Question
What is the maximum I can borrow?
How much can I borrow on an equity release plan? Presumably I can only release a certain percentage depending on the interest rates etc? I currently own outright a house with my wife which is valued at £550,000. I am 65 and my wife is 66.

Answer
The maximum you can borrow through equity release simply depends upon the age of the youngest borrower and the value of your property. It isn’t linked in any way to interest rate payable on the plan but instead determined by age. Simply put, the older you are, the more you could borrow.

For example, at 55, you could borrow up to 28.5% of the value of your home. By the time you reach 80, this has increased to 55%.

As you are 65, the most you could borrow is 40% of the value of your home – which is £220,000. If you have any pre-existing medical conditions, you could borrow up to 54.4% – or £299,200.

Another factor to consider is the higher the loan-to-value you borrow, the higher the interest rates become. Therefore, our guidance would be to only take what’s essential, as you can always consider a drawdown lifetime mortgage – which would allow you to take any further amounts in the future

Question
What is a lifetime mortgage?
I have been looking at a way to use the wealth in my home to help my son and daughter onto the property ladder. I wondered if I could remortgage my property, but a friend suggested I might be eligible for a lifetime mortgage.

Can you explain what this and how we might go about taking one out?

Answer
A lifetime mortgage is the most popular type of equity release plan and the three main criteria for eligibility are that the youngest homeowner is over 55, the property is worth at least £70,000 and it is in the UK. I’ll assume that you ‘tick’ all these boxes.

The amount that you can borrow with a lifetime mortgage is then determined by your age and the value of your property. In essence – the older you are, the more you can borrow. For example, at age 70 you could borrow up to 45% of the value of your home.

If you still have a mortgage, the lender will stipulate that this must be repaid, using your own funds, or with your equity release money. So, if you borrow £100,000 and have a £20,000 mortgage outstanding, you have £80,000 to help your children onto the property ladder.

Always bear in mind you should only withdraw the amount you actually need, and there are plans such as drawdown schemes that will allow you to take funds as and when you require them, rather than taking the whole lump sum all at once. Remember with lifetime mortgages the greater the loan-to-value, the higher the interest rates become, hence another reason to be cautious on the initial amount taken.

There are other borrowing options you could consider. Retirement interest only (RIO) mortgages and retirement mortgages could potentially allow you to borrow much more than with a lifetime mortgage. With a RIO, you could borrow up to 75% of the value of your home and with a retirement mortgage, up to 90%. Both are dependent on your incomes, affordability and credit history.

The main differences between a lifetime mortgage and a RIO or retirement mortgage is that RIOs and retirement mortgages are residential mortgages, and you are required to make monthly repayments of either interest only or interest and capital – just as you would have done with the previous mortgage on your home. You must also pass the lender’s affordability and credit criteria – which considers your income and ability to make repayments – both now and in the future.

While you can’t borrow as much with a lifetime mortgage, you don’t have to make any repayments – unless you want to – and there are no affordability checks to pass.

As a next step, I recommend that you speak to an independent and whole of market equity release adviser who will be able to discuss your financial goals and find the right solution for you.

All our advisers at Equity Release Supermarket are experts in their field and it won’t cost you anything to speak to us. In fact, Equity Release Supermarket won’t charge you anything until your plan is complete and your money is in the bank. You can find your local Equity Release Supermarket adviser here.

Question
What should I ask my equity release adviser?
My partner and I have got an appointment with an equity release adviser booked in later this month. I wondered whether you could offer some tips and advice on what we should be asking them and anything else we should be looking out for.

We are planning to release some equity from our home to make some improvements and to boost our income a little. We are both in our 70s and are a little nervous about the meeting as we are not sure what to expect.

This is new territory and we have no friends or family who have been through the same. Any advice would be gratefully received.

Answer
Your first meeting with an equity release adviser is an important one and so it’s a good idea to be prepared and have all your questions to hand.

Before you meet the adviser, there are two checks that I recommend you make.

Firstly, all equity release advisers must be regulated by the FCA and suitably qualified members of the Equity Release Council. This ensures that they abide by the Council’s Rules and have signed up to its Statement of Principles. You can check if yours is on the Council’s register here – https://www.equityreleasecouncil.com/find-a-member/advisers

Secondly, I believe that you should always speak to an independent and whole of market adviser. Equity release is a big financial decision and so you’ll want to be sure that all your options have been explored and you’ve found the right plan for you both now and in the future.

If your adviser is tied to a particular lender or can’t advise across equity release, retirement mortgages and retirement interest-only (RIO) mortgages, then you should be aware of this and comfortable with the implications, before making any commitment.

And finally, if you are speaking to a whole of market adviser, consider the fee for their advice. Some firms charge a % of the amount you borrow, whereas others work on a fixed fee basis. For example, at Equity Release Supermarket our advice fee is guaranteed never to be more than £995, regardless of how much you borrow, and this is only payable when your plan completes, and your money is in the bank.

We also highly recommend that you discuss your decision with your family and if possible invite them along to the meeting – so that they are able to support you and also ask any questions they may have.
A good, whole of market adviser will put you at your ease and during your meeting they’ll simply want to understand your financial situation, why you are considering equity release and what your financial goals are.

Only at this stage will they then formulate a personalised recommendation for you, from a range of products across the whole of the later life lending market.

What’s also important is that if equity release isn’t right for you, they tell you. You shouldn’t feel in any way pressured into making a decision.

If you have any concerns, we’d be more than happy to help you and you can call Equity Release Supermarket for free on 0800 802 1051.

Question
Rates – what sort of figure should we be looking at?
I am doing some research on equity release rates and can see there are some quite good deals. I have so far just been scouring the internet and – from my experience of mortgages years ago – I wonder whether there might be some better deals to be had by going via an adviser.

So, my questions to you are – what are the average rates at the moment and how can I find the best deals?

Answer
To understand the interest rates that are currently available on all your later life lending options- whether that be lifetime mortgages, retirement mortgages or retirement interest-only mortgages – there are only two websites that offer a comprehensive overview of the plans and mortgages available from the whole of the market.

https://www.equityreleasesupermarket.com is the ideal choice is you also want to learn more about the different plans and how they work. But, if you simply want to focus on the plans, their interest rates and features and benefits, then https://www.compareequityrelease.com is the site for you.

Interest rates are at an all-time low at the moment as lenders vie for your business and there are currently lots of plans available with interest rates below 3%. While these rates are not as low as residential mortgages, the important things to remember about lifetime mortgages is that the interest rate you pay is fixed for life, there are no affordability or credit checks to pass and you don’t have to make any repayments, unless you are in a position to do so.

To take out equity release, it is a regulatory requirement that you have financial advice (which doesn’t apply to residential mortgages) and your options are to either speak to a lender directly or to an equity release brokerage.

Not all lenders offer financial advice and if they do, they’ll only speak to you about their own or a panel of plans. A good equity release broker should be independent, not tied to a particular lender and so will be able to advise you on plans from across the whole of the marketplace and find the best deal for you – such as Equity Release Supermarket.

According to the Equity Release Council’s latest market report for Q4 2020 (they are the trade body for the equity release industry), the average interest rate taken out then was 4.01%. This is higher than the headline rates you’ll see but it’s important to look beyond them and consider the features and benefits you may want and how much you want to borrow, as these can influence the rate a lender may offer you.

To find a plan that meets your individual needs, I’d recommend that you speak to an impartial adviser – such as one at Equity Release Supermarket.