Understanding Equity Release & Joint Ownership
Accessing equity from a jointly owned property should be pretty straightforward. Learn how equity release works when you own your home with someone else.
Equity release plans allow homeowners aged 55 and over to access the equity value in their home.
How does this work if you own your home with your spouse or partner?
Read on as we explain what’s possible, how it works and why getting professional advice is essential.
Please Note: The content on this page is designed to be a helpful starting point for understanding equity release. It explores the concept, different plan types, and the general process involved. However, equity release is a complex financial decision with significant implications for your long-term financial security. To determine if equity release is the right option for you, it’s essential to consult with a qualified financial adviser who specialises in equity release products.
What is equity release and how does it work?
Equity release allow homeowners aged 55 or over to access some of the money tied up in their homes, without the need to sell up.
It’s a way of converting a portion of your property’s value into cash while still living in your home.
You could choose to have the money as a tax free lump sum, a regular income, or a mix of the two. There are also drawdown lifetime mortgages, where you get a pre-agreed credit limit to draw against.
There are two main types of equity release plans: lifetime mortgages and home reversion plans.
Both involve accessing equity, but they work differently.
Lifetime Mortgages
This is the most common type of equity release plan.
You borrow money against the value of your home and receive it as a lump sum, regular income payments, or a combination of both. Interest is added to the loan over time, but you don’t have to make any monthly payments.
The loan and interest are only repaid from the eventual sale of your home, when you die or move into long-term care.
Home Reversion Plans
With this less common option, you sell a percentage of your home to a reversion company in exchange for a cash lump sum or a regular income. You get to remain living in your home rent-free for life, but you no longer fully own it.
The debt is repaid from the eventual sale of your home, when you die or move into long-term care.
Can you get equity release on a jointly-owned property?
Yes.
Unlocking equity from your jointly owned home is often a straightforward process, similar to getting a standard joint mortgage.
As long as you and your co-owner both meet the basic requirements – usually being over 55 and having sufficient equity in the property – you’re likely eligible.
However, it’s important to be aware that things can get a bit more complex if there’s a significant age difference, or if the way you jointly own the property (as ‘joint tenants’ or ‘tenants in common’) presents unique considerations.
How are they different to a standard mortgage?
With a standard joint mortgage, which you probably used to buy your home in the first place, you have to prove you can afford the monthly repayments and pay it back over a set amount of time.
With equity release none of this matters.
You borrow the money but do not have to make any monthly payments or think about how to pay it back.
You have the legal right to stay in your home for the rest of your life, or until you move permanently into long-term care. When either of these happen, the debt then needs to be repaid, usually through the sale of your home.
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Joint ownership explained
If you own your home with someone else, it’s important to understand how this shared ownership impacts equity release.
If you are married, in a civil partnership or living with someone else as a partner and you are both over 55, you can take out a joint equity release plan.
In England and Wales, joint ownership of a property falls into two categories:
Joint Tenancy
Joint tenancy is the most common form of joint ownership, often chosen by married couples or partners.
In this scenario, both of you own the entire property equally, with neither individual having a distinct share. If one owner passes away, their ownership automatically transfers to the surviving owner.
In the context of equity release, this means both owners must agree to the plan, and any equity released is typically shared equally.
Upon the death of one owner, the surviving owner becomes solely responsible for the loan.
Tenants in Common
Tenants in common is not used as much but offers more flexibility.
Here, each owner holds a specific percentage of the property, which can be equal or unequal. This share is determined at the time of purchase and documented in a ‘declaration of trust’.
Upon the death of an owner, their share doesn’t automatically pass to the other owner. Instead, it’s distributed according to their will or, if there is no will, to their next of kin.
This can have implications for equity release, as the deceased owner’s share might no longer be available to support the loan.
Do I have joint tenancy or tenants in common?
Knowing how you own your home is important if you’re thinking about equity release.
If you’re unsure, it’s easy enough to check. It’ll either be as “joint tenants” or “tenants in common.”
Here’s where to look:
- Your deeds: They’ll say how you own it. Look for the words “joint tenants” or “tenants in common.”
- Land Registry: You can also find out online. The Land Registry is the official place where property ownership is recorded. You can order a copy of your title register online, and it’ll tell you right there how you own your home.
If you need a bit more help, don’t worry! Your solicitor can easily check for you.
Eligibility
Both owners must be at least 55 years old, although some lenders may have higher minimum ages. The youngest owner’s age is used to determine the maximum amount that can be borrowed.
You must be the legal owner of the property, either as joint tenants or tenants in common. The property must be your main residence.
The property needs to be suitable for the equity release provider. In general, properties built with brick or block walls and a pitched, tiles roof should be OK.
Very old properties, listed properties, or those of non-standard construction may not be suitable.
Both owners must agree to the equity release plan. This is important because the loan is secured against the property as a whole, and both owners become responsible for it.
How much equity can be released?
When you look at lifetime mortgages, the amount of equity you could release is expressed as a percentage of your home’s value.
The percentage is determined by your age, in the case of a joint application the youngest age is used.
As an example, let’s say we have a couple aged 55 and 60, who own a home worth £400,000.
At age 55 (youngest remember) you could be eligible to access 24% of your home equity. This is the maximum, the exact amount you take will be up to you.
So, £400,000 x 24% = £96,000.
What happens when one of you dies?
If you have a joint equity release plan with your partner, the good news is that the plan is designed to protect them.
This means that if you were to pass away, your partner can continue to live in the property for as long as they wish.
The plan only comes to an end when the last person named on the plan either dies or moves into long-term care. At that point, the property is usually sold to repay the loan and any accrued interest. Any remaining funds are then distributed according to the terms of your will.
If you took out the equity release plan in your name only, your partner might face a different situation. Unfortunately, since the plan is linked solely to you, your partner may need to move out of the property to allow for its sale and repayment of the loan.
Read more: How does equity release work when you die
Spending the money
The cash you release from your home can be spent in any way you choose.
Whether this is for home improvements, helping the family, a holiday or maybe something else.
Read more: What can you use equity release for?
Take what you need
There’s no requirement for you to take the maximum sum of money offered, it’s totally up to you.
Many people do choose the lump sum option but the most popular option is drawdown. This gives you access to money and you choose when to take it.
Read more: What is drawdown equity release?
Getting the right advice
Lifetime mortgages can be a tempting solution to access some of your home’s value while remaining in your familiar surroundings.
However, it’s important to take your time and fully consider how they work and the affect on your finances.
All borrowers must take financial advice before being able to apply for an equity release plan.
And only a suitably qualified financial adviser is permitted to help you set up or amend a lifetime mortgage.
Let Respect Mortgages help you take the next step.
We can match you to an award winning equity release specialist, with over 25 years experience helping people just like you.
Importantly they’re FCA approved and also members of the Equity Release Council.
Please call us on 0330 030 5050 for more details.
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Yes you can. It’s only possible where two people own the property, and both must be over 55.
Yes, both owners need to agree to the equity release plan and participate in the financial assessment and advice process.
Yes, 55 is the minimum age for lifetime mortgages which are the most popular type.
For joint equity release plans both owners need to be over 55 and the youngest age determines the percentage of your equity.
With a joint equity release plan, both you and your partner are protected. If one of you were to pass away, the other could continue living in the home under the existing plan’s terms. And if your surviving partner wanted to move to a smaller property, they might be able to transfer the equity release plan, as long as the lender approves the new home as suitable security.
It’s important to remember that the plan only ends when both borrowers have either passed away or moved into long-term care. At that point, the equity release provider will be repaid, usually through the sale of the property.
It depends on your age, your property’s value, and sometimes your health. Generally, older homeowners can release a higher percentage of their home’s value (up to around 55%).
You have complete freedom to use the money however you wish – boosting retirement income, making home improvements, helping family, or anything else that makes your life better.
Read more: What can you use equity release for?
The loan, along with accumulated interest, is typically repaid after you pass away or move permanently into long-term care. Your home is sold, and the proceeds are used to settle the debt.
Read more: How is equity release paid back?
Unlocking cash from your home while still living there. This can significantly boost your financial comfort and freedom in retirement.
The interest on your loan grows over time, reducing the inheritance you leave to your loved ones.
The UK has strict regulations. The Financial Conduct Authority (FCA) oversees providers, and the Equity Release Council (ERC) sets additional standards. Look for providers who are members of BOTH.
You usually need to be at least 55 years old and own your home. Certain property types, like new builds or flats, might be excluded.
Read more: Am I Eligible for Equity Release?
With a lifetime mortgage, you retain full ownership of your home and the potential to leave an inheritance. Home reversion plans involve selling a portion of your home to a company.
Yes, they are much more common than home reversion plans. This is mainly due to retaining ownership and the possibility of leaving a larger inheritance.
Some plans offer this flexibility! You can either make optional payments or select a plan that specifically allows for interest payments.
Lifetime mortgages approved by the Equity Release Council will have the ability to port or transfer the plan over to a new property. This is not guaranteed though.
Whether you are able to do this depends on the property type and value that you wish to move to.
Read more: Can equity release be transferred to another property?
No, the funds from a lifetime mortgage are considered tax-free.
Read more: Do you have to pay tax on equity release?
No. Equity Release Council members guarantee your right to stay in your home for life unless you move into long-term care. The only time your home would be sold is after these events.
It is possible to use equity release to release cash from your home more than once. But you can’t have two lifetime mortgages, at the same time, on the same property.
Read more: Can you do equity release more than once?
It’s OK if you still have a mortgage. One of the most important things to know is that if you take out equity release, your existing mortgage has to be paid off.
A portion of the money you receive is automatically used to pay off your old mortgage. Any leftover funds then come to you as a lump sum or in regular payments – it depends on the type of plan you choose.
Read more: Can you get equity release if you still have a mortgage?
