If you are a UK homeowner who wants to know how to go about finding an equity release lender, you should first be aware of the types of equity release plans available in the UK market.
Types of Equity Release Plans in the UK
- Home reversion: A lender that operates a home reversion plan is called a reversion company. A reversion company may offer you an equity release loan on your home in the form of monthly payments, a lump sum, or perhaps a mixture of both. When you agree to a home reversion loan, you then become a tenant in what used to be your home though you may not need to pay rent (or if you do, the rent is quite small).
- Interest-only mortgages: This type of equity release plan awards the borrower a lump sum that is secured by the value of their property. You need to shoulder monthly interest payments though.
- Home income plans: This type of plan used to be the most commonly employed equity release plan around. The first step is to get a mortgage using your home as security. Then, you purchase an annuity so that you will be able to receive lifetime income. The monthly payments from the annuity will partly shoulder your mortgage payments, but is generally only after you die and your home is sold that the original capital can be regained (from the proceeds of the sale).
- Lifetime mortgages: In this form of equity release, you receive a monthly income, a lump sum, or perhaps a combination of both. However, no monthly interest payments are charged. Instead, the interest along with the loan amount will be taken out of the proceeds of the sale of your home (usually after your death).
- Shared appreciation mortgages: This type of equity release is currently out of fashion, but some expect that it may become popular again in the future. You do not need to shoulder repayments on the loan against your home; rather, your home will be sold after you die. The original amount lent to you along with a set percentage of the deemed value of your home at the time of sale will then be returned to the lender.
Steps for finding the best equity release lender for your needs
- Ask around: Equity release is now so commonly used in the UK that chances are there is someone in your peer group or in your family who knows an equity release lender. Try perusing the internet for forums on equity release so you can hear the good and the bad about equity release lenders.
- Choose from the list: At present, about 20 equity release providers dominate this industry. They provide about 40 equity release plans, all in all.
- Know the criteria that are usually required: When you know what to look out for, it becomes easier to shake out the good providers from the not-so-good providers.
Common Criteria Required by Equity Release Lenders
To qualify for an equity release plan, you may need to satisfy the following criteria:
- You are the owner of your home which has a minimum value of £30,000, and you have no outstanding mortgage.
- You require at least £10,000 in a lump sum payment.
- You (and your spouse, if you are married) are between 55-95 years of age.
- Your property should be of freehold status, or it should have a lease lasting a minimum of 60 years.
- The property is in good condition (though some lenders ask that it be made of traditional bricks and mortar as well).
- You have no tenants on your property.
Other equity release lenders may ask for additional criteria for you to satisfy.
A Word of Caution
Check with your local Benefits Office whether receiving a loan via equity release will disqualify you from getting state benefits.
If you choose a good equity release lender, and if you satisfy most (if not all) of the given criteria, then equity release may be nearer than you think. Finding an equity release lender should now become easier, since you have read the preceding tips.
If you'd like help finding the best equity release lender for you, take a minute to fill out the short equity release form, and we will put you in touch with an experienced equity release advisor who will get you on your way to releasing the equity in your home.