Before committing to hours of research & requesting numerous quotes on equity release schemes, first you should establish whether you can even qualify for a lifetime mortgage or home reversion plan.
In this article we discuss what lenders are looking for when accepting the over 55’s onto their equity release mortgages.
As much as recent press articles have shown, there is a rapidly growing interest in Equity Release.
There are now further signs that this is being taken ever more seriously by policymakers faced with the consequences of an ageing population and increased financial difficulties being encountered by pensioners.
Recently a House of Lords committee highlighted the need for property-owning pensioners to unlock wealth in their home rather than try to push costs onto future generations, often including their own children.
The report concluded that ‘It is reasonable to expect those who have benefited from the property boom to support their own longer lives. We suggest that one way to address the current imbalance would be for older people to consider unlocking their house wealth.’
So who is eligible for a Roll-Up Equity Release Plan?
Unlike most lending products such as mortgages or personal loans, borrowing on equity release is not determined by your income, but by two main criteria. These are your age and your property.
Your age and circumstances
- You must be aged over 55
- You must be a homeowner and the property is your main residence
- You must live in the UK.
Your age determines the percentage of the property value a lender will provide for you. For example, at the age of 65 with a property value of £175,000, you could expect a release around 30% of the property value – £52,500.
However, In some cases where a client has had a history of poor health, enhanced lifetime mortgage lenders such as Aviva, Partnership, more2life & recently Just Retirement will consider providing a higher amount, subject to further medical information.
By asking a series of health questions relating to your medical history, these enhanced equity release providers can judge how much more you could be entitled to depending on the severity of your health.
Therefore in the scenario above, a male aged 65 with a property value of £175,000 could now potentially raise upto 46% of the property value equating to £80,500. A substantially greater amount of £18,000 has been released by just taking advantage of one’s poor health!
The property itself
All lenders will insist on a valuation being carried out on the property. This valuation determines whether the lender will provide the funding required. The valuation is based on similar property sales in the area and one that could expect a reasonably quick sale. This is always the ‘unknown’ as property value is subjective, however using sites such as Zoopla may help as a guide, but not the bible!
So why is a valuation necessary?
- The equity release lender needs to know that the property is worth at least £70,000
- They needs to consider other factors which may include;
- Construction type. Is the property built of brick with a tiled roof?
- Is it a house or is it a flat?
- Is it freehold or leasehold, and if leasehold, how many years are left on the lease?
- Is it a listed building?
- Does it have any agricultural ties?
- Is it next to or above retail premises?
- More importantly now – Is it in a high flood risk area?
- Has the property suffered subsidence or been underpinned?
*There are cases where one client is under the age of 55 but their partner is over this age, and there are lenders who will consider holiday homes for the source of lending but these require further advice and information
Having been advising on equity release schemes since 2008, Equity Release Supermarket are aware of what an important decision taking releasing equity can be. With an old fashioned face-to-face approach our experienced advisers prefer to undertake home visits, where there is the opportunity to openly discuss both the advantages and disadvantages of the variety of products available with prospective clients and their family members .
If you want to benefit from the experience Equity Release Supermarket advisers have to offer and understand how equity release works further, then please contact the team, on 0800 678 5159 for a free initial consultation.
Alternatively please email [email protected].
To see what Equity Release Supermarket’s clients have to say about us check our 100% Feefo testimonials on the Feefo link on the homepage (bottom right corner).