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How can I release equity for home improvements?

Find out how to release equity for home improvements, the eligibility criteria you must meet, how much you can access, alternatives, and more.

Summary

  • You can release equity tied up in your property to fund home improvements.

  • A lifetime mortgage is the most popular form of equity release for home improvements.

  • The average amount of equity release for home improvements is £50,514, according to SunLife.

  • Unbiased can match you with a mortgage broker to ensure that equity release is right for you.

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Can I release equity for home improvements?

Yes, you can release equity to pay for home improvements in the UK.

Taking out a lifetime mortgage is the most common approach to equity release.

Why do people use equity release for home improvements?

People use equity release for home improvements as it unlocks a considerable sum of money that may otherwise be inaccessible to them.

The average equity release percentage you qualify for depends on your age, your property’s value, and the equity release product you choose.

The percentage you may be offered may increase as you age and could reach 50% or more.

According to the UK Care Guide, the average percentage of equity released for home improvements is around 18%, while SunLife states the average amount of equity released specifically for home improvements is £50,514.

How can I release equity for home improvements?

The most popular way to release equity for home improvements is via a lifetime mortgage, which allows homeowners to borrow funds against some or all of the equity available in their properties. 

What method could be used to release equity for home improvements?

One of the best ways to release equity for home improvements is by taking out a lifetime mortgage

Taking out a lifetime mortgage involves borrowing funds against the value of your property.

This loan is only repaid when your property is sold when you die or go into long-term care.

To be eligible for a lifetime mortgage equity release for home improvements, you must meet certain criteria:

  • You are the homeowner.

  • You are at least 55 years old.

  • Your property has a value equal to or more than the minimum (typically £70,000) amount required by your lender.

  • The lifetime mortgage is on your main residence.

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What are the pros and cons of releasing equity for home improvements?

It’s worth considering the pros and cons of equity release for home improvements before making a decision.

The advantages of releasing equity for home improvements

  • Access to equity tied up in your home.

  • No moving is required.

  • No income tax on the loan.

  • Flexible funds.

  • Provided you keep your house until you die or move into long-term care, you will never owe more than the value of your property.

  • Funds as you need them (a lump sum or smaller payouts).

The disadvantages of releasing equity for home improvements

  • Debt accumulation.

  • Equity release for home improvements could negatively impact your eligibility for means-based state benefits.

  • You may be liable for capital gains tax if you move or sell your home.

  • Potential early exit fees.

  • There may be a reduced inheritance for dependents.

  • Equity release set-up fees (between £1,000 and £3,000).

  • No additional loans are permitted.

Equity release vs remortgage: which is better for home improvements?

An alternative to equity release for home improvements is remortgaging.

Remortgaging to release equity for home improvements involves exchanging your current mortgage arrangement for a new one.

This way, you could get a better interest rate and be eligible to borrow more.

The suitability of equity release or remortgaging will depend on your circumstances:

  • Equity release: This may be more suitable for elderly property owners who have no dependents and are comfortable with the loan repayment taking place on their death or entry into long-term care.

  • Remortgaging: This may be more suitable for individuals with a high and stable income who can make monthly repayments in exchange for lower interest rates.

Note that remortgaging typically incurs lower fees, including early repayment charges, than equity release.

Are there alternatives to releasing equity for home improvements?

If equity release is not right for you, there are many alternatives to equity release for home improvements, such as:

  • Personal savings

  • Personal loans

  • Remortgaging

  • Government schemes or grants 

  • Credit cards

You should carefully consider the pros and cons of each option before deciding how to fund your home improvements.

Seek expert financial advice

If you plan on renovating your home, equity release for home improvements may be a good way to fund this, but it’s a good idea to get financial advice first.

Unbiased can match you with a mortgage broker who will provide expert financial advice and help you choose between equity release and alternative ways to fund home improvements.

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We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.

About the author
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.