Equity release is a financial solution that allows homeowners, typically over the age of 55, to access the value tied up in their homes without having to sell or move. It’s a way of converting the value of a home into cash, which can be received as a lump sum, smaller amounts over time, or a combination of both.
Can you be refused equity release?
Yes, you can be refused equity release if you don’t meet the eligibility criteria. For example, if you are under 55 or have insufficient equity in your home. Also, because the property needs to be sellable at the end of the scheme, you may be refused if it has structural or subsidence problems.
Types of Equity Release
There are two main types of equity release:
- Lifetime Mortgage: This is the most common type. It’s a loan secured against your home, but the money doesn’t usually need to be repaid until you die or move permanently into residential care.
- Home Reversion Plan: Allowing you to sell part (or all) of your home while you continue living in it. The reversion company then gets a share of the proceeds when your home is sold.
Equity Release can offer several benefits.
- No Monthly Repayments
Unlike a traditional mortgage, you don’t have to make monthly interest or capital repayments during your lifetime.
- Retain Home Ownership
You retain legal ownership of the property and the right to remain living in it during your lifetime.
- Potential for Property Value Increase
Since you own the property, you should still benefit from an increase in the property value.
- Inheritance Tax Mitigation
Equity release can reduce the value of your estate, which can be useful in reducing your Inheritance Tax liability.
Equity Release also has its negatives.
- Overall Cost
The overall cost of any equity release plan can be expensive over the long term
- Early Repayment Charges
These schemes are designed to last for the rest of your life, and it can be very expensive to try and get out early.
- Impact on State Benefits
Equity release could affect your eligibility for state benefits
- Implications on Inheritance
Equity release generally means there will be less for your heirs to inherit
There is a significant financial decision with long-term implications when considering Equity Release. It’s crucial to seek professional advice before proceeding. Always consider your options carefully and understand the potential risks and benefits associated with equity release.
Why would I be refused?
When it comes to equity release there are a few reasons your application may be refused equity release. For eligible homeowners, an equity release lifetime mortgage is a way to release some of the cash tied up in your property.
The cash can be used to fund things such as home improvements, mortgage repayment, a holiday or even gifting to loved ones. When it comes to a lifetime mortgage not everyone meets the eligibility criteria.
Here we investigate a few of the reasons why equity release may not be right:
Age
The youngest homeowner in your household must be 55 or over. This means if you have joint ownership of a property and would like to release some of the cash tied up in your property. Both homeowners must meet the minimum age requirement.
Property value and condition
To be accepted for a lifetime mortgage, lenders require the property to be worth over £70,000.
The condition of the property is also taken into consideration by lenders. For example, a cluttered home or one in need of serious repairs, might not qualify for equity release.
As part of the process a property survey will be completed by an independent surveyor on behalf of the Lender.
Spray foam insulation
Whilst spray foam may be good for keeping your home warm, spray foam insulation can cause homeowners several concerns. Some of these concerns may be weakened roof support, mold and damp, roof distortion and instability. Even if spray foam is removed, some lenders may not accept the property due to potential damages.
Amount being released
The minimum initial loan amount for a lifetime mortgage is typically £10,000. The maximum amount that can be borrowed is based on several factors. These range from the age of the youngest homeowner, health and lifestyle, and the property’s value.
If the amount required is less than the £10,000 minimum, it will be refused because it does not fit. Use our calculator to see how much you could potentially release. Or have a chat with one of our advisers.
Location
Booking an appointment
We are proud members of the Equity Release Council and as part of our commitment to you. We aim to be clear and transparent with our advice, taking into account your personal circumstances. This may mean advising to not take out an equity release plan.
Retirement Solutions offers the ability to provide you with whole of market advice in the equity release sector. It is our aim to promote high standards of conduct and practice in the provision of equity release advice.
Important to note about Equity Release
- A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
- Equity release will reduce the value of your estate
- You may be left with limited or no property equity remaining
- Equity release may affect your entitlement to means-tested benefits
- Equity release will reduce your financial options in the future
Speak to an independent equity release adviser
If you’re considering equity release, reach out to Retirement Solutions. We can provide personalised guidance and help you start a conversation about your ideal retirement lifestyle. Remember, informed decisions lead to financial security and fulfilment in later life. It is essential to seek independent advice about your financial circumstances.
To book an appointment with one of our independent equity release advisers request, complete the form below, or call us on 0800 043 0725.
