Downsizing
Moving to a smaller or cheaper home can free up money without any borrowing. Allow for the costs of moving.
What equity release means
Your equity is the share of your home that you own outright: its value, less any mortgage still owing. Equity release lets homeowners aged 55 and over turn some of that into money while staying where they are.
The money can come as a lump sum, in smaller amounts when you need it, or in some cases as regular income. The usual route is a lifetime mortgage, which is a loan secured against your home. The other is a retirement interest-only (RIO) mortgage, where you pay the interest each month. Lifetime mortgages and RIO mortgages are the only types of equity release I advise on, so they're the focus of this guide.
It suits some people well, but it's a long-term commitment with real costs, so take your time.
Retirement interest-only (RIO) mortgages
A RIO mortgage asks you to pay the interest every month, so the amount you owe doesn't grow. The loan is repaid when the last borrower dies or moves into long-term care. Your income has to cover the payments, both now and in the future, so it isn't right for everyone.
Who it's for
Who can release equity?
- Age: you're 55 or over. For couples, everyone named on the plan normally needs to meet the minimum age.
- Ownership: you own your home in the UK. Leasehold homes may be accepted, depending on the lease.
- Value: your home is worth enough, because lenders set a minimum property value.
- Existing mortgage: this can normally be repaid from the money you release.
How much could you release?
The main factors are your age and what your home is worth. In general, the older you are, the more a lender may offer, and some lenders offer more where you have certain health or lifestyle conditions.
Our calculator can give you a rough idea in about a minute. It's an estimate only: your actual offer depends on the lender and your circumstances.
Be aware
What to weigh up
Equity release isn't right for everyone. The main things to weigh up are:
- The debt grows. If interest isn't paid, it's added to the loan and then earns interest itself, so the amount owed can grow quickly over many years.
- There's less left for your family. It reduces the value of your estate.
- It may affect benefits. Extra money may change your entitlement to means-tested benefits, although that's not always the case.
Your protections
Equity Release Council standards
Avalon FS is a member of the Equity Release Council, whose standards are designed to protect you. Its members commit to standards including:
- The right to stay in your home for life, provided you keep to the terms of the plan
- A no negative equity guarantee: you'll never owe more than your home is worth
- The right to move to another suitable property, subject to the lender's criteria
- Fixed or capped interest rates for life
- Independent legal advice before you commit
What does it cost?
Costs differ from plan to plan, so ask for the full picture in writing. They can include:
- Interest, which is usually fixed or capped for life and often added to the loan.
- Arrangement, valuation and legal fees.
- Early repayment charges if you repay or move before the plan ends.
- My adviser fee, which is £895. I'll confirm it in writing before you go ahead.
What happens later on?
With a lifetime mortgage you carry on living in your home. The loan and any interest that has built up are usually repaid when the last borrower dies or moves into long-term care, normally by selling the home. Whatever is left after that goes to your estate.
While the plan is running, you're expected to keep the property in good repair and insured.
Other routes
Alternatives worth looking at first
Sometimes the right answer is not to release equity at all. I'll always talk these options through with you.
Other borrowing
A standard mortgage or loan may cost less if you can comfortably afford the monthly repayments, although lenders may limit borrowing by age.
Help from family
Some families are able to help. If yours can, it's wise to agree the terms clearly and put them in writing.
Benefits and support
Check you're receiving everything you're entitled to, such as Pension Credit or Attendance Allowance. Age UK and the government's benefits calculator can help.
Savings and pensions
You may have savings or pension options you could use instead. Free, government-backed guidance such as Pension Wise is available for many over-50s.
Step by step
If you go ahead: from first chat to completion
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The first conversation
A free chat, with no obligation, about your home, your finances, what you'd like the money for and how your family feel about it. You're welcome to bring someone along.
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Weighing up your options
We look at whether equity release fits your situation, alongside the alternatives. I explain the costs and risks of each so you can compare them fairly.
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Your recommendation and illustration
If equity release makes sense, you receive a personal recommendation in writing, with a personalised illustration showing the costs and how the loan could grow. You then have time to read it and think.
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Independent legal advice
A solicitor, independent of the lender, will be appointed to guide you through the documentation.
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Application, valuation and offer
The lender values your home and checks the details. If everything is in order, it issues a formal offer. This usually takes a few weeks, depending on the lender and the solicitors.
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Completion
Once everything is signed, the money is released. If you have an existing mortgage, it is repaid first and the rest comes to you.
Bring your family in. Equity release affects what's left for your family, so it usually helps to involve them early. Many people find it useful to have them in the room, or on the call, for the first conversation.
Ready to talk it over?
There's no obligation and no pressure. Try the calculator for a rough idea, or get in touch for a friendly chat.