Can I Release Equity From My House in Surrey Before I’m 55?

How do you release equity from your house before the age of 55? It’s an increasingly common question as for most homeowners, a property is their most valuable asset. The average selling price of properties in Surrey has increased by around a third over the past 10 years, according to Land Registry data, so your property’s value may well have increased.

An equity release product could allow you to remain in the property while accessing its value at the same time – but what’s the catch? There are pros and cons, and age matters. We explain the best way to release equity from your house if you live in Thames Ditton, Claygate, Hinchley Wood or surrounding areas, and detail the options for equity release if you’re under 55. 

WHAT IS EQUITY RELEASE?

Equity release is when you cash in a portion of your property’s value, while continuing to live in it. The money freed is commonly used as a source of finance in retirement. You might need to be mortgage-free to participate in equity release, but not always, and you’ll need to understand that it can reduce the amount of inheritance you leave. 

CAN I RELEASE EQUITY FROM MY HOUSE WHEN UNDER 55? 

Most equity release schemes are only available to over-55s, while some are restricted to over 60s. A small number of providers are now offering a form of equity release from 50 but this normally requires you to take out a ‘payment term lifetime mortgage’. 

Bear in mind the minimum age limit applies to the youngest person, if applying as a couple. A transfer of equity could make the older partner the sole owner and this can have serious legal and financial implications.  

How much equity can I release from my house?  

If you want to know how much you could release as a lump sum, knowing how equity release is calculated is a must. Lenders generally use a loan-to-value (LTV) percentage based primarily on your age and your property’s market value. The higher LTV percentages (typically 40%) are usually reserved for older applicants, with younger applicants offered typically 20% to 30%.  

You can use a provider’s online equity release calculator to establish the lump sum you might be able to release but here’s a simple example: 

Property value: £300,000 

Age of youngest borrower: 70 

LTV: 40% 

Calculation: £300,000 × 40% 

Maximum release: £120,000 

What are the different types of equity release? 

There are two main types of equity release, lifetime mortgages and home reversion mortgages. 

1. LIFETIME MORTGAGES 

A lifetime mortgage is a form of equity release where you are borrowing against a proportion of your home’s value. This is repaid when you die, move into long-term care or sell the property. You will pay interest – often capped by a negative equity guarantee. Lending to younger borrowers can make this model unprofitable for lenders. Generally, the interest is added at the end. Some plans allow you to pay the monthly interest in full or in part, which limits how much your equity release loan grows by. 

Funds can be taken as a lump sum or accessed on a drawdown plan (accessing cash from your home in smaller, flexible amounts over time). Some drawdown plans allow you to pay compound interest only on the cash you have withdrawn and not on the reserve fund. 

2. HOME REVERSION MORTGAGES 

Under home reversion plans, you are selling your property or a percentage of it, while continuing to live in your home. Again, home reversion mortgage lenders expect to see their profits after a shorter period, so this product is usually reserved for older homeowners. 

HOW CAN I RELEASE EQUITY WHEN UNDER 55? 

Don’t despair if you’re not 55 but need to access a lump sum or receive a new cash flow. There are other methods to leverage your house’s value if you are too young to consider equity release. Secured loans, downsizing and renting out a room don’t require remortgaging. For example: 

SECURED LOANS 

You may be able to use your home or another higher value asset as security. Borrowing against a valuable asset can come with its own risks. 

REMORTGAGE 

Remortgaging to release equity by increasing your loan-to-value ratio (LTV) can be effective if your property has increased in value since you bought it. You may incur early repayment charges when settling your current mortgage, and will have to pass affordability checks and a credit check. 

DOWNSIZE 

A traditional option, yet moving to a lower-priced property may reduce your financial pressure or allow you to free up funds. While this means leaving your current home and incurring the costs of moving, it can represent a clean break. 

RENT OUT 

If you have a spacious home, you could rent out a room. Up to £7,500 of income earned from renting out rooms in your house is tax free under the Rent a Room scheme. 

Equity release vs remortgaging: which suits you best?  

Equity release for Under 55s	Remortgaging for under 55s
Limited number of providers who offer a ‘payment term lifetime mortgage’ or a retirement interest-only mortgage for under 55s	More likely to be accepted for a standard remortgage if you’re under 55, with multiple lenders able to help
Stricter eligibility and a full affordability assessment required, using current or future projected retirement income	A more common form of releasing equity, with no pension stress testing
Some equity release products allow you to defer some or all of the monthly interest, with all debts settled when you sell the property, you pass away or when you move into long-term care	Monthly interest payments are mandatory and can’t be deferred
Many equity release products accrue compound interest over the years and the interest rate is often higher than that of a remortgage. This can sometimes be avoided with a payment term lifetime mortgage	You may be able to release equity and move to a mortgage product with a lower rate of interest
Can affect inheritance and may impact means-tested state benefits	Can affect inheritance and may impact means-tested state benefits
You can usually make overpayments to reduce the loan	You can usually make overpayments to reduce the loan
You can take your equity as a lump sum or draw down regular, smaller amounts	Equity secured when using a standard remortgage product typically arrives in one lump sum
If you opt for home reversion, you’ll no longer own the home you live in	You’ll retain ownership of the property
You may pay an early repayment charge if you settle a lifetime mortgage early	You may pay an early repayment charge, especially if you move to a new lender

PROS AND CONS OF EQUITY RELEASE SCHEMES 

 There are pros and cons to equity release schemes which are worth considering before you proceed. It’s also advisable to get professional mortgage advice before making your decision. 

Advantages of equity release: 

• Remain in your current property while unlocking its value 
• You could ease financial pressures 
• Receive monthly payments for income in retirement 
• Gain a lump sum to fund a home improvement project 
• Help family members now instead of looking towards an eventual inheritance 
• It can be tax efficient as equity release funds aren’t taxable income 

Disadvantages of equity release: 

• Equity release can affect means-tested benefits (Age UK outlines which benefits are means-tested) 
• The inheritance you leave will be reduced 
• If you gift money to a family member, they may have to pay inheritance tax on it later 
• Your home may be repossessed if you don’t keep up with payments 
• Compound interest quickly builds if you don’t pay all or some of the monthly interest 

Is equity release regulated and safe?  

It’s natural to worry when looking after your most valuable asset but all equity release providers must be regulated and a member of the Financial Conduct Authority (FCA). You can gain extra peace of mind by seeking a provider who also belongs to the Equity Release Council. These members typically include a no-negative-equity guarantee. We recommend taking regulated financial advice before proceeding.  

EQUITY RELEASE – COMMON QUESTIONS

UNDERSTAND WHETHER YOU’RE ELIGIBLE FOR EQUITY RELEASE 

Not every choice is suitable for every homeowner – and being under 55 can limit your options. If you are considering downsizing or selling your property in Claygate, Cobham or Esher, contact Davies Property Partners. 

You can find out more about property sales in our dedicated guides, from what to do if you can’t pay your mortgage, how to sell your house during divorce, or how to downsize your house.