Have you wondered if equity release criteria could hold you back from unlocking your property’s wealth? 

You’re not alone. 

This criteria not only determines eligibility but also influences the terms and potential benefits you obtain from your provider. 

So make sure you’re aware of what’s involved and what can be done to improve your chances.

This article sheds light on the essential prerequisites and guidelines of equity release, equipping potential borrowers with the knowledge to navigate this path with confidence and clarity.

What’s the Criteria to Qualify for Equity Release?

All equity release providers set out the criteria to qualify for equity release.¹

These conditions typically relate to your age, your property’s value, and the amount of equity you hold in your property.

Minimum Age

The minimum age requirement for most lifetime mortgage schemes in the UK is 55 years and 65 for a home reversion scheme. 

This applies to both homeowners if the property is jointly owned. 

Minimum Property Value

While the specific minimum property value can vary between providers, generally, your property must be worth at least £70,000.² 

Your property’s value is crucial as it determines how much equity you can release.

Is There a Minimum Equity?

Yes, most providers have a minimum release amount of £10,000.³

What’s the Maximum Loan-to-Value Ratio?

The maximum loan-to-value (LTV) ratio varies among providers and depends on factors such as your age, any health conditions you may have, and your property’s value. 

Typically

The LTV ratio for equity release ranges between 20% and 60%,⁴ The older you are, the higher the percentage you can borrow.

Learn About: Qualifying for Enhanced Lifetime Mortgages

What’s the Maximum Loan Amount You Can Get?

The maximum loan amount you can get from an equity release scheme largely varies between what you qualify for and what providers will offer. 

For example, a healthy 65-year-old with a property worth £300,000 may be able to release up to £105,000, based on a maximum LTV ratio of 35%.*

*These figures are for indicative purposes only.

What Are the Other Eligibility Criteria?

Other criteria include:

• Your property must be in the UK and of standard construction.
• You must live in the property as your primary residence.
• You should be up-to-date on any existing mortgage repayments.
• The property should be in a good state of repair.

Criteria for Your Property to Qualify for Equity Release 

Not all properties are automatically eligible, and there are additional property-specific requirements that must be met.

Here are some common criteria and considerations:

1. If You Have a Mortgage: If you have an existing mortgage, your property can still be considered for equity release, but the funds must first be used to settle your existing mortgage. Any excess funds can be used as you see fit.
2. On Leasehold Property: Leasehold properties can be eligible for equity release, but some providers may not offer this.
3. On Freehold Property: Freehold properties, where you own both the land and building, are typically suitable for equity release. The value of your freehold property will largely determine the amount you can release.
4. On Commonhold Property: Commonhold properties, where individual units within a complex are owned while shared areas are communal, may be considered. The provider will likely want to review the specifics of the commonhold agreement.
5. On Commercial Property: Commercial properties typically don't qualify for standard equity release. However, semi-commercial properties, like a shop with a residence above, may be considered by some providers.
6. On Buy-to-let Property: Some products cater specifically to buy-to-let properties. The terms for these products can differ from traditional schemes.
7. On Rented Property: Equity release isn’t available for rented properties, as the property needs to be your primary residence. 
8. With a Tenant or Lodger: Having a tenant or lodger may complicate the process. Some providers may require the tenant or lodger to sign away their occupancy rights to approve the release.
9. Property Title Deeds: Your property title deeds should be clear and available for review. These documents will be essential during the application process, confirming property ownership. Furthermore, the deed can have no more than 2 people listed.
10. Japanese Knotweed: The presence of Japanese Knotweed can hamper your equity release eligibility due to its potentially damaging nature - a professional removal plan may be needed before your application can proceed.

Personal Criteria to Qualify for Equity Release 

When it comes to personal criteria, your individual circumstances play a crucial role. 

These conditions often hinge on your age, health, and financial standing, amongst others.

Shared Ownership Equity Release

Shared ownership properties can qualify for equity release. 

However

There can’t be more than 2 people on your property title deed and both owners must meet age qualification criteria.

Read More: Tenants in Common

Equity Release for Divorcees

Divorcees can apply for equity release. 

If the property was jointly owned and now one party owns the property entirely after a settlement, they can apply for equity release.

Can You Get Equity Release With Bad Credit?

Yes, you can get equity release with bad credit.

While credit history may not be a significant factor, providers may be cautious if there's evidence of recent adverse credit issues, like bankruptcy or defaults. 

However 

Each provider has its own criteria, so it's worth discussing this with a financial advisor.

Can You Get Equity Release With Debt?

Yes, you can get equity release with debt. 

Many people use equity release to consolidate and pay off their debts. 

However, if you have mortgage debt, it’ll need to be an amount that can be paid off using your released cash.

Do Expats Qualify For Equity Release?

Yes, expat homeowners can qualify for equity release, but the options may be limited compared to UK residents. 

The property in question must be in the UK, and you may need to provide proof of your ongoing connection to the property because it must be your primary residence.

How Equity Release & Power of Attorney Can Work Together

Power of Attorney (PoA) allows someone to act on your behalf if you're unable to make decisions. 

A person with a registered PoA can apply for equity release on your behalf, provided they show that it’s in your best interest.

Common Questions

In Conclusion

Equity release, involving plans like lifetime mortgages and home reversion, is governed by numerous criteria such as age, property value, and financial health. 

The decision can impact your estate's value, government benefits, and property upkeep responsibilities. 

Complexities arise with bad credit, expat status, unconventional property types, and inflation. 

Given the long-term implications, professional advice is essential, and understanding equity release criteria will help you make a more informed decision on whether it’s a good fit for your personal circumstances. 

Editorial Note: This content has been independently collected by the SovereignBoss team and is offered on a non-advised basis. SovereignBoss may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.