Equity release under 55: Your options.

If you're under 55, you are not eligible to release equity in your property through an equity release scheme. This is because the minimum age for equity release is 55. However, in this insight, we will cover your options on how you can access the funds locked in your property.

Key Takeaways:

• Equity release lets you access the value of your home without selling it, but it's only for people aged 55 or older. If you're younger than that, you can't use it. This rule exists to lower the risk for providers.
• For lifetime mortgage schemes, the youngest applicant must be 55, and for home reversion plans, applicants must be at least 60. If you co-own a home with someone who's over 55, you can transfer your share to them so they can apply for equity release alone.
• You could also consider remortgaging or getting a personal loan, but both have risks.
• Get legal advice that fits your situation before deciding what to do. This will help you make the right choice and stay protected.

Equity release lets you tap into the value of your home without selling it. It's a financial product for those aged 55 and up. If you're younger than 55 and were hoping to use equity release, you'll have to wait til your birthday or explore other options for accessing the equity in your property.

Can you use Equity release under 55?

No. Equity release is for older homeowners who want to access the value of their property without selling it. Lifetime mortgage schemes, a type of equity release plan, require the youngest applicant to be at least 55 years old. Home reversion plans, another type of equity release, require applicants to be at least 60. These age requirements are in place because equity release is intended to provide additional funds during retirement.

Equity release providers set an age limit to reduce their risk. If you take out a lifetime mortgage or a home reversion plan, the provider will eventually be repaid from the sale of your home. To make sure they don't lose money, providers set age limits for eligibility. For lifetime mortgages, the youngest applicant must be over 55. For home reversion plans, the age limit is usually 60. This is because providers don't want to wait too long before they can sell their share of the property and make a profit.

Options for Equity release under 55

As we have no established, you will not able to release equity in a straightforward manner unless you are over 55. However, if you need to access funds, there are options available to consider. If you are just considering your retirement, consider the alternatives to equity release. 

The first option is applicable if you have a spouse who is over 55 and are willing to consider transferring equity:

Transferring Equity

If you are under 55 but own a home jointly with a partner who is older than that, you can transfer your share of the property to your partner who is over 55 so that they are the sole applicant for equity release. Essentially, your share of the property is transferred to the person who is over 55.

Transferring equity is a way for those under 55 to access equity release if they really need to, but it does come with risks. 

For instance: 

• If you are not married to the other homeowner, then transferring your share to them would leave you with no protection if your relationship were to break down, and you could lose your share of the home and have no right to any equity either. 
• Transferring your share of a home to another homeowner may come with extra costs such as legal fees and Stamp Duty. 

To ensure you are fully protected, it is best to seek legal advice that is specific to your circumstances.

For example, Sarah is 50 years old and owns a home with her husband, who is 60. They need extra cash and are considering equity release, but Sarah can't apply because she's under 55. They decide to transfer Sarah's share of the property to her husband so he can apply for equity release. After paying legal fees and Stamp Duty, her husband gets approved for equity release and receives £50,000. They use the money to improve their home and pay off debts. However, they are aware of the risks of transferring ownership and seek legal advice to ensure they are fully protected.

Remortgaging

You can consider remortgaging your property to release some of the equity. This means taking out a new mortgage on your property, which will pay off your existing mortgage and release any equity you have built up. However, be aware that remortgaging will increase your monthly mortgage payments and the total amount you owe in the long term.

To remortgage, make sure you don't have early repayment charges. If you do, think about the costs and effects of remortgaging early. Remortgaging can help release up to 90% of your equity, but it must be affordable and repaid by retirement. Keep in mind that time may be limited to repay it.

For example, John is 50 and wants to get some cash by remortgaging his home. His home is worth £400,000, and he still has £200,000 left on his current mortgage. John finds a lender that will lend him up to 80% of the property value, which is £320,000. So, John applies for a new mortgage of £300,000, which gives him £100,000 in extra equity. This money will help him make some home improvements, pay off some debts, and start a small business. But, he knows that he must pay back the new mortgage by the time he retires, which gives him around 15 years.

Taking out a personal loan

You can use your property as collateral to take out a personal loan, also known as a secured loan or second charge mortgage. These loans have lower interest rates than unsecured personal loans. However, it's important to note that you must be able to make the repayments, or you could potentially lose your home.

Let's say that John needs to borrow £20,000 to pay for some home improvements. He owns his home, which is worth £300,000, and he still has £150,000 left to pay on his mortgage. John decides to take out a second charge loan and uses his home as collateral.

After researching his options, John finds a lender that is willing to lend him up to 80% of his home's value, which would be £240,000. John decides to take out a loan of £20,000, which is secured against his property.

John uses the £20,000 to make the necessary home improvements, which add value to his home. He is also happy that he was able to secure a lower interest rate because his loan was secured against his property.

Downsizing

If you have more space than you need, downsizing to a smaller property can release equity at any age. This involves selling your home and using the money to buy a smaller one. Downsizing can give you a lump sum of cash, but it may not be right for everyone.

Renting out a room

If you have a spare room in your home, you could consider renting it out to generate additional income. This can help you cover your living expenses and access some of the equity in your property without having to sell or remortgage. You will be able to make the most of the government's rent a room scheme to earn rental income, tax-free, up to £7,500.

Getting the right advice for Equity release under 55

In conclusion, If you're under 55, you can't use equity release to access the value of your home without selling it. But there are alternatives to consider, like transferring equity or remortgaging your property. Transferring equity allows those under 55 to access equity release by transferring their share of the property to a partner who is over 55. Remortgaging is another option, but it can increase your monthly mortgage payments and the total amount you owe in the long term. So before you make a decision, it's important to get legal advice that's specific to your circumstances to make the right choice and stay protected.

If you are unsure where to get started with seeking advice for equity release under 55, complete the Sunny Fact Find. The answers you provide help us to find the best-suited adviser for your needs. Your adviser then contacts you to discuss how they can help you. You decide how to proceed.