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How Your Property Type Impacts Eligibility for an Equity Release Mortgage

All you need to know about applying for an equity release mortgage, whether you live in a flat, holiday home, house or ex-council property.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2023-05-09
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How Your Property Type Impacts Eligibility for an Equity Release Mortgage

Are you interested in an equity release mortgage but unsure whether your property is eligible or how much you'd be able to borrow?

Here we look at a variety of different homes, from flats to holiday properties, to explain why the type of residence you own might make a difference to your equity release options.

Property Types and Equity Release Explained

Equity release lenders need to follow guidelines about which properties they can accept as security.

Normally, your security must be your primary residential home, based in the UK, and either owned outright or with sufficient equity to justify the amount you'd like to borrow.

Valuations apply, and you can generally borrow up to around 50% of the property market value, although some lenders will offer a higher Loan to Value (LTV).

There are multiple schemes and products available, but knowing which lender to apply to and how they might assess your property, is key.

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How Do Equity Release Schemes Work?

An equity release scheme is a way to release cash invested in your property, available to UK applicants from age 55.

The idea is that you borrow against your equity to finance your retirement or top up your pension scheme, most popular with pensioners who own a property but don't have sufficient cash assets or savings.

Low-income retirees often consider equity release because there are no regular repayments. Instead, the lender adds the interest to the total debt.

Once the borrower dies or goes into long-term care, the lender sells the home. The proceeds are used to repay the debt (capital borrowed plus interest).

If there is a surplus, this is passed onto the estate to distribute to beneficiaries.

What Are the Property Requirements for an Equity Release UK Mortgage?

Typically, you need to own a property in the UK debt-free, although there are ways to refinance a mortgage through an equity release product if you don't have a large outstanding balance.

Applicants need to be residents in the country for at least half of the year.

Unless you want an equity release mortgage with the option of making regular interest payments to keep the total debt down, you won't need to undergo an affordability assessment.

Lenders will carry out a property valuation before offering a loan because your home is the security against the debt.

Most equity release providers will only consider properties worth at least £70,000.

Can I Get a Lifetime Mortgage Equity Release Product on a Leasehold Home?

If you live in a leasehold property, you do not own the land your home is built on. You own the lease, bought from the freeholder, which means you have the right to sell the property until the lease expires.

The crucial factor for leasehold homeowners is that an equity release lender will need to know how long you have left on your leasehold agreement - these are often for 99 years but can be shorter-term or significantly longer.

You can apply for equity release against a leasehold home, but the lender will likely have a minimum requirement for the remaining lease.

Most providers will look for at least 75 years remaining, although some require 90 or 100 years.

Flats and Equity Release Explained

Most flats are leasehold properties, so you can apply for an equity release mortgage, depending on how long you have left on the lease.

Some lenders also impose restrictions - some will lend against a flat provided the building doesn't have over seven storeys.

Can I Use an Equity Release Mortgage for a Park Home?

Park homes or mobile homes (even if they are static) are not eligible for an equity release loan because they normally depreciate in value rather than appreciating as a normal brick and mortar property would.

The key for the lender is that they have the assurance that your home, when sold, will be worth at least what they have loaned, plus the interest, so a park home isn't considered suitable security.

How do Equity Release UK Lenders View Non-Standard Properties?

As with all mortgage products, a lot depends on your lender. Some have very strict rules about lending and will only accept properties of standard construction where they can make an easy valuation and be confident in their ability to sell in the future.

Other equity release providers are more flexible and will consider a range of non-standard construction types, including:

  • Timber-framed and steel-framed homes
  • Properties with thatched roofs or tin roofs
  • Concrete buildings

Are Equity Release Schemes Available for Listed Buildings?

You can potentially apply for an equity release scheme if you live in a listed property. Still, you may be better off with a specialist lender - a mainstream provider is less likely to consider lending against a Grade I, Grade II or Grade II* building.

Listed properties require greater maintenance and niche insurance and can be harder to sell, so your lender may ask for an upkeep agreement.

Their interest is that the property meets the valuation expectations when they come to sell, so any such agreement is focused on maintaining the value.

How Does a Lifetime Mortgage Equity Release Product Work on Homes With Japanese Knotweed?

Invasive plant species can be a tough problem for homeowners, costing a significant amount to manage and possibly impacting the value of your property.

Like a listed building, you might be able to get an equity release loan, but you will need to select a lender who is happy to lend against a building with Japanese Knotweed - not all will.

Usually, that will involve a more complex valuation and a survey to determine how serious the growth is and whether it's a concern for the structural integrity of the building.

Can I Apply for an Equity Release Mortgage on an Ex-Council House?

Yes, provided you've bought your ex-council house and the discount period allocated by your local council has ended, you can apply for an equity release mortgage.

The past ownership of your house isn't important, whether it is freehold or leasehold, so the lender will consider the property value, equity owned and amount you'd like to borrow.

In some cases, the lender may wish to instruct a surveyor to inspect the construction materials to ensure they are up to specification and fit within their lending policies.

Do Equity Release Lenders Accept Holiday Homes?

No, an equity release product is designed to finance retirement against the security of your primary residence.

Therefore, you cannot apply for equity release against any property you don't live in for the majority of the year, including a holiday home.

Expert Advice With Equity Release Mortgages

In this guide, we've summarised the main rules about equity release borrowing and property types - but if we haven't covered your specific question, or you'd like tailored support evaluating your borrowing prospects, please get in touch.

Revolution Finance Brokers offers excellent customer service from a team of independent, whole-of-market specialists, and we'll be happy to answer any queries you may have.

Please give us a call, send us a message or fill in our contact form, and we'll arrange a convenient time to talk.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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FCA disclaimer

The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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