Can I Get Equity Release Under 55?

Equity release comes in two different forms; lifetime mortgages and home reversion plans. Both of these products differ in how they function, but the basic guidelines remain the same, in that they are not accessible to anyone under the age of 55.

This means that anyone looking to weigh up their options for a later life mortgage, may have to look at an alternative in the meantime. Luckily, there are still a variety of options when it comes to mortgages for over 50s and if you’re under that threshold too, you still have options there too!

Alternatives to Equity Release

When looking at other options below the age of 55, there is plenty to choose from. Some are still limited by age, in that the applicant still has to be over 50, but there are options for younger applicants to consider also.

It’s essential to carefully consider your financial situation and goals before deciding on the best option for you, as each has its advantages and disadvantages. Speaking with a later life mortgage advisor can provide valuable guidance tailored to your specific circumstances.

Downsizing

Selling your current property and purchasing a smaller, less expensive one, may allow you to access the equity without taking out a loan.

Personal Savings

Using your savings or investments could help to cover your financial needs instead of borrowing against your home.

Interest-Only Mortgage

If you still have a mortgage, switching to an interest-only mortgage can reduce your monthly payments, but you’ll need a plan to repay the capital at the end of the term.

Retirement Interest Only (RIO) Mortgages

Retirement interest only mortgages are designed for retirees who want to release equity from their homes without the need to make monthly repayments.

Unlike traditional interest-only mortgages, RIO mortgages continue indefinitely, typically until the homeowner sells the property or passes away. The interest is accrued and added to the loan, and the full amount is repaid when the property is sold.

Term Interest Only (TIO) Mortgages

TIO mortgages allow borrowers to pay only the interest on the loan each month, rather than paying down the principal. They have a set term, usually around 25 years, at the end of which the borrower must repay the original loan amount in full.

Second Charge Mortgages

Also known as second mortgages, these loans are taken out against a property that already has an existing mortgage. They allow homeowners to access the equity in their property for various purposes, such as home improvements or debt consolidation.

Secured Loans

Secured loans are loans that are backed by an asset, typically the borrower’s property. They can be used for various purposes, including consolidating debts, making home improvements, or covering significant expenses.

Conventional Mortgages/Remortgages

Conventional mortgages and remortgages are the most common type of home loans and are used to purchase or refinance a property. They involve borrowing a lump sum from a lender to buy a home, and the loan is secured by the property itself.

When is equity release the right option?

It’s essential to understand that when you do reach the minimum age requirement for taking out equity release, it isn’t a one-size-fits-all solution, it may still not be the right option for you. Here’s an overview of instances where a homeowner might look to take out an equity release plan:

• Enhancing Retirement: If you’re a retiree looking to improve your quality of life without selling your home, equity release might be an option. It can provide funds to make your retirement years more comfortable.
• Home Upgrades: Perhaps your home needs renovations or essential repairs. Equity release can finance these projects, ensuring your property remains safe and comfortable.
• Enjoying Life: Equity release can help you fulfill travel dreams, support family milestones, or simply enjoy life’s luxuries.
• Home Modifications: Many prefer to stay in their own homes as they age. Equity release can fund home modifications, making it more accessible and safe.
• Mortgage Resolution: If you’re facing the end of an interest-only mortgage, equity release can help pay off the balance, allowing you to keep your home.
• Early Inheritance: Some use equity release to provide financial relief to family members while they’re still around to see it.

Remember, it’s important to make an informed decision. Speaking with a trusted and qualified later life mortgage advisor will help to tailor this solution to your unique circumstances and see if equity release, or something else entirely, is the right option for you overall.

Additionally, involving your family in the conversation can provide valuable insights, as equity release can affect your inheritance plans. As a company, we always look to encourage family to be a part of our appointments with you, if this is something you would like to do.

Pros & Cons of Equity Release

Equity release offers several potential benefits. Firstly, it provides financial freedom by unlocking the equity tied up in your home, which can be received as a lump sum or regular income.

One significant advantage is that most equity release plans do not require monthly repayments, alleviating financial pressure. Additionally, you can continue residing in your home, allowing you to live comfortably.

The funds you receive are usually tax-free, offering you a tax-efficient way to access your property’s value. Equity release funds are highly versatile, enabling you to utilise them for various purposes, such as home improvements, debt consolidation, or simply enjoying your retirement years.

On the flip side, there are important considerations to bear in mind. One of the most significant drawbacks is that equity release can substantially reduce the inheritance you leave behind for your family.

Furthermore, releasing equity may impact your eligibility for certain means-tested benefits, affecting your overall financial situation.

The good news, is that whilst many may worry about falling into negative equity, as members of the Equity Release Council, we can offer our customers the no negative equity guarantee. This means that your family will never owe more than the value of your property.

To understand the features and risks, ask for a personalised illustration. Equity Release may come in the form of a lifetime mortgage or home reversion plan.

A lifetime mortgage may impact the value of your estate and it could affect your entitlement to current and future means tested benefits. The loan plus accrued interest will repayable upon death or moving into long term care.

A home reversion plan involves selling all or part of your home to a plan provider in exchange for a tax-free lump sum.

Written by
Dan Osman
Head of Later Life at UK Moneyman Ltd.
CeMAP & CeRER Qualified

26th March 2024

Date Last Edited:

About the Author

Dan Osman

Head of Later Life at UK Moneyman Ltd.

Dan joined the Financial Services sector back in 2002, but actually left the industry in 2008 before returning some years later. During the in-between years, he took a degree to become a Social Worker specialising in working with vulnerable adults.

Upon his return, Dan combined his experiences in the two sectors to become an Equity Release Specialist and he now heads up UK Moneyman’s Later Life Lending proposition. He genuinely believes in a holistic approach and always ensures his clients receive a proper consideration of all the options available, including non-lending alternatives to Equity Release.

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