Once made, the decision to release your equity is effectively irreversible and has potentially significant ramifications. The more you know about it, the better. In this piece, we look at how equity release is commonly used, and who by, and the general pre-conditions that apply for most applicants. All useful background information before speaking with an Independent Financial Adviser.


Equity release - Who uses it? Decision points


Last week we talked about how equity release works and outlined some of the pros and cons that you should discuss with an IFA. In this piece, we’ll discuss its potential uses and look at some of the reasons why consumers may choose to enter into an equity release scheme.

The most commonly used form of equity release is to take out a lifetime mortgage against your home. You then choose whether to make the repayments partly through monthly interest payments and the final sale of your home to pay off the capital sum, or through roll-up where the interest is added to the capital amount and the lender receives their money plus all the accrued interest once your house is sold.


Am I in a position to uses equity release?

The UK Equity Release market is large and diverse, there’s no such thing as “one size fits all”. Having said that, to be considered for Equity Release, you may wish to consider the following questions before you speak to an expert, to see if you meet the usual lending criteria:

  • Are you a homeowner aged 55 or older? If it’s a joint application, the youngest borrower must be at least 55.
  • Are you mortgage-free or close to it? Often, paying off any remaining mortgage will be a condition of the equity release loan.
  • Is your property in the UK (not including the Isle of Man or the Channel Islands) and worth at least £70,000?
  • Do you live in your home as your main residence for at least six months a year?
  • How much do you wish to borrow? Often, a minimum of £10,000 applies.
  • Is your home a freehold property? Or if it’s leasehold, does it have a minimum of 75 years, or with some lenders, a minimum of 160-185 years, remaining on the lease?
  • Are you comfortable with borrowing against your home?
  • Do you prefer minimal or no repayments? (Until you pass away or move into care when the house is sold)
  • Are you worried about “spending the inheritance” and reducing the value of your estate?
  • Do you need bespoke independent advice from expert advisers with access to the whole of the Equity Release market?


How people use equity release

There can be many reasons for wanting to raise a capital sum in later life, and equity release has increased in popularity in recent years. It’s not right for everyone, but it can be used for all sorts of purposes, we’ve outlined some potential/typical uses below:

Refurbishing or renovating your home - House or loft extensions, garden makeovers, conservatories, new kitchen or bathroom, the choice is yours

Moving closer to your children - A house move may require a top-up to your moving budget, especially if to be close the children involves moving to a more expensive area.

Helping out children and grandchildren - You may wish to assist with house deposits, student fees, wedding costs, and other major expenses

Increasing/topping up retirement income - Making your retirement more enjoyable

Making plans to travel the world - Also known as “Spending the inheritance”, by taking the trip of a lifetime and/or seeing friends and relatives abroad

Adapting your home or your elderly parents’ home - Since the arrival of COVID, we all need to keep an eye on the older generation

Paying for funerals - Ensuring a dignified exit

Buying a new car or motorhome - Seeing the country in style

Paying for hobbies & leisure - Indulging in lifelong passions


A lifetime decision

Once you choose to enter into any form of Equity Release such as a lifetime mortgage, it can be very costly to change your mind or switch to other deals. Although many packages will allow borrowers to shift house and downsize, you will need to get permission from your scheme’s provider, and when it comes to early repayments, most lenders charge penalties – some of them charging up to 25%. Equity Release is a no-going-back decision – you’ll need legal advice from a solicitor and you’ll need advice from an Independent Financial Adviser.


Time for expert advice

As you can see, there are many questions to ask before deciding whether Equity Release is right for you. So wouldn’t it be a good idea to talk to an expert and get their carefully researched opinion on the best deal to suit your circumstances? Of course, it would. Which is why free2 has launched the Equity Release Advice Service to help consumers choose the right deal for them.

Visit our equity release calculator and see how much you could borrow:

Equity release calculator


Please note: This article was believed to be accurate at the time of writing and is intended to provide general information only to the reader – it does not constitute advice of any kind. Before making any decision about your savings, investments and your pension, you should consult an Independent Financial Adviser.

Important Note: Free2 Limited (trading as free2) is an Appointed Representative of RS Consumer Finance Limited (RSCF) which is authorised and regulated by the Financial Conduct Authority (the FCA). free2 is a credit broker, not a lender, and will only offer loans from RSCF – an offer of credit is subject to status and affordability. Terms & Conditions apply.

Customers wishing to use the free2 Equity Release Advice Service, once registered, will be introduced to partners Money and Advice Planning (MAP). The free2 Equity Release Advice Service provides a free initial consultation followed by an advisory meeting, for which a fee of £595 is charged on completion of a successful application.


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