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Do I qualify for equity release?

question-equity-release

There are certain criteria you will need to meet to be eligible for equity release. This includes the following:

  • You will typically need to be over 55
  • You will need to be a homeowner
  • What is the property’s value
  • Is it a freehold or leasehold property?
  • Where is the property located?
  • Your credit history
  • Do you have outstanding mortgage repayments?

Let us take a closer look at some of these requirements to be eligible for an equity release product.

 

Applicants age

As already mentioned, you will need to be a certain age in order to apply for equity release. This minimum age requirement differs depending on the equity release product you have applied for:

  • You will need to be 55 and over to apply for a lifetime mortgage
  • You will need to be 65 and over to apply for a home reversion mortgage

You may be wondering why the age requirement is higher for a home reversion mortgage. This is because the equity amount is usually far higher, which the lender will be giving upfront. That equates to more risk for the lender. Consequently, by upping the minimum age, the risk is mitigated and they may receive their funds back soon.

One thing to not forget when applying is the age of the youngest homeowner. This may apply if you have joint ownership with a spouse. Many equity release providers will require both homeowners at the time of purchasing a product to be both over the age of 55. It is more likely that your application will be rejected if this is not the case.

 

Property location and condition

The condition of the property is important when it comes to equity release. This is because lenders will want to ensure the property is being kept in good condition and increasing in value. A property will be considered high risk (and therefore an increased chance of your application being declined) if it has the following:

  • Subsidence
  • Damage
  • Mould
  • Flat roof (higher risk of flooding)

Where the property is located in the UK can also have an effect too.

 

property-location

 

Keep in mind a property survey and valuation will be carried out prior to an equity release scheme being approved.

 

Whether it is a freehold or leasehold property

Both freehold and leasehold properties can qualify for an equity release scheme, but remember that there will need to be at least 75 years left on the release. If this isn’t the case you may need to look at extending it, which may cost you money.

 

Outstanding mortgage repayments

Most equity release lenders need you to have no, or very little debt outstanding when you make an application. This includes your mortgage. The reason for this is to maximise the chances of being able to recover their full funds and interest at the end of the loan term.

Property value

To be approved for equity release, the property will usually need to be above a certain value. In most cases, this is above £70,000.

You might find some lenders will also implement a maximum property value too. Typically, this will be £1 million to safeguard them from risk.

Credit history

As with almost any loan product available on the market, the homeowners’ credit rating is a factor in qualifying for equity release. But, it is not necessarily the case with all lenders, you may not need a credit check with a loan, as you are using your home as security. However, keep in mind it doesn’t always apply, so making sure your credit rating is in good shape (for example, by keeping up with monthly interest repayments for credit cards) can help increase your chances.