How much equity can I release? | Saga Equity Release (2024)

Discover what influences how much equity you can release from your house

Equity release is seen by many people as an attractive solution to the issue of needing to raise money in retirement without having to sell the family home. But how does it work and how much can you actually get?

What factors influence how much equity you can release from your house?

There are two main factors that equity release providers will look at when they work out how much they can offer customers:

• How much the property is worth
• How long the borrower is likely to live after taking out the plan

How long you’re likely to live is based on your age, or the age of the younger borrower in the case of a joint application for a plan. This is important because providers typically don’t make any return on equity release until the end of a plan, when the last borrower dies or moves into permanent long-term care. So, the younger you are when you take out equity release, the less money you’ll be able to raise.

A provider will conduct a valuation of your home in order to work out how much equity you could release. The condition of your home and the type of propertywill also be considered.

What else do providers take into account?

With some providers, you can request that your lifestyle or certain health conditions are taken into account. If these factors mean that your life expectancy is reduced, you may find that the amount of equity available to release from your property is higher.

Another factor that providers will consider is whether you have any debt secured against your home. If you already have an outstanding mortgage, or any other debt secured against your home, this will need to be repaid either before or at the time of releasing equity. This can be done with some of the funds released or can be repaid from any other available funds. Using equity release to repay an existing mortgage or other debt may end up costing more in the longer term.

How much equity can I release from my home with a lifetime mortgage?

The most common type of equity release scheme, a lifetime mortgage, involves you borrowing a certain sum against the value of your home, with the capital plus interest only required to be repaid when you or the last borrower on a joint arrangement die or move into permanent long-term care.

Each equity release provider will set a limit for how much you can borrow expressed as a percentage of your home’s value.

Younger customers – you need to be 55 or over to take out a plan – can expect to borrow significantly less than half what their home is worth, while for older people, or those with serious health issues, the percentage of their home’s value available for equity release might be as much as 60%.

On a home valued at £300,000, the maximum amount that could be released varies from £80,000 or less to around £150,000 – but you don’t have to take the whole amount.

How much equity can I release from my home with a home reversion plan?

The other main type of equity release is a home reversion plan, where you sell part or all of your home to the provider while retaining the right to live there for the rest of your life. The minimum age for home reversion is at least 60, which is higher than for lifetime mortgages.

If you decide to sell a 50% stake in your home, you’ll get an advance of considerably less than half of its current value. This is to reflect the fact that the provider will have to wait many years, possibly decades, to make any returns.

Customers with the greatest life expectancy might get just 20% of the market value of the share that they sell, although this could rise to 60% for older customers.

In the case of a home valued at £300,000, this means that selling a 50% share could generate between £30,000 and £90,000.

These figures are intended solely as a guide. To find out how much you might actually be able to raise, speak to a financial advisor who specialises in equity release.

What’s the minimum amount of equity you can release?

The minimum amount you can release is usually set at £10,000 by most providers as lending lower amounts wouldn’t be financially justifiable for providers. Your property must also be worth at least £70,000 in order to be able to access the equity.

If you’re looking for a smaller cash boost, you could consider cheaper ways of borrowing amounts under £10,000, such as a personal loan.

What’s the maximum amount of equity you can release?

The maximum amount you can release, if you’re eligible, will depend on your own situation.

You’re probably looking at no more than 50% as a maximum percentage of the value of your home. Most people will end up with between 20% and 50% equity release in terms of loan to value (LTV).

To get a better idea of what you can expect to be able to release with a lifetime mortgage, you can use our online equity release calculator.

Can I release more equity if I already have an equity release plan?

If you already have equity release, you might still be able to release more from your home. Your current provider will be able to tell you if you’re eligible, or an independent adviser may help you discover if there are better alternative plans that you could switch to at a better rate.

If you are able to do this, there might be an early repayment charge or restrictions on the timing of when you can do this, so you’ll need to make sure you understand all the implications before you switch.

Another thing to consider is a lifetime mortgage with a drawdown facility, where you agree a maximum amount you can borrow, but only take part of the full amount as a lump sum followed by smaller amounts up to the agreed maximum as and when you need the cash.

What can I do with the equity I release from my home?

Once you have an agreed amount of money from an equity release provider, you can spend it on almost anything you choose. Here are a few different ways people choose to spend released equity:

• Home improvements: you may use a sum to fund a new extension, install a new heating system, or to make other improvements to your home
• A new car or dream holiday: you might feel that now is the time to do the things you’ve been putting off for years and have some fun
• Help an adult child buy a house of their own: the Bank of Mum & Dad can help with house buying or find other ways to support family needs. You should be aware that gifting money can have inheritance tax implications
• Supplement retirement income: you might want the money to support or make changes to your lifestyle.

Will there be any money left for my beneficiaries to inherit?

Equity release will affect the value of the estate you leave behind, but that doesn’t mean there won’t be anything left for you to leave in your will. There may be money left from the sale of a property, once the equity release plan has been cleared.

The ‘no negative equity guarantee’ that lifetime mortgages come with mean that you or your beneficiaries won’t be left in debt at the end of a plan, as you won’t be asked to pay back more than the value of your house when you die.

With home reversion plans, you can choose how much of your property you sell to a provider. When the plan ends your beneficiaries can still benefit from the value of the percentage of the house you didn’t sell.

One of the ways your estate might be affected is the impact of inheritance tax, and you should take professional advice as to how your tax situation will change.

Saga Equity Release is an advice service that can help you discover the ins and outs of releasing equity from your home without any pressure or any obligation to take out an equity release product. But if you do decide to take out a Saga Lifetime Mortgage you'll need to pay an advice fee of £799.

What are the alternatives to equity release?

Choosing equity release is a big financial decision, and part of your decision process should include looking at alternative ways you could raise the cash you need.

Some alternatives might include reviewing your budget to look for savings, applying for available grants, or looking at new ways to raise money such as selling unwanted possessions or taking in a lodger.

It’s worth exploring all possible alternatives in detail before settling on equity release.

Whatever the amount you’re looking for from equity release, you should explore the options and take professional advice as to your best course of action. If you’ve thought through the alternatives and still want to explore the equity release option, it’s time to check out Saga Equity Release – a no-obligation, no-pressure advice service. Saga Equity Release is provided by HUB Financial Solutions Limited and the Saga Lifetime Mortgage is provided by Just and is available exclusively through Saga Equity Release.