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Location: Gloucester
Value: £880,000
19th August 2022
Equity Release to Help Child Purchase First Property
Location: London, UK
Value: £5,000,000M
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Ways to Release Equity from Property
There are several ways to release equity from your property, depending on your income, objectives, and how quickly you need access to funds.
Remortgaging
Replacing your existing mortgage with a larger loan to release capital, typically suited to borrowers who meet affordability requirements.
Equity Release (Lifetime Mortgages)
Access capital without monthly repayments, with interest rolled up and repaid when the property is sold. Commonly used by older borrowers.
Bridging Loans
Short-term funding is used where speed is required or a traditional mortgage is not suitable, usually repaid through sale or refinancing.
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Property Equity Release Specialists
Our equity release experts provide personalised solutions and straightforward advice to help you meet your financial objectives. Speak with our team today.
Property Equity Release FAQs
How Does Equity Release Work?
Any equity you release from your property will need to be paid back in the form of a mortgage or short-term loan. As a result, you will still need to adhere to various lending criteria.
Historically, retail banks tend to have a more rigid approach to equity release transactions, while private banks and niche lenders are more flexible. That is not to suggest that retail banks are not competitive. For straightforward transactions, many high street banks are ideal. However, for more complicated situations and borrowers, the use of private banks is often more advantageous.
Enness acts for many high-net-worth individuals who can have assets spread across the world and various forms of income, often in foreign currencies. Very often, high street retail banks won't include these assets in affordability calculations. This can significantly impact how much sense it will make for you to borrow from these lenders and the finance packages that will be available to you.
Private banks and niche lenders tend to be very different in their approach and flexibility. They are more appreciative of overseas assets, multiple income streams, and they will also consider future events that would positively influence how much you would pay. For example, they can consider future investment returns, salary increases, upcoming bonuses, liquidity events, etc. While high street banks tend to have rigid formulas and algorithms deciding the outcome of an equity release application, private banks and niche lenders are more able to offer a personal approach and custom-made finance packages.
Is It a Good Idea to Release Equity to Buy Another Property?
Releasing equity to buy another property can be a viable option, but it’s important to weigh up the risks and benefits carefully.
As a mortgage broker, we often see clients use equity release to fund buy-to-let investments or second homes, whether for personal use or to support family members. In some cases, this can be a smart move, especially if the rental income from a buy-to-let property covers the loan costs and provides long-term financial gains.
Our expert brokers can help you assess all available options to make sure you choose the best financial solution for your circumstances.
Is Equity Release a Good Idea?
Equity release can be a useful financial tool for high-net-worth individuals looking to access capital tied up in property without selling. It can provide liquidity for investment opportunities, business ventures, or wealth planning while allowing you to retain ownership of your property.
Pros:
- Access tax-free capital without selling assets
- No requirement for monthly repayments (unless preferred)
- Retain full use and ownership of your property
- Some plans offer a no negative equity guarantee, ensuring you won’t owe more than your property’s value
Cons:
- The loan accrues interest, which can reduce overall estate value
- Early repayment charges may apply if you choose to settle the loan early
- Market conditions could impact future refinancing options
- Other solutions, such as private banking facilities or bespoke lending arrangements, may be more flexible
Equity release can provide a practical way to access capital from your property without selling. However, it’s important to consider all options to make sure it’s the right choice for you. Get in touch to speak with our expert equity release brokers, who can discuss your options and help you find the best solution for your needs.
Why Take out an Equity Release Product?
An equity release product will release a lump sum of capital, tax free, which can be used for any legal purpose. Still, the most common reasons why people who meet the criteria take out an equity release product are:
- Home improvements
- New home
- To pay off an existing mortgage and debts
- Increase disposable income
- To help family members financially
- Holidays
- Cars
Raising Capital for Redevelopment
After the UK changed its stamp duty regulations, many individuals saw a significant increase in property purchase costs. In addition to the relatively low-interest rates, it can make more sense to redevelop an existing property or family house rather than try and buy a new home. Given the significant competition for property and the time it can take to secure a mortgage, releasing equity to invest in redeveloping a property or home can make good sense.
For example, if you were to spend £100,000 on a renovation that resulted in a £200,000 uplift in the value of your property, this makes perfect investment sense. Rather than moving home, you can benefit from an instant return on capital invested. You will also have opportunities to remortgage in the future based on the new, higher value of the property.
How can Enness Help With Raising Capital?
Enness has operated in the equity release market for several years, and the team understand current market trends and what these mean for you. In the current low-interest-rate environment, there is enormous liquidity in the lending market. Therefore, there is potential to enhance returns significantly.
As long as your figures add up and you have further collateral to give lenders comfort, equity release is often a very straightforward decision for lenders. If you own worldwide assets and you have various income streams, you will usually find that private banks are better able to cater to you and understand what you bring to the table. As such, they will most likely be Enness’ first port of call if you wish to release equity from a property you own.
Enness has close relationships with specialists in this area, and your broker will know how you need to present your case and what lenders will want to see to be able to make a lending decision. Enness’s recommendation and introduction will often go a long way towards securing funds, and the application process will be streamlined and quick.
It can be tempting to sit on your hands and take a passive approach to investments in low-interest-rate environments. In reality, however, you will find that there is lots of finance available at very attractive prices. Releasing equity even for a renovation or extension of your property may be worth considering, given the potential for an immediate uplift in capital value.
What are the Types of Equity Release
- Lifetime mortgage
- Home reversion plans
A lifetime mortgage allows homeowners to borrow money against the value of their home while retaining ownership. The borrowed amount and interest are typically repaid when the homeowner sells the property, moves into long-term care, or passes away. Interest can be paid periodically or added to the loan, leading to compound interest.
A home reversion plan involves selling a portion or the entire home to a provider while retaining the right to live in it rent-free. The homeowner receives a lump sum or regular income. When the property is sold, the provider gets their share of the proceeds based on their percentage.
Each option has its own implications for inheritance tax, future property value and your estate.
Enness only advise on lifetime mortgage equity release, and not home reversion plans.
What is the Difference between Equity Release and a Standard Mortgage?
Equity release and standard mortgages are both ways of borrowing against property, but they are structured very differently and designed for different needs.
A standard mortgage is typically taken out over a fixed term with regular repayments of capital and interest, and is commonly used to purchase or refinance property. Equity release, on the other hand, is designed to unlock capital tied up in an existing property, usually without requiring monthly repayments, depending on the structure.
Equity release products are often used by homeowners who want to access liquidity while remaining in their property or retaining ownership. The loan, plus accrued interest, is typically repaid when the property is sold or upon a specified event, depending on the agreement.
These solutions are more commonly associated with later-life lending or long-term capital planning, whereas standard mortgages are broader in use and available across a wider range of borrower profiles. Working with a specialist broker helps ensure the most appropriate structure is chosen based on financial goals, tax considerations, and long-term planning needs.
Do I need income to release equity?
Not always. Whether you need income to release equity depends on the method used. For example, remortgaging typically requires sufficient income to meet affordability checks. However, some options, such as lifetime mortgages, do not require monthly repayments, meaning income may not be needed. Short-term solutions like bridging loans may also be structured around the property and exit strategy rather than income.
Contact Enness
Maximising your asset when interest rates are low is perhaps easier said than done. However, Enness’ brokers have experience across the board and contacts in the high street and private banking sectors. Enness can structure funding requirements specifically around your situation. Get in touch for a no-obligation chat about your situation and your plans, and the team will present you with the options available.
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