7 of the best equity release providers (and rates) in the UK

An increasing number of homeowners aged over 55 are considering equity release to access a large lump sum, top up their pension, or even fund renovations for their home.

But what is equity release, and who are the best providers currently?

Summary

• The two most popular types of equity release are lifetime mortgage and home reversion.

• There is no standard equity release interest rate, but many factors are considered.

• The equity release process will typically take about eight weeks from start to finish.

What is equity release?

The value of your home that you own, known as equity, is determined by subtracting any outstanding mortgage balance from the total market value. Essentially, it represents the amount you would receive if you sold your home outright.

But what if you want to keep your home and tap into your equity?

Fortunately, if you have paid off a significant portion or the entire mortgage, you can explore an equity release plan.

By opting for equity release, you can unlock a substantial amount of money while retaining the right to live in your home.

This can be particularly beneficial when facing significant expenses later in life, such as long-term care. 

What are the different types of equity release?

The two most popular types of equity release are lifetime mortgages and home reversion.

Lifetime mortgage

This is the most popular type of equity release.

You borrow a lump sum in the form of a mortgage, which is eventually repaid from the sale of your home when you die or move into long-term care.

The amount you can borrow is usually between 18% and 50% of the property’s total value – typically, the older you are, the more you can release.

Home reversion

With a home reversion scheme, you sell all or part of your property but with a legal right to continue living in it until you die or move into long-term care.

You can choose to receive the money as a lump sum or as a regular income.

Which equity release companies are the best?

In this article, we’ll reveal some of the best equity release companies, all of which are regulated by the Financial Conduct Authority (FCA) and are members of the Equity Release Council (ERC).

Equity release isn’t the right option for everyone, so it’s worth doing your research and considering independent financial advice before making a decision.  

Now, we’ll run through some of the leading equity release providers in the UK. 

1. Aviva 

Aviva is the UK’s largest insurance company and has won several awards for their equity release service.

Their minimum mortgage loan is £15,000, and you must be either mortgage-free or have a small mortgage on your property. 

2. Canada Life 

Canada Life specialises in retirement, investments, and protection products.

They offer various equity release plans, including a second home mortgage.

Canada Life also offers voluntary repayment plans, which can protect you from early repayment charges. 

3. Just 

Just offers a large range of financial products for retirement, including an equity release mortgage.

Some mortgages have fixed monthly interest, which is agreed at the start of your plan.

The company also offers a home reversion service aimed specifically at people over 65 who wish to sell a portion of their home to release a cash lump sum.  

4. Legal & General

Legal & General offers various equity release mortgages.

You can take a cash lump sum and pay interest as it accrues or let the interest roll up.

Alternatively, you can opt for an income mortgage, which allows you to draw down monthly income or choose a loan with no early repayment charges. 

5. LV= 

Not only does LV= offer car insurance, but it also provides many investment and retirement services.

There are two equity release options: lifetime mortgage drawdown and a lump sum version.

6. More2Life

More2Life has a range of equity release plans with ‘enhanced’ options.

These are designed to take your medical history and current health into account, which may give you lower interest rates and higher borrowing limits. 

7. Sunlife 

Sunlife offers many equity release services, as well as support and advice, to people over 50.

You can find a wealth of information on their website about releasing equity.

The best equity release interest rates

We’ll now reveal some of the best equity release rates for lifetime mortgages as of April 2024, according to Simply Equity Release. 

These rates are correct as of April 2024 and may have changed, but they give an idea of what rates to expect.

How do equity release rates work?

There is no standard equity release interest rate, as the interest rate you receive depends on your circumstances.

Factors taken into consideration by lenders include:

• Your age

• The value of your home

• Your health and lifestyle

• How much equity you’d like to release

As you do not need to make any monthly payments on a lifetime mortgage, the interest on your loan compounds as time goes by.

This means that your compounding equity release interest, which is charged on the principal loan and the accumulating interest, can grow substantially throughout the loan period.

This is one way a lifetime mortgage differs from a regular mortgage, which entails monthly repayments.

Most equity release providers add compound interest to your balance every year.

You may have the option to settle your loan and interest before the end of your loan term. However, you may have to pay substantial early repayment charges, depending on your provider’s limits.

How long does the equity release process take?

The equity release process will typically take about eight weeks from start to finish, though it may be longer or shorter, depending on your circumstances.

What are the benefits of equity release?

The benefit of home equity release is that it provides access to capital now rather than keeping it inaccessible within your home.

The rise in UK house prices over the last few years has resulted in a substantial portion of homeowners' net worth being tied up in their properties.

If your home has increased in value over time, home equity release enables you to tap into some of that accrued value to supplement retirement incomes.

What you need to consider with equity release

It’s vital that the equity release provider you choose is a member of the ERC. This will ensure that you are protected with capped interest rates for lifetime mortgages.  

As with any major financial decision, getting independent financial advice is a good idea.  

A financial adviser can look at your circumstances and financial goals to recommend the best action or financial products for your needs.