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How Do You Release Equity In Property?

We’ve written a few blogs on the pro’s & con’s of equity release and whether you can sell your house if you have equity release, however we’ve never actually gone into detail around how you can actually do it. In this post we’ll explore what equity release is, how it works, what the cost of it is, some tips and any alternative options that you may have.

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Release equity in property


What is Equity Release?

Equity release is the process of releasing some of the money you have paid into your property over time as a cash lump sum. Whatever you take out of the property must however be repaid at a later stage, and can usually result in costing more than your standard mortgage repayments, so you need to be careful when you look to utilise equity release.

How Do I Release Equity From My House?

There are three main ways in which people release equity from their property, home reversion plans, lifetime mortgages or if you can, re-mortgaging. Here’s a breakdown of each of these methods:

  • Home Reversion Plans – You typically need to be above the age of 65 to take advantage of this one. It’s when a provider of this service will buy a portion of your home, which as you would expect is for significantly below market value. This will remain completely free until you sell the property or die, at which point the company will take their portion of the sale.
  • Lifetime Mortgages - A lifetime mortgage is a mortgage of sorts, with a difference. You borrow a percent of your homes value but you don’t make any repayments but the interest on the amount you borrow keeps growing and overtime can add up to be a substantial amount. The amount is repaid either when you die or go into long term care.
  • Re-mortgaging – This option is only available in limited circumstances, and you will have to speak to your lender, but you could potentially re-mortgage if you are able to extend the term of the mortgage or increase your monthly payment. This is only available in certain circumstances but could often be the best option, we’ve written about re-mortgaging and whether it is a good idea here.

How Much Equity Can I Release?

If you want to release equity then you may be wondering just how much you money you can get out of your property. Well, if you are eligble to take advantage of an equity release scheme, it depends on a few things and different providers may offer you slightly different amounts but it usually varies between 20% - 55% of your properties value.

When looking at how much the equity release company will lend you, they look at two main things. Firstly, although rather grim sounding, they will look at how long you are likely to live after taking the plan based on your health, age and other factors. Then they will look into getting your property valued, to find out exactly how much it is worth. Those who are older and have a higher value property will be able to lend more.

When trying to determine the value of your property they will look at the type of property it is, area, condition and more. Another thing they have to consider is how much you owe on the property. In order to release equity, you need to have a significant amount already built up.

Most companies won't release below £10,000 of equity, and normally release anywhere between £10,000 to £100,000, but there will be some companies that lend more than that for higher value properties.

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How Much Does It Cost?

It’s extremely hard to tell, it depends on what method that you choose and how much you are looking to borrow. It’s not worth giving you any example figures as there are so many variations to how much you could be charged, make sure whatever option you choose that you are fully aware of what the costs are going to be as it can sometimes be extremely expensive.

Equity Release Tips

If you are looking at releasing equity then you should always be careful in doing so, here are a few of the top tips we could find across the web:

  1. Ensure that the company you are using are a member of the ERC (Equity Release Council)
  2. Make sure you have professional advice, contact a financial expert
  3. If you can, it’s better to borrow smaller amounts repeatedly than a large amount in one go because the interest won’t grow as much (only applicable with some methods)
  4. Make sure it doesn’t impact any of your benefits, taking out a large cash some may mean you don’t get universal credit payments or pension credit.
  5. Be fully aware of how much it could cost you overtime. Equity release often isn’t cheap.

Alternative Options – Downsizing

Your best option by far if you can do it and have enough equity, is to downsize your property. As the name suggests this is when you buy a smaller (or rather cheaper) home than you currently have, selling yours in the process. This allows you to unlock cash difference between how much equity you have and the lower cost property you’ve bought.

This essentially will mean that you’re not paying anything for releasing equity.

Frequently Asked Questions

Looking to release equity in your property? We've gone through some of the details on how you can do it, the costs, tips & alternatives, but we may have missed some of the frequently asked questions. We've gathered some of the most common ones for you below:

Is equity release a con?

Equity release isn't a con, it's a heavy regulated industry by the Financial Conduct Authority (FCA) so it needs to be done to a high standard and above board. Equity release can be extremely expensive and can easily spiral out of control in terms of debt, so it's easy to see why people might ask whether it's a con. That being said, it can be useful in certain circumstances, but generally it should be used as a last resort and there are several alternatives that have less of a financial impact.

Can I sell my house if I have equity release?

This is a concern for a lot of people, once you have actioned an equity release plan will you be able to sell your home at a later date? Many normal equity release plans will allow you to move your current mortgage plan to a new property if you do want to sell, however the lender has to agree to it. It may hinder the process slightly as equity release providers may not accept the new property you have your eyes on if they think it will be hard to sell, like a retirement home for instance.

How easy is it to release equity from your property?

Equity release is relatively easy, there are a few different types of equity release schemes to understand and to figure out which one is best for your situation. There are a lot of different companies with slightly different criteria, but generally speaking in order to be eligble for equity release you need to be 55 or over, own a qualifying property and the property usually has to be worth over £70k as a rough guide.

Downsize or equity release?

Always, always, always Downsize if you have the ability to do so, ahead of choosing equity release. There are certain dangers to taking equity release, just like any kind of loan, meaning there is of course a risk. When you downsize you are accessing your own equity, there's no cost to it, other than the cost of moving house of course. The only reason to choose equity release is if you are fixed on wanting to stay in your property.

Can you release equity more than once?

Yes, technically you should be able to release equity more than once, although it can be hard to do and several companies may reject you if you've previously released equity. Typically speaking you can release between 20% to 55% of the overall value of your home. If you think that you may want to release equity more than once, perhaps a plan in which you can release the sum from your property in regular instalments.

How We Can Help

Do you need money quickly? Perhaps you need it quickly enough that you don’t think that downsizing is an option for you. We might be able to help as we can buy your home in as little as 7 days, for cash. You can find out everything you need to know about our service on our sell house fast page.

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