With equity release you can borrow around 20% to 60% of the value of your home with a lifetime mortgage, or as much as 80% to 100% of the property’s value if it is a home reversion scheme.
Equity release is commonly used to release money that is tied up in your home and the minimum age requirement is 55 years old. Whether you have paid off your mortgage in full or have a mortgage balance outstanding, an equity release plan is designed to give you a large cash sum that can be used to add to your retirement income or for other important lifestyle purposes such as home improvements, paying for weddings or gifting to your children.
Equity release is categorised as either a lifetime mortgage (release 20% to 60%) which runs until you die or go into long-term care and you can still retain ownership of your property. Or there is a home reversion scheme (release up to 100%) where you are physically selling off a stake in your home but not keeping ownership when you die or go into care.
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See Also
Can I get equity release with an outstanding mortgage?
Can I still leave inheritance to my children?
Do you need good credit to be eligible for equity release?
What Determines The Percentage That I Can Get From Equity Release?
- Your age and health
- Property value and condition
- Outstanding debts
Age and Health– With equity release plans available to people from 55 and over, you will typically be eligible to borrow a smaller amount if you are closer to 55. This is because it will take longer for the equity release lender to recover their investment, especially if you live for another 20, 30 or 50 years.
Usually the most you can release as a person aged 55 is around 28% of your property’s value. For more information and options, see equity release for under 55.
However, if you are older and living in your 70s and 80s, this could make you eligible to release higher percentages of 50% or 60% of the property’s value.Your health status may also be taken into account, since someone with ongoing medical conditions may be viewed differently in terms of what percentage they can release.
Property Value – The value and condition of your property will be important when determining how much you can release and what percentage – since the equity release lender ideally needs to lend against something that will maintain or increase in value over time. Your property will be subject to a professional valuation prior to approval, but other factors include the type of property, the condition, the materials of the building, average house values in the area and its potential growth.
Outstanding Debts – An equity release provider will need to consider any other outstanding debts that you have both secured and unsecured. The lender will assess whether you have an outstanding mortgage and any other secured loans since these will ideally need to be cleared for the equity release plan to go ahead and for the lender to take first charge of the property. If you have a lot of debts outstanding, this may require the lender to offer you a higher percentage to pay these off, whilst taking your age and property value also into consideration.
How Much Equity Release Can I Get Based On My Age?
| Age | Value of your home | ||||
| £150,000 | £200,000 | £300,000 | £400,000 | £500,000 | |
| 55 | £36,000 | £48,000 | £72,000 | £96,000 | £120,000 |
| 60 | £44,250 | £59,000 | £88,500 | £118,000 | £147,500 |
| 65 | £52,650 | £70,200 | £105,300 | £140,400 | £175,500 |
| 70 | £61,650 | £82,200 | £123,300 | £164,400 | £205,500 |
| 75 | £70,650 | £94,200 | £141,300 | £188,400 | £235,500 |
| 80 | £77,400 | £103,200 | £154,800 | £206,400 | £258,000 |
| 85+ | £81,150 | £108,200 | £162,300 | £216,400 | £270,500 |
Is There a Minimum or Maximum Amount That I Borrow From Equity Release?
Equity release lenders may have a minimum amount you can borrow, but the amounts typically range from £10,000 to £100,000 loans with the average loan around £65,000.
There may be a maximum amount depending on your age, with 20% of your property’s value usually the maximum for people aged 55, with some lenders increasing this to 28% based on good health conditions.
How Do You Calculate Equity Release?
To calculate equity release, you simply need to find out how much equity you have in your existing home. If you have paid off your mortgage and own the property outright, then you will have 100% equity in the property.
Otherwise, you are looking at the property value minus the outstanding mortgage balance – and this will give you the equity i.e what you own of the property.
For example, if your property is worth £500,000 and you have a mortgage of £100,000 outstanding, your equity is £400,000 and you will be able to borrow 20% to 60% of this amount.
Should I Use a Home Reversion Plan to Borrow Money?
With home reversion you are physically selling off a stake in your property for a large cash sum, which is tax-free.
There are certainly benefits to this, because you are getting as much as 80% or 100% of your property’s value (although this is likely to be undervalued by the lender) and you can continue to live in your home until you die or go into long-term care.
However, with this type of equity release, you are not maintaining ownership of this property – so once you die or go into care, the equity release provider will claim full ownership of the property and likely sell it to recover their initial lump sum.
If you are looking to benefit from any increases in the value of your property or pass it onto your children, you may find that home reversion may not be the right fit.
Should I Try Release As Much As Possible?
When looking at how much you can borrow through equity release, you should carefully consider how much you need and whether you should be trying to release as much as possible.
There is interest charged on the amount that you release and this can be paid monthly or rolled up until the end of the loan term. But the more you borrow, the more interest that you will be paying. So if you have released £100,000, but in fact you are only using £50,000, you will be paying extra interest which may not be necessary.
You should carefully consider how much you need to release, whether it is for a wedding, home extension or to gift to your children. Or you can consider other types of equity release products such as drawdown or interest-only, so that you can limit the amount of interest that you pay.
To discuss your equity release requirements today, you can get a free and impartial quote from Lending Expert here >>
