Is equity release a good idea?

Raising money for retirement through equity release is a big financial decision that shouldn’t be taken lightly. There are a number of things for you and potentially your family/beneficiaries to think about. Find out more about equity release and whether it could be the right choice for you with this guide.

What is equity release?

Homeowners may look to equity release if they’re looking to turn some of the value of their property into cash. Usually available to applicants 55 and over, you don’t need to have paid off your mortgage in full to unlock some of the equity you’ve got stored in your property. What’s more, you don’t even need to move home.

There are several ways to access the cash released from your equity:

  • Take the money in one large lump sum.
  • Draw down smaller amounts over a period of time.

There are 2 types of equity release, each with its own differences.

  • Lifetime mortgages where the loan is secured against your home and you continue to own your home.
  • Home reversion plans involving selling a share of your home to a provider.

Should I consider equity release?

Whether or not you should take out an equity release product is an individual decision and dependant on your own personal circumstances and needs. What’s right for one customer may not be right for another given the changes to your financial situation it would bring.

When you take out a Lifetime Mortgage, you don’t have to make repayments on it. Instead, your home is sold when the last remaining borrower dies or moves into long-term care, and the loan is then repaid from the proceeds of the sale.

If you want to hold back as much of the value of your home as possible for inheritance to family members, equity release to aid your current lifestyle may not be the way to go. Interest accumulated on the loan will be added to the loan’s original value, meaning you may leave less for your immediate family than you may have hoped for.

If, however, you’re focused on making the most of your assets yourself, or even helping out family members financially before you pass away, equity release might be suitable. You may be looking at making some home improvements, or funding your next holiday. Whether it’s a big or a number of smaller purchases, releasing equity from your home to fund it could help you in achieving your goals.

What considerations are there with a lifetime mortgage?

A lifetime mortgage has its advantages and disadvantages, just like any major financial decision. It’s important to understand the features and benefits before you decide if equity release is a good idea for you.

Equity release considerations

  • You can take a cash lump sum, or a lump sum and then smaller amounts over time.
  • You will continue to own your home until the mortgage needs to repaid upon death or long term care of the last surviving borrower. 
  • You can set aside some of your home’s value to be passed on as inheritance however this may be reduced if you take a lifetime mortgage.  
  • No monthly payment is required but interest will continue be added to the amount owed. 
  • You will have the right to move to an alternative  property (subject to lending policy and criteria at the time) without having to pay any early repayment charges. 
  • You will be protected by the ‘No Negative Equity Guarantee’ meaning your estate won’t have to repay more than what your home sells for even if you owe more.
  • Taking out a lifetime mortgage could affect your entitlement for means-tested benefits.
  • You can make some overpayments over the life of the mortgage without penalty but, early repayment charges may be payable if you want to repay more or repay the mortgage in full.  These do not apply on death or moving into long term care.

What does a lifetime mortgage cost?

The upfront cost of a lifetime mortgage will vary between different lenders, depending on any fees which may be charged. 

  • Arrangement fee. This fee may be charged to arrange the setup of the lifetime mortgage.
  • Valuation fees. The lender will request a valuation on your home which, combined with your age, will determine how much you can borrow.
  • Solicitor’s fees. With a lifetime mortgage you will need to take independent legal advice which ensures you fully understand and are aware of any implications that may impact you.
  • Advice fee. The firm providing the advice to you may charge a fee for doing so which could be a percentage based on the amount of borrowing you take or alternatively a fixed fee.

Who is eligible for a lifetime mortgage?

If you’re thinking about releasing equity from your home, you’re likely to be considering plans for retirement and weighing up whether equity release can help you achieve them. You might be looking to pay off another mortgage, or help young relatives make their own next step in life, like a deposit to buy a house.

Lenders have a set of criteria for who can apply for a lifetime mortgage and you must go through an advised process to ensure it will meet your needs as well as ensuring you fully understand any impacts it will have.

Usually, to be eligible for a lifetime mortgage:

  • applicants are aged between 55-85
  • applying for a single or joint application (maximum age limit only applies to younger applicant)
  • the lifetime mortgage is for your main residence
  • the property is in England, Scotland or Wales
  • applicants already own the property
  • want to borrow more than £30,000. 

Find out if you can apply for a Scottish Widows Bank Lifetime Mortgage by using our Lifetime Mortgage Checker.

Lifetime Mortgage Checker

Provided you meet the initial criteria, you’ll then speak to an adviser who will look to understand your individual needs and circumstances in order to see if a lifetime mortgage might be right for you, at a time that suits you.

Or, you can call us on 0345 122 1607. Our lines are open Monday to Friday 8am – 8pm, Saturday 9am – 4pm. We’re closed on Sundays and Bank Holidays.


Lifetime Mortgage FAQs