Author Paul Murphy

Updated January 2023

We review which banks offer lifetime mortgages, how to access the top deals, and how to find the best company for equity release.

What is Equity Release?

Modern equity release is a safe method for the over 55’s of raising tax-free cash from your home without having to downsize to access the equity tied up in the property. 

Demand is growing amongst over 55’s releasing equity for a cash boost to improve finances, raising funds for interest only remortgages, funding home improvements and gifting an early inheritance.

The most popular method of raising money in the home for the over 55’s are lifetime mortgages which are designed to be more flexible than conventional mortgages in later life years. 

The rise in lifetime mortgage applications over the past 5 years is set to grow further with the increasing costs of living and the desire to enjoy a comfortable retirement.

Money taken from your main residence is tax-free, providing an efficient method of raising cash. Alternative options, including downsizing or using other assets instead of releasing equity should be considered to ensure a balanced decision is made.

All reputable equity release companies are members of the equity release council and regulated by the Financial Conduct Authority, the industry regulator and watchdog.

Choosing The Best Equity Release Company For You

Most well known banks do not offer equity release because they do not have funding structures in place to support longer term lending, so who are the main lenders, and who is the best company for equity release?

Names including Aviva, Legal & General and Liverpool Victoria are familiar to most of us. 

These companies also offer insurance and pensions, which provide a stable funding strategy for equity release and lifetime mortgages. This is why the main banks do not tend to offer products themselves, as they do not have the funding sources to support the  lifetime nature of these mortgages. 

Selecting the best equity release company and a solution for your specific needs is important to ensure it meets your current and longer-term priorities, such as whether you plan to move home and settle the mortgage early, for example.

This level of detail is important when exploring equity release; providers have varying levels of plan options, features, and criteria to consider, which underlines the benefits of seeking expert advice and guidance.

Request an equity release calculation and book a free consultation to discuss whether equity release is suitable for your requirements.

Equity release companies include Aviva, LV (Liverpool Victoria), Legal & General, More 2 Life, Canada Life, Just (formerly Just Retirement), Hodge Lifetime, One Family, Standard Life and Crown. 

Many equity release companies are insurance and pension firms. The high street banks are not directly involved with arranging equity release because the funding required for the products are based on a longer-term repayment timeframe due to the lifetime nature of the plans. Pension and insurance firms are more suited to financing equity release mortgages for this reason and represent most of the lenders in the marketplace.

It’s not a ‘one size fits all’ approach with equity release. Careful consideration of your overall requirements is critical to ensure the selected solution is appropriate. You do not want to be met with a substantial early repayment charge if you wish to settle the mortgage in the event of downsizing, for example. Certain lenders cater for such needs with their lending criteria, which needs to be considered when identifying a solution for your requirements.

The industry is governed by Financial Conduct Authority (FCA) regulation to ensure advice provided is suitable. 

Equity Release Advice

Lenders require applicants receive advice from a qualified adviser who will discuss all your options including any impact on means tested benefits and will explain the alternative options for consideration before making a recommendation.

Later Life Finance provide a whole of market, independent broker service for equity release lifetime mortgages. They are directly FCA authorised and specialise in lifetime and retirement mortgage lending.

Your adviser will carefully explain each lenders terms to ensure they are flexible enough for your objectives.

Lifetime Mortgages and Home Reversion Plans

A lifetime mortgage enables you to retain full home ownership for life. A home reversion plan is an alternative method of equity release which involves selling a share of your home for a reduced percentage and a guaranteed lifetime tenure in the property.

The lifetime mortgage is the most popular form of equity release, as these schemes offer more flexibility than a home reversion plan. For example, you could repay a lifetime mortgage early, which wouldn’t be the case with a home reversion plan.

One major difference with a lifetime mortgage when compared to a traditional mortgage is there are no income or affordability checks. Interest can still be repaid on a voluntary basis to maintain control of the balance outstanding or allowed to ‘roll up’ if making payments is not preferable.

Interest rates are fixed for life with Lifetime Mortgages for long-term stability. Most lenders now allow you to repay your plan within 3 years of your spouse or partner dying or moving into long term care.

Most lifetime mortgages allow voluntary repayments for flexibility and without any commitment. This means you can still service the interest without the same level of risk as a typical mortgage. This level of repayment flexibility can also help with budgeting if the rising cost of living is becoming a struggle. This also means there is no risk of default or repossession with a lifetime mortgage.

You are also able to move home and port the mortgage with you. The new property must be acceptable for lending purposes, (standard construction, for example).

Equity Release & Inheritance Tax

Gifting a ‘living inheritance’ is also rising in popularity to enjoy the benefits of helping family members financially now, rather than when you have passed away. Having  an equity release mortgage in place to be settled upon death may also benefit your inheritance tax planning strategy, by reducing the size of your estate and resulting death duties.

Solicitors and Equity Release

You do need a solicitor if you are releasing money from your home. Your adviser can normally recommend an independent firm, or you can choose your own. Your solicitor ensures the Equity Release Council legal standards are met and receives your funds from the lender to pay into your bank account on completion.

What Happens When You Die With Equity Release?

Equity release is repaid when the property is eventually sold when you have passed away or if you go into long term care. In joint cases, the plan only ends on the surviving homeowner leaving the property; meaning you can both stay in your home for the rest of your lifetimes.

Any remaining equity after the plan is settled will either be paid to your estate or be used toward your long-term care costs, if applicable.

Lifetime Mortgages are protected by the Equity Release Council, the industry trade body who provide several consumer safeguards, including a no negative equity guarantee for added peace of mind.

The Equity Release Council

Equity Release Council membership verifies the firm you are dealing is reputable and adheres to the principles set out by the council.

What are the codes of conduct the Equity release council require to be followed?

• For lifetime mortgages the rate must be fixed for each release or, if variable, the rate must be capped for the life of the loan. (Most plans offer lifetime-fixed interest rates)
• You must have the right to remain in your property for life or until you need to move into long-term care, provided the property remains your main residence and you abide by the terms and conditions of your contract.
• You have the right to move to another property subject to the new property being acceptable to your product provider as continuing security for your equity release loan.
• The product must have a “no negative equity guarantee”. This means that when your property is sold, and agents’ and solicitors’ fees have been paid, even if the amount left is not enough to repay the outstanding loan to your provider, neither you nor your estate will be liable to pay any more.
• All customers taking out new plans which meet the Equity Release Council standards must have the right to make penalty free payments, subject to lending criteria.

Later Life Finance are members of the Equity Release Council.

Who is the best company for equity release?

Selecting the best equity release company and solution for your personal needs should fit your current and longer-term priorities, such as whether you plan to move home and settle the mortgage early, for example.

Lenders have varying levels of plan options, features and criteria which makes the requirement for expert advice more important. It’s not a ‘one size fits all’ approach with equity release. Careful consideration of your overall requirements is critical to ensure the selected solution is appropriate.

Lifetime mortgage providers Liverpool Victoria and Canada Life offer ‘defined’ early repayment charge criteria for early settlement of the mortgage. Canada Life also offer ‘downsizing protection’ for moving home and settling the mortgage early.

Other well-known names including Standard Life and Legal & General provide plans with a wide range of features.

The best equity release company for you will based on how closely the individual lender features match your priorities, which your adviser will evaluate with you. 

The overall market tends to be competitive with lenders frequently competing with one another for the most competitive interest rate position.

Standard Life do not offer their plans to the whole market. Only a select number of brokers can offer their products. Later Life Finance have access to Standard Life products.

Medically enhanced lending plans are available with lenders More 2 Life, Aviva and Just, for higher loan to value percentages of lending based on health conditions.

Plan features including the applicable interest rate, any early repayment charges, lender fees, inheritance protection features, and downsizing protection should all be taken into consideration.

The Pros and Cons of equity release

Obtaining expert advice to navigate the various pros and cons of each lender is crucial to specify who the best equity release company is, based on your specific needs and objectives.

The main downside of equity release is compound interest eroding the equity in your home; however, since most lenders allow voluntary repayments to be made this negative factor can now be reduced, or even eliminated entirely by arranging regular repayments to the mortgage to avoid compound interest.

A compound interest illustration will be provided by your adviser. A compound interest calculator can also be used to factor in any planned voluntary repayments with the projection of interest over the term of the mortgage (the true term being on a lifetime basis) to help show the benefit of making repayments if you plan to exercise this facility.

Remember, this option is purely voluntary and if preserving your equity for an inheritance, downsizing or for long term care is not a priority, the interest can be ‘rolled up’ onto the sum borrowed and settled at the end of your lifetime when the property is sold.

High ‘exit fees’ can be an issue with existing equity release plans, although modern plans offer ‘defined’ exit fees for flexibility later on in life if your circumstances change. The options have improved significantly over the last 10 years for homeowners releasing equity.

Finding Equity Release Advisers Near You

Access to a qualified, Equity Release Council registered equity release adviser will ensure you receive independent, expert advice. Advice can be provided by telephone, video call, or in person.

Dealing with an adviser with access to the whole equity release market will also enable you to access all companies and schemes available, which will help match your requirements with the most appropriate solution available and the best provider and plan for your needs, on an impartial basis.

Equity release has evolved into a viable, mainstream later life mortgage product. With 40 thousand interest-only mortgages maturing per year over the coming decade*, a safe and flexible solution now exists for homeowners to remain in their homes if downsizing isn’t preferable, and to access tax-free equity for retirement, wealth distribution by gifting an early inheritance to family, for aspirational purposes, or simply to help homeowners meet the increasing costs of living.

Request an equity release calculation and book a free consultation to discuss your options to help you decide if equity release is suitable for your requirements, or simply read our free guide.

*Source FCA interest only mortgage report