10 Steps to Releasing Equity From Your Home Using A Lifetime Mortgage

Releasing equity through a lifetime mortgage is a journey that requires thoughtful consideration and careful planning. By following these steps, you can approach the process with confidence, knowing that you’re making an informed decision that aligns with your long-term goals. And remember, your advisor is there to guide you every step of the way, ensuring that the choices you make are the right ones for you. This blog post is also available as a YouTube guide below, should you want to watch the 10 steps rather than read them.

Navigating the world of later-life lending can feel overwhelming. Over the years, as a later-life lending specialist, I’ve had countless conversations with clients who are eager to tap into the equity in their homes. Whether it’s to enhance retirement, support family members, or simply enjoy the fruits of decades of homeownership, releasing equity through a lifetime mortgage can be a viable solution. With that said, it’s a decision that requires careful consideration and understanding.

In this blog post, I’ll walk you through the 10 essential steps to releasing equity from your home using a lifetime mortgage. My aim is to provide you with an informed perspective, so you can confidently navigate this journey, knowing what to expect at each stage.

Step 1: Establish Your Eligibility

The very first step in this process is determining whether you meet the eligibility criteria for a lifetime mortgage. Generally, you need to be at least 55 years old. If you’re younger, between 50 and 55, there may still be options available, but they fall outside of the traditional equity release products.

Owning your home is also a fundamental requirement. If you don’t own a property but are looking to purchase one, you can still use a lifetime mortgage, with the loan secured against the property you’re buying. A common misconception is that equity release products can only be used on an existing home, but that’s simply not true. These products can also help you buy a new home.

However, if you’re not yet eligible, don’t worry. It might be worth exploring alternative options or deferring your decision until you reach the eligible age. The key is not to rush into anything prematurely.

Step 2: Do Your Homework

Before you dive into the process, it’s crucial to take some time to think about what you really need. Start by asking yourself: How much do I need? What do I need it for? And when do I need it? These might seem like simple questions, but they’re fundamental to ensuring you make the right decision.

For instance, if you’re planning to borrow for home improvements, you should have a clear idea of the costs involved. A good advisor will ask for specifics—what work are you planning, and do you have estimates? This isn’t to pry but to make sure you’re borrowing just what you need.

Timing is another important factor. If you need the funds for different purposes at different times, you might consider a drawdown option. This allows you to borrow a portion of the money now and access more later when you need it.

It’s also helpful to have an idea of your property’s current value. Whether through an online estimate or a local estate agent’s appraisal, knowing this will give you a ballpark figure of how much equity you can release. Additionally, having a snapshot of your finances, like a recent bank statement, will help your advisor understand your disposable income and whether there might be other solutions available to you.

Step 3: Meet with Your Advisor

Once you’ve done your homework, it’s time to sit down with a specialist advisor. This meeting is your opportunity to discuss your financial goals in depth. A good advisor will ask questions about what you want to achieve, how much you’ll need, and when you need it. They’ll explore various options with you, including alternatives to equity release, such as using savings, drawing from a pension, or considering a more conventional mortgage.

Remember, the goal here is to ensure that any recommendation is tailored to your specific circumstances. It’s not just about finding a product; it’s about finding the right solution for you.

Step 4: Involve Your Family

While this step is entirely optional, involving your family or a trusted friend can be a wise move. Releasing equity from your home is a significant decision, and it can have implications for your family down the line. By bringing them into the conversation early, you can address any concerns they might have and ensure that everyone is on the same page.

That said, the final decision is yours to make. You know your needs and circumstances better than anyone. A good advisor will support you in making the choice that’s best for you, regardless of what others might think.

Step 5: Receive a Recommendation

After your initial meeting, your advisor will take everything you’ve discussed into account and come back with a tailored recommendation. This will typically involve a specific product from a lender, with all the details laid out, including features and financial implications.

Once you have the recommendation, take your time to review it. You may want to arrange a follow-up meeting to ask any further questions or seek clarification on any points that weren’t clear. There’s no rush. Whether you decide to proceed, defer, or not move forward at all, a good advisor will respect your decision.

Step 6: The Application Process

If you decide to proceed, the next step is the formal application. Your advisor will submit your details to the lender, including your personal information, property details, and financial background. They’ll act as the go-between, liaising with the lender, solicitors, and surveyors to ensure everything runs smoothly.

One of the key roles of your advisor during this time is to keep an eye on the market. Sometimes, rates can change, and a better deal might become available even after you’ve started your application. A proactive advisor will switch you to a better deal if it’s in your best interest, ensuring you get the most favorable terms possible.

Step 7: The Valuation or Survey

Once your application is in, the lender will instruct a surveyor to value your property. The surveyor’s job is to provide the lender with an unbiased, professional opinion of your home’s market value.

While it’s natural to feel a personal attachment to your home and its sentimental value, the surveyor is focused on what the property could sell for in the current market. They’ll compare your home with similar properties in the area and factor in the condition of your home.

If the surveyor identifies any issues, such as necessary repairs, this could impact the lender’s decision. The lender might require these issues to be addressed before they agree to proceed.

Step 8: Receive the Mortgage Offer

After the valuation, assuming everything is in order, the lender will issue a formal mortgage offer. This is the stage where your advisor will go over the offer in detail with you. They’ll explain any terms and conditions, discuss the final figures, and ensure that everything aligns with your expectations.

In some cases, the property might be valued at less than expected, which could reduce the amount of equity you can release. Your advisor will discuss how this impacts your plans and help you decide the best course of action.

Step 9: Conveyancing

With the mortgage offer in hand, the next step is conveyancing, which is the legal process of securing the loan against your property. Your solicitor will provide you with independent legal advice, as required by the Equity Release Council, to ensure you fully understand the legal implications of the Equity Release mortgage.

They’ll also ensure that any conditions set by the lender, such as repairs or additional surveys, are met. Your solicitor will then prepare the necessary documents for you to sign, allowing the lender to take a charge over your property, much like a traditional mortgage.

Throughout this process, your advisor and solicitor will work together to coordinate the final steps, including setting a completion date.

Step 10: Completion

The final step is completion, where the funds are released to you. On the completion day, the lender transfers the money to your solicitor, who will then repay any existing mortgage or debts secured against your home. They’ll also deduct any fees, such as legal costs or advisor fees, before transferring the remaining funds to you.

You’ll receive a completion statement that breaks down all the costs, so you know exactly what you’ve paid and how much you’ve received. At this point, the lifetime mortgage is in place, and you can use the funds as planned.

Bonus Step: Follow-Up

After your lifetime mortgage is set up, it’s not the end of the road. A good advisor will stay in touch, typically checking in with you annually to ensure that the mortgage still meets your needs. Circumstances can change, and your advisor can help you navigate those changes, whether it’s adjusting your plan, considering future financial decisions like wills or power of attorney, or simply answering any questions that arise.

Staying in regular contact with your advisor ensures that your mortgage continues to serve you well over the years. It’s about making sure that you remain in the best possible position, not just now, but in the future too.

Ready to find out more? Visit our dedicated later life lending page to arrange your free 10 minute discovery call!