, you and your next of kin will not be liable to pay the difference. The lender will be responsible.

However, the property market is usually on the rise, meaning that when it comes to selling your house and repaying your debt after you pass away, your family will most likely be entitled to a significant amount of inheritance after the loan is paid off.

The Equity Release Council [2] ensures that all equity release schemes across Scotland and the rest of the UK benefit from a no-negative equity guarantee.

You should always check with your lender and your equity release advisor that your equity release plan includes a no-negative equity guarantee. This not only protects you but your family from any future debt or financial stress or uncertainty [2].

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What are the Alternatives to Equity Release?

It is important to remember and accept that equity release in Scotland is not the only and best option for some people. This is why it is important to always be aware of the alternatives to equity release, and consider them carefully.

For lots of people, selling their home and downsizing to a smaller property might be the best option. This means that you will sell your current home for a large amount and buy a cheaper and smaller property.

For lots of people aged 55 or over, this seems like the best logistically option. It makes sense, right? Lots of people aged 55 or over no longer live with children or grandchildren, so don’t need the three-bedroom, large home they once needed.

However, lots of people aged 55 or over have built up many memories in their home over the years, and simply do not want to sell.

As house prices are also on the rise, selling up might now mean moving out of the local area and away from family and loved ones who might live nearby.

Instead, you might want to look into a bank loan or credit card, which might charge you less interest on a loan depending on current interest rates as set by the Bank of England [3].

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How Can I Be Sure I’m Getting the Best Advice?

The great thing about equity release in Scotland is that all equity release advisors and plans across Scotland and the rest of the UK need to be regulated by the Financial Services Conduct Authority [4], known as the FSA.

The FSA makes sure that everyone gets a fair deal, and if someone is offered an unfair plan or deal then the FSA will step in and take legal action. Due to this, the equity release industry is good at being fair and monitored [4].

The Equity Release Council also ensures that all plans and advisors are fair and responsible, offering customers only the best and most sensible plans. You must ensure that your equity release advisor is monitored and regulated by the Equity Release Council.

Equity release advisors in Scotland also play a key role when it comes to ensuring that you are getting the very best advice when it comes to equity release in Scotland.

They will ensure that you are given all of the appropriate and necessary information, and will even draw up a mortgage illustration for you so that you are able to see just how much money you will receive, and how much you will need to repay in the form of interest.

You need to be really clear and honest with your equity release advisor so that they have a clear and true picture of your current financial situation.

You will also need to be really honest about how you want to spend your equity release money.

You should not be surprised if your equity release advisor asks you questions about these things during your first or second meeting with them.

Please call our 24-Hour Helpline: 0330 058 1579

What Does The Equity Release Council Do?

Below, we outline what the Equity Release Council does:

1. They set standards

The Equity Release Council [2] is fantastic at setting standards across the equity release industry.

For example, the Equity Release Council ensures that all interest rates on equity release loans must be fixed and if they are not, then the variable rate must be capped throughout the entirety of the loan.

The Equity Release Council also ensures that individuals are able to remain living in their home for as long as they want, and that no lender has the right to ask them to leave.

They also ensure that you only have to repay the equity release loan either when you pass away or move into long-term care for health reasons.

As discussed previously on this page, the Equity Release Council also ensures that all equity release loans in Scotland must include a no negative equity guarantee which means that even if the value of your house is not as much as the loan taken out, neither you nor your family will be liable to repay the difference.

The Equity Release Council [2] also set standards when it comes to voluntary repayments, which states that all equity release loans must allow individuals to make voluntary repayments if they choose to, penalty-free.

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2. They provide you with the best information available

Equity release advisers in Scotland are also there to provide you with the best information available to them, and will be able to lay out the pros and cons to equity release.

They will never try to sell equity release to you, they are simply there to provide you with the information so that you can make the best decision that is right for you.

They will also be really clear about the costs surrounding equity release in Scotland, including the set up costs, the costs of a valuation and how much you will need to repay in interest.

Your equity release advisor will also highlight what the consequences will be to any tax or means-tested benefits you currently receive or are due to receive in the future.

Your advisor will also be able to talk through what would happen if you choose to ever move home in the future, or if the value of your house changes dramatically.

3. They deal with any complaints across the industry

One of the best things the Equity Release Council does is deal with any complaints throughout the industry.

Although the industry is highly monitored and regulated by the FCA and Equity Release Council, from time to time mistakes do happen and things can go wrong.

If an individual has a complaint, either against an advisor or a lender, they will need to make them aware and try to resolve the issue with them before doing anything else.

If this proves difficult, then they will need to report this issue to the Equity Release Council. They will be referred to the Financial Ombudsman Service [5], who will then undergo an impartial investigation.

Please call our 24-Hour Helpline: 0330 058 1579

Final Considerations before Choosing Equity Release in Scotland

1. You will end up owing more money

You will need to think carefully about how equity release in Scotland might affect you and your finances in the long term, as you might end up owing more money in the future.

The interest on your equity release loan will compound over time, which could also mean that your next of kin and loved ones might not get as much inheritance if you opt for a scheme such as the home reversion plan.

In addition to this, if you do not pay off the interest on the equity release loan, then this will add up and compound, and will eventually need to be repaid upon the sale of the property, meaning that your next of kin will receive less money.

2. Downsizing your property might be a cheaper option

If you are aged over 55 but do not want to consider equity release, then you might want to consider downsizing your property as a way of gaining access to more money.

As you can see above, the costs of equity release in Scotland can mount up. However, the costs of downsizing your property could be completely free.

3. Speaking to an equity release advisor is a must

In order to apply for an equity release loan, it is incredibly important that you speak with an equity release advisor so that they can offer you the best advice and plans in your area.

If you want more information on equity release in Scotland, then call Equity Release Warehouse for a free call with our specialists and advisors. They will be able to provide you with information on how the process works, as well as the pros and cons when it comes to different equity release plans across Scotland.

Please call our 24-Hour Helpline: 0330 058 1579

References

[1] https://www.nationaldebtline.org/fact-sheet-library/equity-release-s/

[2] https://www.equityreleasecouncil.com/what-is-equity-release/

[3] https://www.bankofengland.co.uk/knowledgebank/what-are-interest-rates

[4] https://www.fca.org.uk

[5] https://www.financial-ombudsman.org.uk

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