Equity release lets you access the cash locked up in your home if you are aged 55 or over, without having to sell it. But should you opt for it?
This article looks at the pros and cons of equity release, plus lists the top equity release companies.
In this article, we outline:
- Top equity release companies
- Calculator: ‘How much equity can I release?’
- How to choose the right equity release product
- How do equity release fees work?
- Equity release alternatives
- Video: Equity release in a nutshell
Related content: What is equity release? and the ten alternatives to equity release.
This article may contain affiliate links that can earn us revenue*
Top equity release providers
The most popular type of equity release is a lifetime mortgage – much more so than the alternative: home reversion schemes.
Here we look at the leading equity release providers for lifetime mortgages. They are all authorised and regulated by the Financial Conduct Authority.
Our equity release ratings, compiled by the independent research group Fairer Finance, focus on flexibility.
They are designed to be a good conversation starter with an adviser or broker.
Age Partnership Ltd* is our “accredited broker”, which means we have assessed them to be impartial, ethical and customer-focused.
If you choose to apply for any of the products below, you can do so via Age Partnership Plus.The retirement specialist can answer any questions you have, and hold your hand during the process.
More 2 Life
Best for: Flexibility
Why we rate the company: More 2 Life’s Capital Choice range of products gets five stars in our ratings. This means it’s the most flexible set of products on the market, with low early-repayment charges, which disappear entirely after 10 years.
It also offers downsizing protection, and low fees for adding someone to the loan or removing them from it.
Why we rate the company: LV has fixed early-repayment charges across all its products – with charges of just 5% for the first five years, 3% from year six and nothing at all after 10 years.
It offers a relatively limited range of products, which include a lump-sum loan as well as a flexible product that allows you to lock in future withdrawals at a fixed rate. We have given the latter a four-star rating.
OneFamily
Best for: Customer experience
Why we rate the company: OneFamily’s two-year fixed lifetime mortgages get four stars in our ratings. As the name suggests, the interest rate is fixed.
If you want to repay your loan early, the fees are reasonable: if it’s done within the first three years, there’s a fee of 6%, which then drops to a comparable 3% from year six and nothing at all after 12 years. After five years, the early repayment fees are waived if redemption is due to downsizing.
OneFamily also provides advice for a fixed fee of £950, paid on completion, rather than as a percentage of the loan, so there are no hidden surprises.
Legal & General
Best for: Large loans
Why we rate the company: The insurer offers loans of up to £2m, which may make them a good choice if you’re lucky enough to own a very valuable property.
Beware, however, that L&G also levies government bond-based early-repayment charges, potentially meaning high fees if you need to pay the loan back early.
Aviva
Best for: Older borrowers
Why we rate the company: Most equity release plans are not available to people over 90. But Aviva will consider applications at any age over 55 – as will Just. But watch out for Aviva’s early-repayment charges, which can be as high as 25%.
Other equity release providers
There is a relatively small number of equity release companies on the market:
- Other lifetime mortgage providers include: Just, Hodge Lifetime, Canada Life and Pure Retirement.
- If you’re looking for a home reversion plan, the main lenders are: Bridgewater and Crown Equity Release.
Our ratings
Equity release plans that come with greater flexibility also tend to be more expensive.
Depending on your circumstances, you may not actually need the flexibility that some plans offer and therefore be better suited to a cheaper equity release product.
Plans that get lower star ratings from us are not bad plans, they are just less flexible – and they are likely to be cheaper.
If you do choose to pay a higher rate, it’s worth understanding what the full cost could be if you live a long life.
A five-star product in our table will:
- Be the most flexible
- Offer low early-repayment charges
- Allow you to repay penalty-free if you’re in a couple and one person dies or goes into care
- Be portable, meaning you can take the loan with you to another property
- It won’t levy early repayment charges if your new property is worth less than your old one
- Charge low fees for adding or removing someone to your loan
What is equity release?
Equity release is a way for people over the age of 55 to access some of the value in their home without having to sell it.
Your property will also need to be worth at least £70,000, and the size of the loan you’re after will typically need to be at least £10,000.
There are two main types of equity release product: lifetime mortgages and home reversion plans. We have information on the different types in our guide to equity release.
The decision to release equity from your home is obviously a big one and comes with a number of downsides, which we list here.
It’s important you talk through your needs in detail with an independent financial adviser.
Why choose equity release?
Equity release is not for everyone. The cheapest way to release the value in your property is to sell it and downsize to a smaller property – or move to a cheaper area.
But many people understandably don’t want to leave the family home, which is where equity release can be a good alternative.
It’s important to understand the pros and cons, the cost, and the impact that it will have on the amount you have left to pass onto your family.
Ideally, the decision to take out an equity release plan is one that you’ll make alongside your children or beneficiaries.
Given the downsides to this type of loan, consider these alternatives to equity release first.
If an equity release plan is right for you, it’s also worth considering whether you can afford to make monthly repayments to your loan. If you manage to pay back the interest each month, you’ll have much more left to pass on.
Other loans for older people, where they remortgage to release some cash and pay back just the interest, are often referred to as retirement interest-only (RIO) mortgages; loans where they repay interest and capital are called retirement capital and interest loans. These are more general home finance products, and look and feel like regular mortgages.
Use an equity release calculator, like the one below from the broker Age Partnership Plus, to get an idea how much cash you can unlock from your home, and the likely cost.
What is a typical interest rate with equity release?
Lifetime mortgage rates vary considerably. A typical interest rate is about 5%, although some come in at under 3%.
The cheaper deals are likely to have less flexibility.
Calculator: ‘How much equity can I release?’
Use our calculator to work out how much you could potentially release from your home. The tool hasbeencreated together with our accredited broker Age PartnershipLimited.
How to choose the best equity release plan
Here’s a checklist:
- Make sure you choose a lender that is a member of the Equity Release Council.
- Check that the company offers a “no negative equity” guarantee – which mean the amount you owe the lender can never be greater than the value of your property.
- Check whether there will be applicationfees, also known asarrangement fees.
- You can also look at our independent product ratings. These highlight the most flexible products out there, with no sneaky high one-off fees.
Do I need financial advice?
You have to get financial advice before taking out an equity release product. You can choose between getting advice from:
- A restricted adviser: they can only advise on a limited number of products, meaning there is no guarantee that you’re getting the best possible deal
- An independent adviser: they search the whole of the market to find the best deal to suit your needs
For example, Legal & General, one of the biggest equity release providers, has its own tied advisers:
- The upside is that you won’t pay extra for the advice you get from them
- The downside is they can only recommend L&G products, which means you might miss out on a better product from another provider
An independent financial adviser will be able to give you a more rounded view of what’s available in the market.
It’s important to find a good independent adviser that specialises in equity release. The biggest national independent specialists are Age Partnership Limited and Key Group.
Age Partnership Limited is Times Money Mentor’s “accredited broker”, which means we have assessed them to be impartial and customer-focused. If you choose to apply for any of the products in our equity release table, you can do so via Age Partnership Plus.
Find out more about how much you can expect to pay for financial advice here.
How do equity release fees work?
Equity release plans can be complex and come in lots of different forms. They may also have lots of additional fees and charges attached to them. We’ve listed the main ones to watch out for here:
- Arrangement fees
Like regular mortgages, lifetime mortgages often come with set-up fees, usually called arrangement or application fees, which can run to hundreds or even thousands of pounds.Although you only pay them once, if you add them to the loan, interest will be charged on them.
Loans with higher application fees and lower rates may be cheaper for people looking to borrow large sums – while for those borrowing smaller amounts, it may make sense to look for a loan with a higher interest rate but lower fees.
- Early repayment charges
Circumstances change and if you decide to pay your loan back early, it could end up being very expensive.All providers have early-repayment charges, but some are much lower than others. In the worst cases, the charges can be as high as 25% of the mortgage.
Other firms have fixed early-repayment charges that fall the longer you’ve had the loan.
- Redemption fee
These apply when the loan is repaid – usually when you die or go into long-term care. Some firms charge up to £200, while others charge nothing. So make sure you’re clear if these fees apply. - Fee for adding or removing someone to the loan
Your might divorce or remarry and adding or removing someone to or from your equity release plan, can involve high fees. Some companies charge as much as £695, while others charge nothing. - Valuation fee
As with a regular mortgage, lenders will want to value your home before they decide how much to lend to you and on what terms.Some providers and products don’t charge anything for this service, while others have tiered fee structures, and valuation fees can be as high as £2,400 for the most expensive properties.
Is there a better alternative to equity release?
Equity release is a big decision. It’s wise to explore the alternatives first, as there might be a simpler and cheaper way to raise money.
Alternatives include:
- Downsizing
- Extending your mortgage term
- Renting out a spare room
- Taking out a retirement interest only mortgage
We run through your options in more detail in alternatives to equity release.
If you are aged 55, you might want to consider taking cash from your pension instead, though there are downsides to this too.
Prefer to watch rather than read? Equity release in a nutshell
Our two-minute video takes you through everything you need to know about equity release.
James Daley is managing director ofFairer Finance, the independent consumer group that produces our product tables.
All products, brands or properties mentioned in this article are selected by our writers and editors based on first-hand experience or customer feedback, and are of a standard that we believe our readers expect. This article contains links from which we can earn revenue. This revenue helps us to support the content of this website and to continue to invest in our award-winning journalism. For more, see how we make our money and editorial promise.
FAQs
Which company is best for equity release? ›
Who Are the Top Equity Release Providers? The top equity release companies in 2022 include SunLife, Key Later Life Finance, and Aviva Lifetime Mortgage, but there are more!
What does Martin Lewis think of equity release? ›According to Money Saving Expert6, Martin Lewis thinks that equity release can be a good but expensive way to access money to help you live a better retirement. It's no secret that lifetime mortgages and home reversion plans can affect the inheritance you leave behind to your loved ones.
Is there a better alternative to equity release? ›The most obvious alternative to equity release is to downsize – i.e. sell your current home and move into a smaller property (or at least one that is less expensive).
Where can I get advice on equity release? ›Getting advice
If you're thinking of taking out an equity release product, you should take financial advice from an independent financial adviser. They'll be able to suggest a plan suitable for your needs by researching all the products on the market.
Lifetime Mortgage interest rates are at an all-time low, so now might be the best time for you to look at Equity Release. Our general rule is an interest rate below 3% is outstanding, 3% excellent, 4% good, 5% being average, and 6% plus being for more substantial borrowing with the most product features.
What percentage do equity release companies take? ›| Age of youngest homeowner | Maximum percentage of property value which can be released (LTV) with a lifetime mortgage (equity release) | |
|---|---|---|
| Standard terms | Medically enhanced | |
| 65 | 44.3% | 54.4% |
| 66 | 45.4% | 54.5% |
| 67 | 46.4% | 54.5% |
Home equity loans can help homeowners take advantage of their home's value to access cash easily and quickly. Borrowing against your home's equity could be worth it if you're confident you'll be able to make payments on time, and especially if you use the loan for improvements that increase your home's value.
Is now a good time to buy a house Martin Lewis 2022? ›Martin Lewis has issued a fresh warning to home buyers as rates are expected to rise 6% in 2023. The Money Saving Expert founder has advised that first time buyers should not be buying a house right now unless they are prepared and plan to live in the home for the long term future.
Can you be refused equity release? ›Can you be rejected for equity release plans? You can be rejected for equity release if you have CCJs on your credit file, but there are more common reasons why people get rejected for a lifetime mortgage. You are more likely to get rejected for equity release if there are issues with the property.
What is the downside of equity release? ›The main disadvantage of equity release is that it does not pay you the full market value for your home. You will receive far less money than you would from selling the property on the open market – although of course in that situation you would still have to find somewhere else to live.
Is it better to downsize or do equity release? ›
But with equity release, the financial aspect of repaying the loan is less appealing. If finance is the only thing that matters to you, then downsizing will usually be better.
Is a bank loan better than equity release? ›You may be able to unlock more cash from your home with equity release than if you were to remortgage. This is because you don't have to make any monthly repayments. By contrast, a mortgage lender will only lend you what you can afford to repay each month from your income.
How much do equity release advisers charge? ›Most Equity Release advisers will charge advice fees during the process. Many advisers charge a fee based on a percentage of the loan amount, which will be around 1.5 or 2% of the loan amount.
Do I need a financial advisor for equity release? ›All Equity Release Council-approved equity release providers require you to seek independent legal advice. Ensure your chosen solicitor has equity release experience and ideally agree a fixed legal fee before proceeding. Your advisor will be happy to recommend a specialist solicitor.
Do you need a solicitor for equity release? ›A solicitor is required to ensure you receive completely independent legal advice about the risks, rewards and obligations attaching to an Equity Release plan.
Are equity release rates rising? ›In January this year the average rate stood at 4.1 per cent, when base rate was 0.25 per cent. Both have risen and in July the average rate for equity release hit 5.63 per cent.
Can I pay off equity release early? ›Can you pay off equity release early? Yes, if you have a lifetime mortgage, which is the most common equity release product, you can make early repayments if you wish to. However, there's no obligation. Remember, these loans are designed so that no payments are due until either you die or move into long term care.
Do interest rates affect equity release? ›It's worth remembering that although a low interest rate on Lifetime Mortgages may look good, there may be fees associated with releasing equity that wind up making it more expensive than other plans with higher interest rates.
Do you need a good credit score for equity release? ›Firstly, if you have a poor credit score, don't worry, you will likely still be able to take out an equity release plan. Equity release lenders do check your credit report, but it is not the most important factor. The lender is more concerned with the condition of, and future saleability of your property.
How much cash can I get out of my house? ›In general, lenders will let you draw out no more than 80% of your home's value, but this can vary from lender to lender and may depend on your specific circumstances. One big exception to the 80% rule is VA loans, which let you take out up to the full amount of your existing equity.
Can I sell my house if I have equity release? ›
Yes, you can sell your house if you have equity release. An equity release product, such as a lifetime mortgage, can be repaid at any point and by any means.
What is the best way to get equity out of your home? ›If you know the amount, consider getting a home equity loan or doing a cash-out refinance. If you're working on a project that has ongoing costs, a HELOC would be best. That way, you could borrow more money if the project goes over budget.
Can I use my equity to pay off my mortgage? ›If you have built up equity in your home but still have a mortgage balance to pay off, you may consider using a home equity line of credit (HELOC) to reduce your monthly payments and the overall interest you pay on your loan.
Will house prices go down in 2023? ›As economic conditions continue to impact the country, industry experts are suggesting there will be less demand in 2023 which will likely result in house prices falling.
What is a good investment right now UK? ›A stocks and shares ISA is likely to be most suitable. That is unless you will turn 55 within 30 years, in which case a pension might be a better tax wrapper for you. If you're unsure about the time horizon, you could invest in both a pension and a stocks and shares ISA.
What is the average time for equity release? ›It usually takes around eight weeks for an equity release application to complete and for you to receive your funds. Some applications complete in as little as three weeks; however, some complicated cases can take many months.
Why is equity release declined? ›It is possible that a case is declined due to the cost of the works is greater than the allowable retention limit. A property that typically does not have a cavity wall. Structural issues raised by the surveyor can mean that resale is not possible or the property is not safe.
What documents do you need for equity release? ›You will need to provide us with documents to support your equity release application: photographic proof of your identity, proof of your address, proof of your income (payslips, pension letters/statements, accounts etc.), bank statements, proof of your deposit etc.
What's the catch with equity release? ›What's the catch with equity release? Like most financial products, equity release will cost you money. “The catch” is simply that you will pay interest on the money you release and the amount you owe will grow each year.
How do I get out of equity release? ›All equity release plans need to be repaid upon the death of the last borrower, or when the borrower enters long term care. But what if you wish to repay before this? You can repay equity release early at any time, but you may be charged a penalty for doing so, in the form of an Early Repayment Charge (ERC).
What is a lifetime mortgages for over 60s? ›
A lifetime mortgage is a type of equity release, a loan secured against your home that allows you to release tax-free cash without needing to move out. Lifetime mortgages are available to homeowners aged 55 or over. You can take the money as a lump sum or as series of lump sums.
How do I pull equity out of my house UK? ›Equity release works by borrowing cash against the value of your home. There are two ways to do this – a lifetime mortgage and a home reversion plan. Lifetime mortgages allow you to release some of your home value to a limit, while still being the homeowner. This cash is tax-free and able to be used as you please.
What is the interest on a lifetime mortgage? ›The current market average interest rate on a lifetime mortgage is roughly between 4% and 7%. The rate you could be offered will depend on different factors, such as your age and the value of your property.
Can I change my equity release provider? ›For those with an equity release mortgage in place, it is possible to change to another product and lender, just as you are able to remortgage your home in the traditional mortgage lending market.
Will equity release affect my benefits? ›Money received from equity release can affect your entitlement to means-tested benefits such as Pension Credit, help with health costs and Council Tax Support (Council Tax Reduction Scheme in Wales).
Is it better to remortgage or equity release? ›The main difference between equity release vs remortgaging is that equity release has no monthly repayments while remortgaging does. This makes equity release a better choice than remortgaging when you want to unlock the most amount of money from your home.
Which company is best for equity release? ›Who Are the Top Equity Release Providers? The top equity release companies in 2022 include SunLife, Key Later Life Finance, and Aviva Lifetime Mortgage, but there are more!
Do you pay a fee for equity release? ›The fees you'll pay for equity release will usually include a valuation fee, solicitors' fees, advice fees, and application fees3. Some lenders may offer to waive certain fees depending on the plan you choose.
Do you pay for equity release? ›You do not have to pay rent to the equity release provider. For lifetime mortgages, you may be able to choose whether to pay back interest or let it build up. The loan is only paid back when you die or when your property is sold.
What does Martin Lewis think of equity release? ›According to Money Saving Expert6, Martin Lewis thinks that equity release can be a good but expensive way to access money to help you live a better retirement. It's no secret that lifetime mortgages and home reversion plans can affect the inheritance you leave behind to your loved ones.
Do building societies do equity release? ›
Our equity release product is a Lifetime mortgage. This can unlock the value in your home as a tax-free lump sum. With our Lifetime mortgage, the interest rate is fixed for life, and you only make monthly payments if you want to.
Do Barclays Bank do equity release? ›Does Barclays Do Equity Release? No, Barclays doesn't do equity release.
Is equity release conveyancing? ›Equity release is a specialist area of conveyancing law, and as such you need a specialist team that can handle your case quickly and effectively. We can also offer legal advice on any Drawdown Lifetime Mortgages and Home Reversion Plans.
Can I pay solicitors fees by credit card? ›Since solicitors are typically paid by fee-based agreements, payment by credit card is not possible. However, some solicitors may provide credit card payment as an option for their clients.
Can I change my equity release provider? ›For those with an equity release mortgage in place, it is possible to change to another product and lender, just as you are able to remortgage your home in the traditional mortgage lending market.
Is Canada Life good for equity release? ›Yes, Canada Life's equity release is safe, as it's a member of the equity release council and follows its guidelines. They're also FCA regulated.
Is key equity release safe? ›Equity release has become more popular over recent years due to falling interest rates and improved regulation. Today, equity release plans are safe because they are regulated and offer protections from the FCA.
Do building societies do equity release? ›Our equity release product is a Lifetime mortgage. This can unlock the value in your home as a tax-free lump sum. With our Lifetime mortgage, the interest rate is fixed for life, and you only make monthly payments if you want to.
How do I get out of equity release? ›All equity release plans need to be repaid upon the death of the last borrower, or when the borrower enters long term care. But what if you wish to repay before this? You can repay equity release early at any time, but you may be charged a penalty for doing so, in the form of an Early Repayment Charge (ERC).
Can you get a second equity release? ›You can take equity release more than once. There may be additional funds from your existing lender, which you can release with a drawdown plan or by a further advance. Alternatively, you can replace your existing equity release plan with a new one that repays your current lender and provides you with additional funds.
How many times can you pull equity out of your home? ›
A home equity line of credit, or HELOC, works like a credit card. You can withdraw as much as you want up to the credit limit during an initial draw period, usually up to 10 years. As you pay down the HELOC principal, the credit revolves and you can use it again.
How much can I borrow equity release? ›The maximum amount you can borrow with equity release is usually up to 60% of the value of your home according to MoneyHelper.
Is Canada Life a good company? ›With $396 billion in assets and a financial strength rating of A+ from A.M. Best, Canada Life is one of the most stable life insurers in the country.
What are the interest rates on lifetime mortgages? ›The current average interest rate on a lifetime mortgage is just over 5%. However, rates can start from as low as 4,53% (AER), and rise to 7.39%*. View the current rates here. In March 20212, lifetime mortgage interest rates were at an all-time low, but have since risen.
Will equity release affect my state pension? ›Equity Release does not impact your State Pension entitlement. As the money released is a loan, it is not income, so there is no tax to pay.
What is the best age to do equity release? ›Equity release is traditionally aimed at pension‑age homeowners. Many equity release lenders insist upon all applicants being aged 60+, but Age Partnership have access to plans for everyone aged 55 and above.
Is it better to downsize or do equity release? ›But with equity release, the financial aspect of repaying the loan is less appealing. If finance is the only thing that matters to you, then downsizing will usually be better.
Can you be refused equity release? ›Can you be rejected for equity release plans? You can be rejected for equity release if you have CCJs on your credit file, but there are more common reasons why people get rejected for a lifetime mortgage. You are more likely to get rejected for equity release if there are issues with the property.
Can I sell my house if I have equity release? ›Yes, you can sell your house if you have equity release. An equity release product, such as a lifetime mortgage, can be repaid at any point and by any means.
How long does it take to complete equity release? ›It usually takes around eight weeks for an equity release application to complete and for you to receive your funds. Some applications complete in as little as three weeks; however, some complicated cases can take many months.