How much equity can I release from my home?

How much equity can you release?

Equity release is one way to raise money in retirement without selling your home. There are several factors that could affect how much you can release.

What affects your equity release value?

Your equity release value can be decided by a range of factors.

• The value of your home.
• The condition and type of your property.
• Your age, health and lifestyle. If you’re making a joint application, the younger partner’s status is used. Typically, the younger and healthier you are, the less money you’ll be able to raise.
• If you have an outstanding mortgage or any other debt secured against your home. This will need to be repaid before or when you release equity. This can be done with some of the funds you free up. Using equity release to repay debt can cost more in the long term.  

How much can you release with a lifetime mortgage?

The most common equity release scheme is a lifetime mortgage.

• You need to be 55 or over to take out a plan.
• You borrow a sum against the value of your home.
• The capital and interest are repaid when you (or the last surviving partner on a joint plan) die or enter long-term care.

Each provider sets a borrowing limit, shown as a percentage of your home’s value. For older people, and those with health issues, this value might be as much as 60%.

On a home valued at £300,000, the most you could release varies from £80,000 or less to around £150,000. But you don’t have to take the whole amount.

How much can you release with a home reversion plan?

The other main type of equity release is a home reversion plan.

• You need to be 60 or over to take out a plan.
• You sell part or all of your home to the provider.
• You are still able to live there for the rest of your life.

If you sell a 50% stake in your home, you’ll get an advance of much less than half of its current value. This is because the provider will have to wait many years to make any returns.

People with the highest life expectancy might get just 20% of the market value of the share that they sell. This could rise to 60% for older people.

In the case of a home valued at £300,000, selling a 50% share could raise £30,000 to £90,000. These figures are solely a guide. To find out how much you could raise, speak to a financial advisor who is an equity release expert. 

What’s the lowest amount you can release?

The least you can release tends to be £10,000 with most providers. Your home must be worth at least £70,000 to be able to access the equity. If you need a smaller cash boost, you could think about a personal loan.

What’s the most you can release?

The largest amount you can release depends on your situation. You’re probably looking at no more than 50% of the value of your home. Most people will end up with 20% to 50% equity release in terms of loan to value (LTV).

To get a better idea, you can use our equity release calculator.

Want to release more from an existing plan?

If you already have equity release, you might be able to release more from your home. Your provider can tell you if you’re eligible.

Looking to switch? An independent adviser could also help you look at other plans that might offer a better rate. If you choose to switch, there may be charges or time restrictions. 

Another option is a lifetime mortgage with a drawdown facility. You agree a maximum amount you can borrow, but only take part of it as a lump sum. You then receive smaller amounts as and when you need it.

What can you do with the money you release?

When you release your money, you can spend it how you like. Here are some ways people choose to use released equity:

• Home upgrades – for example, an extension or a new heating system
• A new car or dream holiday.
• Help an adult child buy a house of their own. Note that gifting money can affect inheritance tax.
• Boost retirement income.

Can your loved ones still inherit?

Equity release will affect the value of the estate you leave behind. But that doesn’t mean there won’t be anything left for you to leave in your will. There may be money left from the sale of a property, once the equity release plan has been cleared. Lifetime mortgages come with a ‘no negative equity guarantee’.

This means that you or your beneficiaries won’t be left in debt at the end of a plan. Your beneficiaries will never have to pay back more than your home sells for, even if it's less than the amount owed on the mortgage. As long as all the terms and conditions are met. With home reversion plans, you can choose how much of your property you sell to a provider. When the plan ends, your beneficiaries can still benefit from the value of the percentage of the house you didn’t sell.

Will you pay more tax?

One of the ways your estate might be affected is the impact of inheritance tax. You should take professional advice as to how your tax situation will change. Saga Equity Release is an advice service that can help you discover the ins and outs of releasing equity from your home.

There’s no pressure or any obligation to take out an equity release product. But if you decide to take out a Saga Lifetime Mortgage, there’s an advice fee of £799. A lifetime mortgage is a loan secured against your home.

Are there alternatives to equity release?

Choosing equity release is a big decision. Part of your decision process should include looking at other ways you could raise the cash you need. You could review your budget, apply for available grants, sell unwanted belongings, or even take in a lodger.

Whatever amount you’re looking for from equity release, you should take professional advice first. If you’ve thought through the alternatives and still want to explore equity release, we’re here to help.