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Am I eligible for equity release?

Here to help

These questions will help you understand whether equity release could be a good option for you and help you think about possible alternatives. After all, equity release is not right for everyone and will reduce the value of your estate.

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Having an outstanding mortgage will affect how much you can release

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If you have an existing mortgage or other debts secured against your home, these would need to be paid off when you release the money from your home. Don’t worry though, if you wish, you can use some of the money from the released equity to do this. However, using equity release to repay existing debts or mortgages could cost more in the long-term.

Good news, if you don’t have an existing mortgage or other debts secured against your home and are eligible for equity release you could receive 100% of the equity you’re eligible to release. It’s important to know that if this isn’t the case your debts would need to be paid off when you release the money from your home.

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Having access to savings could be a viable alternative

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There are alternatives to equity release and your financial adviser will want to discuss these with you as part of the process. Having savings available may mean you’ll be able to release less equity from your home, or even that equity release may not be right for you.

Having savings may mean you don't need to release as much equity from your home but for many this isn’t possible. Even if you don’t have any savings it’s important to make sure you’ve considered the alternatives. Your financial adviser will discuss these with you as part of the service and will support you in making the right decision for you.

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One of the most important factors that will decide how much money you are eligible to release for is the property valuation.

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It's possible that the value of your property has changed. If you proceed with equity release the provider will request an independent valuation, just as with a standard mortgage.

The internet is a good resource to find out how much your home is worth by searching for similar properties that are on the market. You could also get a valuation from your local estate agent. These can usually be obtained free of charge. If you proceed with equity release, the provider will request an independent valuation, just as with a standard mortgage.

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The costs involved in setting up equity release vary between different providers so be sure to ask about all fees before making a commitment.

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Along with all the fees involved, it's important to know that you remain responsible for repairing and insuring the property. The equity release provider will expect you to maintain your home to a reasonable standard.

Make sure you’re fully aware of any completion, arrangement, advice and application fees as well as valuation and solicitor fees. Your solicitor and provider should make these clear to you.

Typically, costs when releasing equity from your home include:

  • Completion, arrangement or application fees to cover administration costs
  • Valuation fees that are linked to how much your home is worth, with higher prices for more expensive properties
  • Solicitor fees, which include the cost of the legal work carried out on your property (your solicitor should give you a breakdown of these fees).

Make sure you’re fully aware of any completion, arrangement, advice and application fees as well as valuation and solicitor fees.

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You need to consider the impact of releasing equity on your current and future entitlement to benefits

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Releasing equity could affect any means-tested state benefits you get so as part of Saga Equity Release your adviser will prepare a financial assessment including a state benefits check. Many people are entitled to state benefits but may not be aware they are eligible to claim or that such help exists.

Money received from equity release can affect your entitlement to means-tested benefits such as Pension Credit, help with health costs and Council Tax Reduction. All Saga Equity Release advisers will consider this, and your future plans and needs, when assessing whether equity release is suitable for you.

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Releasing equity won’t always be the most suitable option, it’s important to look at all your alternatives

If you have savings tucked away for a ‘rainy day' you could use these funds in retirement. Adjusting your regular spending will help your household budget and you should consider looking at your overall spending habits to see how you can make the most of what you already have.

Downsizing by selling and moving to a smaller, less expensive property can free up some extra cash, but you’ll have to leave what might be your longstanding family home. There are the extra costs of moving to factor in as well, such as estate agent and solicitor fees, not to mention stamp duty, and even having to buy new furniture or redecorate. Having said all this, equity release may work out more expensive in the long term than downsizing to a cheaper property. Talking with Saga Equity Release will help you understand the pros and cons.

If you think you may need to move into residential care, now or in the future, equity release may not be suitable. This is because equity release is designed to be repaid if you move permanently into a care home. Eligibility for help with future care home fees can be affected, so discussing this with a financial adviser is important.

Continuing in, or returning to, paid work to top up your income, letting out a room in your house to a tenant, accepting financial support from a relative or friend or arranging a traditional mortgage are all viable alternatives in some cases. Your situation is unique so it's important to be aware of your options and make the choice that best suits you.

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With most lifetime mortgages you can choose to borrow the maximum amount of equity available as a one-off lump sum or opt for a smaller amount initially followed by additional amounts at later dates from a pre-agreed limit (known as a drawdown).

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A lifetime mortgage is the most popular type of equity release, where you borrow some of your home’s value at a fixed or capped interest rate. Interest is compounded, meaning that you pay interest on interest, although this can be avoided if you choose to make monthly repayments which is an option on some products. The roll up of interest can only be avoided if you make full interest payments.

You can choose to borrow the maximum amount of equity available as a one-off lump sum or opt for a smaller amount initially followed by additional amounts at later dates from a pre-agreed limit.

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Introduced by the Equity Release Council the guarantee protects you and your estate.

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As you’ll be aware, the guarantee means that you or your estate will never owe more than your property is sold for, even if this is less than the amount owed, following death or entering long-term care of the last borrower.

Under an equity release plan, you have the right to live in your home until you move into long-term care, or until death. Following one of these events your property will be sold and the sale proceeds will usually be used to repay the money owed to the provider of your plan. The Equity Release Council’s ‘no negative equity’ guarantee means that you or your beneficiaries will not have to repay more than the sale proceeds following death or moving into long-term care - even if this is less than the amount owed.

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There are differences between the types of plan available so it’s worth knowing what they are.

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Both types of plan are regulated by the Financial Conduct Authority (FCA).

A lifetime mortgage is a type of loan secured against your home where you can choose to extract your funds in a single lump sum, or in smaller amounts over time up to the maximum limit agreed with the plan provider. You retain full ownership of your home and interest on the loan is usually fixed or capped and rolled up and added to the loan.

With some plans you can make monthly interest repayments in part, or in full. If you pay the interest in full, you can maintain the debt to the initial amount of the loan before interest. If you choose to make interest repayments, you still have the option to move to a roll-up arrangement at a later date if you wish.

With a home reversion plan, the provider will purchase all or a part percentage of your home. You know precisely what portion of your property you have parted with and, equally, what has been left for later use, possibly to leave in a will. The percentage you retain in your property will always remain the same regardless of the change in property values, unless you decide to take further cash releases. You will be provided with a tax-free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property for the rest of your life or until you move into long-term care. At the end of the plan your property will be sold and the sale proceeds are shared according to the remaining proportions of ownership.

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The Saga Equity Release team are here to help in any way they can. Saga Equity Release, provided by HUB Financial Solutions Limited, is a no-obligation, no-pressure service dedicated to finding out if equity release is right for you.

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