Content Writer
Senior Equity Release Advisor
If you’re interested in equity release, one of the critical things you’ll want to know is how much money you can raise against your property.
Here, we’ll explain how this works with relevant examples, and also outline the factors that can influence what you receive and how interest is calculated.
How much equity can you release from your home?
The amount you can release is typically between 20% and 60%. How much you can actually get from an equity release scheme will depend on the following factors:
- Your age at the time of the application (age of youngest applicant if a joint application)
- Value of your property
- Your health status
- Type of equity release scheme chosen - lifetime mortgage or home reversion plan
The effect these factors can have is explained in more detail in the section below, but to offer an example of how much equity you could potentially release, based on an applicant aged 55 with a clear health record and a property value of £500,000 the amount of equity that can be released, using a standard lifetime mortgage, would be circa 30% / £150,000.
You can use our calculator below to get a rough idea of how much equity you can release based on your age and the value of your property:
Factors that affect maximum borrowing
The maximum amount you can borrow is determined by the factors mentioned above. But why are these specific details so influential, and how much of an effect can they have?
Age
The minimum age requirement for equity release providers is 55. The older you are, the more you’re usually allowed to borrow, as your life expectancy (and, therefore, the overall term of the loan) will then be shorter.
The table below offers an illustration - based on the same property value used in the example above (£500,000) - of how your age can influence the amount you can borrow for equity release.
|
Age of youngest applicant |
Amount of equity you could release |
Loan-to-Value (LTV) |
|
55 |
£155,000 |
31% |
|
60 |
£190,000 |
38% |
|
70 |
£240,000 |
48% |
|
80 |
£290,000 |
58% |
The above information is purely for illustration purposes only, based on a property value of £500,000. For an accurate quote based on your own personal circumstances, get in touch with one of our equity release advisors.
Property value
Naturally, the value of your home will play a big part in how much you can borrow. The higher the value, the more equity you can release.
The table below shows how the amount of equity you can release will vary for different property values (based on an applicant aged 60).
|
Property value |
Amount of equity you could release |
Loan-to-Value (LTV) |
|
£250,000 |
£95,000 |
38% |
|
£350,000 |
£133,000 |
38% |
|
£600,000 |
£228,000 |
38% |
|
£800,000 |
£304,000 |
38% |
The above information is purely for illustration purposes only, based on an applicant aged 60. For an accurate quote based on your own personal circumstances, get in touch with one of our equity release advisors.
Applicants’ health status
Several equity release providers will offer enhancements to their standard terms if you have particular health conditions (e.g., a serious illness such as cancer, heart disease, or high blood pressure).
The same can also apply if your lifestyle is deemed risky (smoking heavily or alcohol consumption is well above average). This means you could release more equity, as any of these factors could reduce your overall life expectancy.
Type of equity release scheme
There are two types of equity release - lifetime mortgages and home reversion plans. Each type has its own criteria for calculating the maximum amount you can borrow.
For lifetime mortgages, the amount you can borrow is based primarily on your age and the property value. For home reversion plans, the amount you receive is based on the percentage of your property. It would likely be lower than the market value to cover the provider’s additional risk of not knowing when they will get their money back.
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How much does equity release cost?
Equity release is a form of long-term borrowing, and, like any loan, it incurs interest charges. However, unlike standard mortgages, where the interest charges are repaid on a regular (monthly) basis, with this type of loan, the interest is allowed to roll up and accumulate on a compound basis.
This means the interest is added to the original borrowed amount and then charged to the new total, potentially leading to a significant increase in the amount owed over time.
The examples below show how this would work based on different amounts borrowed; all are based on an interest rate of 6% and a term of 10 years.
|
Amount of equity released |
Amount of interest accrued after 10 years |
Total outstanding balance owed |
|
£100,000 |
£82,203 |
£182,203 |
|
£200,000 |
£164,406 |
£364,406 |
|
£300,000 |
£246,609 |
£546,609 |
|
£400,000 |
£328,812 |
£728,812 |
|
£500,000 |
£411,014 |
£911,014 |
The above information is purely for illustration purposes only. For an accurate quote based on your own personal circumstances get in touch with one of our equity release advisors.
To reduce the overall effect of compound interest, most equity release providers offer the facility of making monthly interest repayments if you have sufficient disposable income. This will reduce the impact on your loved ones, who will need to repay the final balance when you either die or move into a care home.
Other fees
In addition to the interest charges, there are also additional fees that can apply to equity release schemes, such as:
- Provider administration fee: to cover the set-up costs for the scheme
- Advisor fee: covers the cost of advice (a legal requirement for equity release schemes)
- Valuation and solicitors fees: covers costs for property valuations, etc.
Why choose Teito for your equity release needs?
Understanding how much you can borrow from an equity release scheme is an integral part of the decision-making process, and we can help answer any lingering questions you might have.
At Teito, our advisors have extensive knowledge and experience of this type of borrowing. They can provide all the clarity you’ll need about how much equity you can release and which factors could have the most influence on this amount.
Here are some of the reasons people choose Teito for their equity release needs:
- Your initial consultation is FREE, with no obligation to proceed
- Teito is a fully-fledged member of the Equity Release Council
- Our advisors can take you through the application process from start to finish
- We are rated 5-star on leading review websites
Ready to get started with an independent equity release advisor? Fill out our quick form to book your free, no-obligation consultation now.
FAQs
Potentially, yes. Remortgaging is based on a different set of eligibility criteria than equity release and involves adding further borrowing to an existing home loan. As such, a mortgage lender could allow for an overall loan-to-value of up to 85% (or higher).
If you have an existing mortgage and want to release equity by increasing your borrowing, contact us, and one of our advisors will be able to discuss your options in more detail.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.