The equity release market is booming with record activity with 93,421 new and existing equity release customers in 2022 unlocking £6.2 billion of property wealth.

Most individuals and couples find that their savings are tied up in their biggest asset - their home. Those over 55 years of age can raise finance with the assistance of equity release borrowing which releases funds which were previously tied up in equity in their property to spend as required on holidays of a lifetime, upgrade their homes or provide their beneficiaries with their inheritance whilst they are alive to watch them enjoy it.

The Equity Release Council carried out a survey which concluded that 40% of homeowners believe it is becoming more acceptable to have a mortgage in later life, while 57% are interested in accessing money from their property as they age.

The most predominant type of Equity release mortgages utilised by individuals and couples are “lifetime mortgages” which normally run for the remainder of the borrowers’ life.

Those interested in raising finance with a lifetime mortgage should be aware of the following-

1.A “lifetime mortgage” has the effect that the lender will provide a lump sum payment and in return you grant a Security in favour of the lender over your home. The title to your home would still remain in your name.

2.Most lenders have a minimum value of property they will offer this product for and it is important that you have an idea of the value of your property prior to approaching some lenders.

3.The amount you owe is normally paid back from the proceeds of the sale of the property following your death. Any sums left over would then pass to your beneficiaries in terms of your Will.

4.If you were to move home at any time in the future you would require the consent of the lender – they may allow you to transfer the equity release mortgage to the new property. Any sale of your current home would require the consent of your lender.

5.If you required to go into long-term care, the sums due to the lender would require to be repaid upon the sale of the property.

6.The interest rate for the initial advance is normally a fixed interest rate. Interest is payable on the whole sum available to you regardless of whether you utilise the full amount or not. Individuals should be aware that interest can build up quickly.

7.You will not make any monthly repayments during the lifetime of the mortgage.

8.The offer of an equity release mortgage is normally based on your anticipated life-span (this tends to be based on 15-20 years) however you can continue to reside in the property once the anticipated period has passed and the “mortgage” would continue to run on.

9.If you were to repay the mortgage in full prior to the end of the term the lender may charge an early repayment fee.

10.There is normally a “no negative equity guarantee”. If when your property is sold the market value is less than the sums owing to the lender you do not have to pay any more than the sale proceeds.

11.An equity release mortgage may affect your ability to claim social security benefits and your tax position. 

12.You will be required required to continue to repair and maintain your property through the duration of the mortgage. 

13.You cannot obtain another mortgage from another lending institution without the consent of the equity release lender.

14.If any other person requires to reside in the property with you for any reason whatsoever you will require the consent of the lender.

We recommend that prior to entering into an equity release mortgage that you discuss matters with your family and intended beneficiaries under your Will as this will ultimately affect your Estate upon your death.  Some lenders do allow you to ring-fence part of the property to ensure there is some inheritance for beneficiaries upon your death however this should be checked with each individual lender.

There are various types of equity release mortgage available on the market and individuals should meet with a mortgage advisor to ascertain which option is best for them as equity release is not for everyone. We recommend meeting with an independent mortgage advisor who will research the market on your behalf and source the best equity release product for you. 

If you are considering an equity release mortgage please contact our property department on 01292 281711 or enquiries@mckinstry.co.uk