Maximum equity release

Maximum equity release

This page was last updated on 1 December 2021

Maximum Equity Release In 2021

This article looks at what the maximum equity release is that people can borrow as well as related topics.

What is equity release?

Equity release is basically about taking money from your home, without having to sell it, giving you the option to unlock cash that might otherwise be tied up.

The most popular types of schemes are a lifetime mortgage (including a drawdown lifetime mortgage or enhanced lifetime mortgage) or a home reversion plan.

It can be an effective way of raising funds for retirement, since house prices have risen faster than average incomes over the past couple of decades.

But there are risks involved. If you don’t fully understand them and act accordingly, an equity loan could backfire on you .

So what exactly is ‘equity release’ with reference to property? Put simply, it means using your home as security so that it can be used as collateral for a loan – often referred to as a ‘home-release scheme’.

And with this kind of arrangement, typically where people borrow against their home value, there is a big risk that they’ll become ‘over-indebted’ and find themselves unable to repay the loan.

Topics that you will find covered on this page

You can listen to an audio recording of this page below.

 

How much equity can I release?

Most equity release mortgages let you take about 30% – 50% of your property’s value. These are usually lifetime mortgages. This depends on how long you live in the house and whether or not you still have a mortgage on it.

So, for example, if you had a home worth £200,000 and wanted to release £60,000 of this to help with retirement planning, the maximum amount you could borrow would be around 30% or £60,000 of the total equity, leaving approximately £140,000 in equity in the property (i.e., after repaying all mortgages).

You can usually access some cash immediately; some providers will offer interest-free periods while others will initially ask that you repay an element of interest only.

But once the repayment period comes to an end, you will need to start paying back the loan.

You can always use an equity release calculator to check how much you can borrow.

It is also worth noting that many lifetime mortgage providers are willing to let older borrowers release more equity – the maximum amount available may vary from provider to provider but can be as high as 60% or 70% for a lifetime mortgage.

How much you may receive also depends on what type of plan you choose and your age when applying for it. All providers set limits on how much they will lend in total but these limits vary across plans and age groups. Many people opt for lifetime mortgage , which becomes due once all other living costs (such as residential and home care costs) have been paid.

What is the maximum equity release you can borrow?

The maximum amount of equity release mortgage you can access is based upon the value of your property, how much you owe on your mortgage(s) and for how long.

It typically lets older people borrow between 30% and 60% of their property’s value without having to repay any interest until later in the loan term (i.e., often for up to five years). On top of this, some providers also offer interest-free periods .

This means that if the value of your home has risen since you bought it, its current market value could be more than enough to cover the monthly repayment terms set out by an equity release lender.

And if not, even with today’s low rates for mortgages, borrowing against your home could still be a cheap way to access funds.

For example, the maximum you can borrow from some providers is 60% – equating to 80% of your property’s value if you have no outstanding loan on it .

At this level, for example, someone with a £200,000 house could obtain a lifetime mortgage cash lump sum of up to £144,000 (i.e., £80,000 at the outset and then repay interest-only payments of £2,400 a month).

Some providers offer an interest-free period that lasts up to five years , but after this period has come to an end customers must begin repaying the entire loan as well as any fees or charges applied by the lender. These interest payments can quickly add up.

how much equity can i release

Do I qualify for equity release?

As with any financial product, there are different criteria you must fulfil depending on which equity release provider you go for.

For example, some providers only let people borrow if they are over 55 years old or will also need to have repaid any outstanding mortgage debt before the home equity release programme is set up .

Other providers may be more flexible with age requirements but limit their equity release product to those who don’t own other property – although this does vary between providers too.

The availability of equity release schemes has been reviewed by the Financial Conduct Authority (FCA) , which now regulates most forms of equity release advice.

Equity release is basically about taking money from your home, without having to sell it, giving you the option to unlock cash that might otherwise be tied up.

It has ruled that, if you are considering releasing equity, your adviser must check your ability to repay the finance .

For example, they should consider whether you can pay off any interest or charges before you make repayment – this would typically give you up to five years’ grace before doing so. They should also calculate how much income you will have available after taking out a loan. An equity release calculator can help you understand what you will need to repay.

Providers are also expected to weigh up whether there is enough equity in your property to justify releasing it . If not, then some advisers may suggest that they might be better off keeping what little equity is available for their own use or recommend alternative equity release solutions to help with retirement planning.

Is there a maximum age for equity release?

There are no rules which state that you are too old to release equity in your home.

Instead, providers can set their own maximum age for applicants – usually around 70 years old .

However, if you are within 10 or 15 years of this age when applying, some lenders may ask for medical evidence before approving the application – in case you fall ill without warning.

Of course, even if it is approved there is no guarantee that you will receive all of the capital or income that you were expecting to receive when making an equity release plan.

The value of property tends to change over time and adverse movements could mean that property values have not increased enough to fund a sale which provides enough cash to repay what has been borrowed plus interest. The Financial Conduct Authority (FCA) requires providers to make sure that you are able to repay what has been borrowed before you take out an equity release plan .

However, it does not regulate the age at which people can take one out.

Is there a minimum age for equity release?

No. The FCA does not regulate the age at which people can apply for equity release

Equity release providers can set their own minimum ages but, where this is the case, they must take into account your ability to repay what has been borrowed using income you are likely to receive before retiring or moving house .

how much equity can i release from my home

What impacts how much equity I could release?

There are many factors which affect how much you could potentially release through equity release.

Age

These include the age of the youngest borrower, property value, how much is owed on mortgages, health and living arrangements.

Health

Health is an important factor when getting equity release because it can have an impact on income or ability to borrow. For example, if someone falls ill this could affect their health and also make it more difficult for them to keep up repayments . Providers must consider your health before giving you any financial advice about equity release plans .

They should check that you are capable of repaying what has been borrowed using the likely income you will receive before taking out a plan – or within six months after doing so.

Loan amount

Some providers offer different products with different maximum loan amounts. How much money is available will depend on the value of your property, how much is owed on mortgages and other debts, health and living arrangements .

This information provides an indication of how much equity release providers may be willing to provide

Old or new build

For example, some providers offer equity release schemes for new-build properties while others will only let you borrow against your own home.

Loan to value (LTV) amounts

You could also find that different providers have different maximum loan to value (LTV) ratios . For example, you may be able to release equity in a new-build property through one provider up to 80% of the property’s value compared with another provider who would only allow you 70%.

Interest rates

The interest rate can have a huge impact on how much you could get.

For example, a homeowner aged 65 borrowing £100,000 could be offered interest rates of 1% or 3%. Therefore it is always worth checking  lifetime mortgage rates.  Even small differences can have a large impact.

In the first scenario, they would be able to release £100,000 from their property after five years. In the second they would need to wait until 2032 – nearly 30 years – before releasing this amount. Therefore, do carefully check the interest rate that you are being offered.

Is there a minimum or maximum amount I can release?

There are minimum and maximum amounts that providers set on their equity release schemes

Minimum

As mentioned above, these can vary depending on your age, property value or health.

Maximum

On the other hand, some providers may only let you borrow up to a certain percentage of your home’s value. For example, it may be possible to take out an equity release plan which allows you to withdraw between 5% and 25% of what your property is worth .

what is the maximum equity release i can have

What if I already have equity release but want to release more money?

As mentioned above, equity release is a type of plan which you can take out once. After this, there may be no other options available to get money from your property .

Of course, you may have been able to release equity from your property before and could choose to do it again in the future if the right product becomes available which suits your needs. For example, someone who already has an existing mortgage might want to use another one later in life so they can use their home for care or simply because they want more money .

Whatever your reasons for wanting to release equity again, don’t rush into anything without doing your research first . It’s important that you’re happy with what provider you’re using because it will affect how much equity you can release .

As mentioned, It is possible to release money from an existing equity release plan . However, you should check the terms and conditions of your plan before doing this because there may be restrictions on how much you can withdraw.

For example, it may be possible for someone to take £10,000 from their equity release pot to help pay for a new conservatory . However, they may not be able to do this if their provider only allows them to borrow up to 80% of their property’s value .

See how much money you could be entitled to using the equity release calculator below

 

Want to find the best equity release deal or speak to a specialist to have your questions answered?

You can contact Key Equity Release, our partners, in one of 3 ways.   

  • Option 1 – Call directly on – 0333 567 1607
  • Option 2 – Book an appointment directly in the calendar below, and one of the Key team will call you back at your chosen time to discuss your requirements
  • Option 3 – Leave your contact details below and we will get in touch with you.

 

Option 1 – Call directly

Mon – Thurs – 9am – 8 pm

Friday – 9am – 5:30pm

Saturday – 9am – 5pm

Option 2 – Book an appointment, in the calendar below, for an equity release specialist to call you back when its convenient

Option 3 – Leave us your details and we will get in touch

Leave your contact details below and one of the equity release team will give you a call to discuss your needs.

Please note that all calls are undertaken by Key Equity Release, the UK’s leading equity release specialists. Key Equity Release is a trading name of Key Retirement Solutions Limited which is authorised and regulated by the Financial Conduct Authority

Article author

James Lloyd

I am the primary writer and author for Help and Advice, having originally helped start the site because I recognised that there was a need for easy to read, free and comprehensive information on the web. I have been able to use my background in finance to produce a number of articles for the site, as well as develop the financial fitness assessment tool. This is a tool that provides you with practical advice on improving your personal financial health.

Outside of work I am a keen rugby player and used to play up to a semi-professional level before the years of injury finally took their toll.  Now you are more likely to see me in the clubhouse enjoying the game.

Email – james@helpandadvice.co.uk

Linked in – Connect with me 

Frequently Asked Questions

What is equity release?

Equity release is basically about taking money from your home, without having to sell it, giving you the option to unlock cash that might otherwise be tied up.

The most popular types of schemes are a lifetime mortgage (including a drawdown lifetime mortgage or enhanced lifetime mortgage) or a home reversion plan.

How much equity can I release?

Most equity release mortgages let you take about 30% of your property’s value. These are

usually lifetime mortgages. This depends on how long you live in the house and whether or not you still have a mortgage on it.

What is the maximum equity release you can borrow?

The maximum amount of equity release mortgage you can access is based upon the value of your property, how much you owe on your mortgage(s) and for how long.

Do I qualify for equity release?

As with any financial product, there are different criteria you must fulfil depending on which equity release provider you go for.

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