Equity release calculator: how much could you get?

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What is equity release?

Equity release refers to a range of products that let you access the equity tied up in your home. With equity release, you can receive the money either as one lump sum, or in several small amounts or as a combination of both.

For most of us, our home is our largest asset. This means that when we require a large amount of money to do those things in life we don’t want to put off, it makes sense to look to our homes to help us fund that. 

Equity release can be a great option for those who wish to release funds from their property without having to sell

– Danny Chapman

One of the simplest ways of getting at the cash invested in your home is to sell and move to a cheaper property, but not everyone can, or wants, to do this. This is where equity release products come in.

In order to qualify for an equity release loan, you need to be at least 55 years of age and for some products, at least 60. This means you could be approaching retirement or that you are already retired. Equity release is a way of looking to release funds in an attempt to boost your income or take a lump sum to help make your life easier.

How much equity can you release from your home?

Since releasing equity from your home is about taking out a type of mortgage, it should not be taken lightly. You should consider it as part of your financial planning strategy. If you happen to have access to cash through investments and savings, it is wise to use such funds first.

Currently, lenders charge about 5% on the amount you release. They let you borrow up to as much as 50% of your property’s value as an income or a lump sum. According to Key Provider, the UK’s main equity release loans provider, the equity release loan average is around 35%.

How to calculate equity

The maximum amount that you can borrow is determined by a combination of:

  • Your age
  • Property value
  • If you currently have a mortgage and if so, its amount.

The older you are, the more you are able to borrow. How much equity you can receive on your property is a standard calculation.

You could use the table below to determine how much equity you can receive. All you need to do is:

  • Find which age category you fall into under in the first row
  • Check the second row for your property’s value (subtract any mortgage loan)
  • Check the last row to see how much equity you can receive.

How to release equity from your home

Releasing equity is also referred to as releasing cash. It is commonly known as a lifetime mortgage or a home reversion plan. Unlike with a conventional mortgage, you do not make monthly repayments once the loan is in place. The interest the lender charges is added to the cash you have borrowed so your outstanding balance increases every year. The outstanding loan is then only repaid once you die or move into long term care and the property gets sold. If the equity release loan is in joint names and one person dies, the other person can remain in the property.

Releasing equity from your home is quite straightforward provided you receive advice from qualified experts and you fulfil the criteria. An independent advisor can compare equity release products in the market and give you advice on the best option based on your personal needs.

Once you apply, your property is valued by the mortgage company and you may want a solicitor to ensure all the paperwork is in order. They will also ensure you understand your commitment.

Can you have equity release if you have a mortgage?

Yes, it is possible to have equity release if you still have an existing mortgage on the property. All you need to do is pay off the outstanding loan using the money you release. Take for instance, you have an existing mortgage of £40,000 and you want to release £80,000, you just need to pay the outstanding £40,000 balance with the £80,000 cash released. You are left with £40,000 to spend however you wish.

What you can do with the money

While some people use the money to buy cars or spend it on luxury holidays, most people release equity to pay for home improvements such as a new kitchen or conservatory. This is a way of future-proofing your home to make life easier as you grow older, and can also add value to your property.

Some people use the money as a gift for their family. It could be to help them financially with something like with paying for university.

You could also use the money to subsidise retirement funds to make life easier financially.

Equity release tips

If you are sure that equity release is the thing for you, here are a few tips:

  • Don’t borrow the whole amount you require all at once- the sooner you borrow, the more expensive it becomes so try and borrow as little as you currently need and wait for as long as you can to borrow again.
  • Make sure you use a lender that is a member of the Equity Release Council – the trade body’s members should promise a ‘no negative equity’ guarantee. This will ensure you never end up owing more than your home’s worth. 
  • Seek advice before doing it- it is advisable to speak to a financial adviser who has an equity release qualification or an independent mortgage broker to find a good deal. 
  • It could affect your benefits – having cash instead of property could affect your entitlement to benefits such as universal credit and pension credit among others. If you are entitled to such benefits, you should check the impact first.

Equity release can be a great option for those who wish to release funds from their property without having to sell. However there are some possible negative implications on your future plans, so it’s important to consider all the options before coming to a decision on whether to release equity from your home.

See How Much Tax-Free Cash
You Could Release from Your Home

How much is your property worth?

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