If you’re looking into how to release equity under 55 in the UK, you’re in luck – there are a few ways you might be able to make some money back from your asset. Normally that’s not how it works.
If you’re a homeowner and you need some quick cash, it’s always worth considering equity release. However, releasing equity in the UK comes with a few rules and regulations you need to keep in mind – for example, you usually need to be at least 55 years old to release asset value from your home as cash.
But, what are the exceptions to this rule?
I’ve done the research so you don’t have to – let’s learn a little bit more about equity release and whether or not you can take advantage before your mid-50s.
What is equity release?
Equity release lets you access money from a property you pay a mortgage on. Your equity is your home’s value minus the amount you have left to pay via your mortgage. When you release equity, you effectively “cash out” this difference as a lump sum.
Releasing equity doesn’t mean you have to move home. You can release equity to pay debts from other pressing creditors provided you continue to pay your mortgage and/or any other loans secured on your home.
It’s worth remembering that equity release isn’t perfect for everyone. However, it’s a popular way for homeowners to ensure essential creditors are paid and don’t risk losing their assets.
It’s always wise to discuss equity release in detail with your mortgage lender and/or bank before making promises to creditors.
Equity release is an appealing option for driving down debt for obvious reasons – but is it really restricted to people aged 55 and over?
Is there any way I can release equity under 55 years old?
You can access the equity in your mortgage before you reach 55, but there are a few restrictions to keep in mind. I’ll explore these in detail below.
Typically, mortgage lenders will only allow you to release equity from the age of 55, when you’ll be able to set up a home reversion plan, or set up a lifetime mortgage. When it comes to equity release for joint property owners, the youngest of the two will need to be at least 55 years old.
In this scenario, however, you can still release equity if the younger homeowner transfers ownership over to the older party.
If you’re younger than 55, you’ll need to access the value remaining in your property through different means. Here are a few options to consider:
Take out a home improvement loan
If the money you need is specifically to help improve your property – for security reasons, to boost value or otherwise – you might be able to secure a home improvement loan against your asset.
Unsecured options exist, though you might find secured loans easier to arrange as you’re offering an asset if you cannot pay back the amount you borrow. What’s more, secured loans typically provide you with access to more money.
You can apply for home improvement loans to secure against your property if you’re at least 18 years old, but there’s an upper age limit of 75.
Remortgage your home to release equity
Remortgaging is a last resort for some homeowners, but for people under 55 years of age, it’s often a viable alternative to releasing equity.
When you remortgage your home, you effectively replace your original loan with a larger amount. It’s important to keep in mind that as you’re basically getting a new mortgage with a higher loan value against your home, the lender will likely test your household income and your ability to pay back the loan.
You’ll also need to keep in mind that remortgaging will typically need a loan to value ratio (or LTV) of around 80% when looking to release equity while remortgaging. This is calculated when you take into account your property’s value and the mortgage you originally took out.
Typically, if your property value has increased since you took out your original mortgage, you can apply to your lender for additional funds, and then release equity if you’re over 55 years old.
However, this process can vary from lender to lender, and you’re not always guaranteed access to remortgaging, let alone equity release. For example, a lender will need additional reassurance that you can repay higher amounts per month if you choose to increase your loan.
The good news is that there are deals for remortgaging and equity that can run right through to your 90s – meaning it’s worth looking into if you’re concerned about the upper cap.
Sell your property
While many of you will already know that selling property in the UK is by no means a simple process, it’s one of the most straightforward ways to release equity and make use of the difference.
The funds received are used to pay off the remaining value of the mortgage while the difference – the equity in your home – goes in to your pocket.
To do this, simply move to a property with a considerably lower value than the one you currently pay a mortgage on. After expenses, you have full rights to the equity that’s left over.
Another way to benefit from equity release through property sales is to sell on an investment property. In either case, while selling on is a relatively quick way to release equity, it’s a major step for a lot of people, as it means uprooting and re-entering the dreaded chain!
Take out a retirement interest-only mortgage
If you’re over 50 years of age, taking out a retirement interest-only mortgage can be an effective way for you to release value in your home and take away the cash.
While you’ll ideally be approaching retirement when applying for a RIO mortgage, there are technically no lower age requirements. These loans typically pay off when you pass away, when you sell the property attached, or if you move into care.
Some people find it easier to apply for and manage RIO mortgages because there’s less demanded of their borrowers. For example, in most cases, you’ll only need to show your lender that you’re able to pay the monthly rates they expect of you.
RIO mortgages can let you borrow around half of your home’s value provided it is your main residence. Monthly payments, from there, settle any interest that accrues over time.
Switching to this type of mortgage helps you get a firmer grip on your property value as a cash asset before you reach the 55 bracket.
Can I receive equity release funds as a beneficiary?
Yes, you can. If someone close to you wishes to give you money in the shape of equity release as early inheritance, you won’t have to worry about the 55 age limit.
Many people choose to release equity to help their family members invest in their first homes – however, if you’re considering taking this option yourself, it’s still wise to talk it over with a financial advisor.
Remember that releasing equity and offering the money as early inheritance means your next of kin won’t benefit later on in time. It’s part of a conversation you will need to have with your estate to ensure everyone knows what to expect.
Should I sell my other assets?
If you’re younger than 55 and don’t have access to any of the above options discussed – or if you’d rather not approach such angles – it’s worth looking at other assets you have available.
For example, if you are an art or antique collector, selling such items can bring considerable value in the short term so you can afford to pay off your creditors. Though it might not be the most desirable move for petrolheads, selling assets such as vehicles can also generate four to five-figure sums if you need them at short notice.
Is there an age limit to equity release?
You’ll need to be at least 55 years of age to apply for equity release, and there’s no specific upper age limit for releasing the value. However, some mortgage lenders and banks will vary, with some capping equity release at 100 years old.
Can I release equity at 35?
In the UK, you can’t legally release equity on your home until you are at least 55 years old. However, there are other ways you can make money from your property value. For example, you might be able to secure a home improvement loan against your property, or sell your home and move to a property of a much lower financial value.
Can I still sell my home if I have equity release?
Yes – you can still sell your property and move home if you take advantage of equity release. However, when you sell your property and equity release is in play, proceeds from the sale will firstly go towards any equity debt and accrued interest you have left over.
Is equity release the same as a remortgage?
No – remortgage essentially means you extend the loan on your property, while equity release lets you cash in a portion of value in your home to use to pay towards other debts.
Can I buy back equity release?
Yes – you can buy back the funds you released in equity, though you will need to check the terms and conditions outlined by your lender in your agreement.
Where can I get more information about equity release?
The UK government has helpfully set up a website to provide information on the rules around equity release. Please refer to their Moneyhelper site for more details.
by Jon Craig
I am the creator of Project Financially Free and I started this journey to both educate myself and share my insights on personal finance. I’m passionate about financial literacy and I invite you to join me on this transformative path. See more.