Equity Release On Jointly Owned Property
If you’re over the minimum age of 55 and own your own home, equity release could provide you with a tax free lump sum to be used for anything you like, such as home improvements, paying off debts or supplementing your income in retirement.
Many UK homeowners co own their property with a spouse or partner and wonder whether it is possible to effect joint equity release. The answer is yes, but there are a few careful considerations to make before taking that step.
This article will detail the different scenarios in which you might find yourself wanting joint equity release and the advantages and disadvantages you may want to consider before taking the step to release capital.
Topics that you will find covered on this page
What types of equity release plans are there?
Equity release is a way of releasing cash from your home without having to move house and downsize. Instead, you may be able to release cash in one of two ways. You could borrow money secured against the value of your home or sell a share of your home to a home reversion provider.
The first of these options is called a lifetime mortgage and is the most popular option for retirees wanting to free up some more money for their retirement.
You don’t make any regular payments on a lifetime mortgage, and the lump sum does not have to be paid back until you have passed away or moved into a care home. You will need to pay interest, but like with the repayments, this does not have to be paid until you have both passed on. At this point, the money is repaid to the lender through the sale proceeds of the home.
In a home reversion plan, you sell only part of your home, which means that you will still benefit if your house goes up in value. Home reversion plans have become less popular with the rise of lifetime mortgages due to the fact that a lifetime mortgage plan is generally more flexible.
In a home reversion plan, you can receive your money either in regular payments or as a lump sum. If you do opt for a home reversion plan, you should be aware that you can only use this against your main residence, not on a holiday home.
Who can get equity release?
There are a few different criteria that you must meet in order to be eligible for equity release from a lifetime mortgage. First and foremost, you have to own 100% of your property, so if you have a significant amount of debt remaining on your mortgage, you will most likely be refused a plan.
This requirement also means that you will not be able to release equity on just your share of a home as you do not own the entire home in this case. However, if you co own your home with a partner, and both of you agree to take out an equity release plan together, this will be acceptable. We will go into more detail about the different types of joint ownership later in this article.
You must also be over the minimum age of 55 and under the age of 95, and your property must be worth at least £70,000.
You can get equity release on leasehold properties, but it may be more complicated than with freehold flats. Lenders will likely have different requirements for the remaining time left on the lease.
How does joint property equity release work?
In essence, shared ownership equity release works in a very similar way to a regular equity release plan except that the amount released is in joint names.
You must be joint owners of home, or tenants in common, and you must have both agreed to the equity release. You must both be of eligible age and you must be living in a home that meets the minimum property value requirement of £70,000.
You should be aware that the amount you are able to release from your home is dependent on the age of the youngest owner. This is because the debt does not need to be repaid until the final person on the plan dies or moves into long term care. A fully qualified mortgage advisor should be able to help you understand how much equity you might be able to release from your property.
It is possible to remove the younger party from the title deed if they are under the qualifying age. However, you should seek equity release advice from a financial advisor before going down this route since this could leave the younger party homeless once the sole owner dies. This is because the debt remaining on the lifetime mortgage would have to be repaid at this point.
What are the advantages and disadvantages of joint equity release?
There are both advantages and disadvantages to equity release as a joint owner and these might depend on your personal circumstances. The main advantage is that both you and your partner will be able to live in your home until the end of your life or until you move into permanent residential care.
However, there are also disadvantages. The main downside is that your property value will be reduced in the long term and any relatives who you might want to leave money to will receive less after you are gone.
The payments that you receive may not reflect the actual market value of your home. And you may also have to pay certain fees to set up the equity release, such as an arrangement fee.
The latest equity release interest rates as at 1 April 2024
The table below shows you the latest rates, as at 1 April 2024, for lifetime mortgages from some of the leading equity release providers in the UK.
| Product | Provider | Interest Rate | Incentives |
|---|---|---|---|
| 5.35% | |||
| 5.40% | |||
| 5.50% | |||
| 5.50% | |||
| 5.50% | |||
| 5.55% | |||
| 5.57% | |||
| 5.59% | |||
| 5.59% | |||
| 5.60% |
What is the difference between owning your property as joint tenants or as tenants in common?
If you own a property in England or Wales as joint tenants or tenants in common, you may own it as either joint tenants or tenants in common.
If you own the property as tenants in common, there are two specific features which differentiate the agreement from joint ownership.
The first key difference is that as tenants in common, each owner’s percentage share in the property can be specified. For example one owner could own 80% and another only own 20%. This is often a way of dealing with a situation in which the owners paid different amounts towards the property in the first place.
"Many UK homeowners co own their property with a spouse or partner and wonder whether it is possible to effect joint equity release. The answer is yes, but there are a few careful considerations to make before taking that step."
Another of the key features of properties owned as tenants in common is that you can leave your shares of the property to different people in your will. This means that the property is treated like separate shares rather than one jointly owned asset.
How do you know whether you are joint tenants or tenants in common?
You can check the title deeds of your home to see if it’s co-owned as tenants in common. If you see the term ‘title absolute’, this means that the property is owned as tenants in common.
How does equity release work if you are tenants in common?
The main difference between equity release for joint owners and for tenants in common is when it comes to the death of one of the owners. With a tenancy in common, when one owner dies, their share of the property is left to whoever is named in their will.
If their will dictates that the surviving owner should receive their share in the property, there should not be too much of a difference with joint ownership when it comes to releasing equity. However, things get more complicated when the Will entitles another party to their share of the property.
Where the Will states that the share is willed to another party, or parties, there are potential implications to the equity release plan. You should make sure that you have considered the implications on your will if you intend to release equity as tenants in common.
Can I get equity release on my share of a property?
It’s not possible for one co-owner to take equity release on their portion of a property if it’s jointly owned. Instead, both names must be used, or one co-owner must be removed from the title deeds, and a single application must be submitted. Equity release must be taken on the whole property.
How does equity release work if you are joint owners of a property?
Many individuals who co own their homes with a spouse or partner wonder if it is possible to get Joint Equity Release, as they previously had a joint ownership mortgage to buy the property.
The answer is that it is certainly possible to release equity from your property as a couple if you fulfil the requirements for Equity Release on an individual basis.
If you and your partner are both within the eligible age brackets and co own your house, you may be eligible for a joint plan if you take out a lifetime mortgage. Keep in mind that some Equity Release companies may impose a higher age restriction than this at their discretion.
Can we remove the younger unqualifying homeowner and then apply?
It is possible to remove the younger co-owner from the deed and then apply for equity release and some people might advise this. However, it poses a serious risk to the younger owner in the future as they could be left homeless and having to repay the debt once their partner dies or moves into long term care.
Do I have to use joint equity release?
You may want to use equity release as a single person if the others in your home are under the age of eighteen, aren’t on title deeds to the property, or aren’t your spouse or partner, such as your children.
However, if you only apply for an equity release plan in a single name, there are a few issues that might spring up later down the line for your surviving relatives. That is why it’s critical to talk about equity release with any relatives you may be residing with.
If the property is seemingly occupied by a spouse or partner, the equity release provider will generally demand a joint mortgage plan.
The issue in question is that if only one person is named on the plan, when that person passes away or moves into care, the scheme is finished and the money must be repaid, likely by selling the house. This will mean that anyone still living in the house and not named on the plan will most likely have to move out and sell the house. The right course of action will, of course, depend on your specific circumstances.
How do you use joint property equity release?
If the property is jointly owned by two parties, both signatures will be necessary, and the lender will have access to both people’s credit histories. As a joint owner, you will also need to sign any legal papers that pertain to the home equity loan secured against your home.
A lender does not divide the property’s equity equally between both parties. Both parties are responsible for the total amount of the lifetime mortgage. As a result, if you want to apply for a secured loan, you’ll need the shared owner of your house to co-sign any papers involved with the application.
Can two people have equity release if only one name is on the deeds?
If you bought a home alone but now live with someone else, such as a new spouse or partner, you’ll need to include their name to the property ownership if you want the equity release to be in both names. This can occasionally be completed as part of the equity release application, and it is advisable to consult with your advisor first.
What happens to your equity release plan when one owner dies?
People often worry about what happens to the equity release plan when the first borrower dies. However, as long as both people are named on the plan, you will be safe to continue living in your home. The obligation to pay off a mortgage does not have to be met until the last living person dies or enters long-term care.
Therefore, if one person dies or moves into permanent care, the second person can remain living in the property without having to repay any of the debt or worry about interest rates. The property will only need to be repaid once the second named person has passed away or moved into permanent care.
How to get equity release if one owner has already passed away
The title deeds will have to be modified to remove the late co-owner if you are applying for equity release in this situation.
To make this easier, the late proprietor’s will must be consulted. If their will has already been probated, the surviving co-owner should be aware of the late co-owners wishes.
If their share of the property was left to the surviving co-owner, the equity release application can be made and the land registry can be updated at the same time.
If no will was made, then the surviving spouse would automatically inherit and the equity release application can be made as above.
How does equity release affect benefits?
You should bear in mind that if you use equity release, you may no longer be eligible for any means-tested benefits.
However, you can rest assured that equity release does not affect your right to get a state pension. State pensions are not means-tested so you will continue to receive your pension regardless of how much money you release from your home.
How can I avoid risk if I’m taking out equity release?
We have mentioned a few potential risks that could arise as a result of taking out an equity release plan. However, there are a few ways to mitigate this risk.
Firms that advise on or sell equity release plans and lifetime mortgages are regulated by The Financial Conduct Authority (FCA). These firms should conduct themselves in line with the standards of the Equity Release Council, which should ensure that you can live in your property for the rest of your life, and will never owe more than the property value of your home. This is also known as a negative equity guarantee.
When looking at lifetime mortgages, you should check whether you will be able to transfer your plan from your existing lender onto another retirement property, should you ever decide to move house. This will give you greater flexibility for your retirement years.
The most important thing is to only choose a product that is sold and regulated by the financial authority. Finally, make sure to think carefully and discuss with qualified advisors before making the decision to secure other debts against your home.
Article author
Katy Davies
I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch. I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.
Outside of work, I love the snow and am a keen snowboarder. Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.
Email – [email protected]
Frequently Asked Questions
Who can get equity release?
There are a few different criteria that you must meet in order to be eligible for equity release from a lifetime mortgage. First and foremost, you have to own 100% of your property, so if you have a significant amount of debt remaining on your mortgage, you will most likely be refused a plan.
How do you know whether you are joint tenants or tenants in common?
You can check the title deeds of your home to see if it’s co-owned as tenants in common. If you see the term ‘title absolute’, this means that the property is owned as tenants in common.
Can I get equity release on my share of a property?
It’s not possible for one co-owner to take equity release on their portion of a property if it’s jointly owned. Instead, both names must be used, or one co-owner must be removed from the title deeds, and a single application must be submitted. Equity release must be taken on the whole property.
Can we remove the younger unqualifying homeowner and then apply?
It is possible to remove the younger co-owner from the deed and then apply for equity release and some people might advise this. However, it poses a serious risk to the younger owner in the future as they could be left homeless and having to repay the debt once their partner dies or moves into long term care.
