Can I use equity release if I’m under 55?

Equity release, the process of cashing in some of the value of your home – is usually available only to those aged 55 or over.

With a lifetime mortgage, you borrow part of the value of your home, which you then repay when you either sell the property, go into long-term care or die. 

Alternatively, a home reversion mortgage involves selling some or all of your property while you continue to live in it. 

The maximum lifetime mortgage size is around 60% of the value of your property. 

However, there may be other options for you to borrow money against the value of your home without using full equity release products.

Also, if you’re under 55 but your partner isn’t, there may be a way for you to access equity release.

There are always risks and downsides to releasing the value of your home, as well as advantages, so bear this in mind.

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Do I have to be 55 to get equity release?

The simple answer is yes, you do.

Equity release schemes based around lifetime mortgages require the youngest applicant to be over 55, while those based on home reversion plans require you to be at least 60. 

This is because equity release is designed essentially to provide extra money in retirement.

That said, other options are available for those aged under 55, some of which are similar to equity release.

Possibilities may include secured finance, transfer of equity, or remortgaging.

Why is there a minimum age for equity release?

Equity release providers set a minimum age threshold to control and limit their risk exposure.

For example, if you take out a lifetime mortgage, your provider lends you money that will be repaid from the eventual sale of your home.

This loan accrues compound interest over the years, which eventually could exceed the sale value of your home.

However, most lifetime mortgages have a ‘no negative equity guarantee’, which states the loan repayment can’t exceed 100% of the home’s sale value.

Therefore, to ensure the provider doesn’t lose out too often, they must set an age limit on who can take out a lifetime mortgage.

Similar restrictions apply to home reversion schemes.

Here, the lower age limit is usually 60, as the provider does not want to have to wait too long before being able to sell their share of the property and make a profit.

In short, equity release schemes have age limits to make them commercially viable for the providers.

How do I release equity if I’m under 55?

If you are under 55 but jointly own a home with a partner who is older than that, you can use equity release if you decide you really need to.

This is called transfer of equity, but in simple terms it means simply gifting your share of the property to your partner so they are the sole applicant for equity release.

Essentially, your share of the property is transferred to the person who is over 55.

You must pay legal fees and stamp duty if the amount transferred is over a certain threshold.

You should also carefully consider the risks of doing this.

If you’re not married to the other homeowner, transferring your share to them would leave you with no protection if your relationship were to break down (so you could lose your share of the home and have no right to any equity either).

If you are married and bought the home together after your marriage, the home should count as a matrimonial asset even if you transfer your share of the property to your spouse.

However, you should seek legal advice to ensure it covers your specific circumstances.

Learn more: the top 5 places to get free financial advice

Note that if you still have a mortgage on your property, you won’t be able to instruct your solicitor to transfer equity until you have contacted your mortgage lender.

You usually can't use equity release unless you own the home mortgage-free, so you may have to wait until your mortgage is paid off.

What are the other pros and cons of equity release?

Equity release offers a way to release cash from your home without the hassle of moving home to a cheaper property. 

You can also still leave an inheritance to your family, and you can also still move house with an equity release mortgage. 

As mentioned above, most plans now have a ‘no negative equity’ guarantee.

However, the amount of inheritance you leave to your loved ones will be lower if you take out an equity release mortgage. 

Plus, if you gift money to a family member, they may have to pay inheritance tax on it in the future. 

The interest you pay on the mortgage is compounded, meaning the amount you owe will increase over time if you do not make repayments before you die or enter long-term care. 

Some plans also charge early repayment fees if you pay back more than the maximum voluntary repayment. 

What’s more, the cash released from your equity release mortgage could reduce any means-tested state benefits you may receive. 

It’s important to weigh up all these pros and cons before making a decision.

What about other options for equity release under 55?

Though formal equity release products are not available to anyone aged under 55, there are still ways you can get money to spend by leveraging the value of your home.

One option is a secured loan, which is money you borrow using one of your assets as security.

This asset could be your home or another valuable asset, such as a vehicle. Usually, any asset would have to be worth at least £10,000.

If you want to borrow a larger amount, you could remortgage to release equity.

Although this sounds similar to equity release, it differs in that you can do this while still paying off a mortgage.

Do check whether you might be liable for paying early repayment charges by doing so, however.

Remortgaging to release equity involves increasing your loan-to-value (LTV) ratio.

It can be a popular option, especially for people whose homes have increased in value since they took out their mortgage.

Seek expert financial advice

Equity release enables you to access funds tied up in your property while continuing to live in it, providing financial flexibility in later life.

However, it’s essential to fully understand the implications of various equity release options, particularly how they may impact your estate and overall financial situation.

Carefully weigh the benefits against potential drawbacks, such as the effect on inheritance and repayment terms.

By thoroughly evaluating your options and aligning them with your long-term goals, you can make a well-informed decision that supports your financial well-being and future plans.

Unbiased can connect you with a qualified financial adviser or mortgage broker to provide tailored guidance on the most suitable equity release options for your unique needs.

If you found this article helpful, you might also find our article on shared equity mortgages informative, too.