Ever wondered how much you could borrow using equity release? This was one of the questions put to our equity release expert Mark Gregory this month. Here he explains how the calculations work…
Question
I wondered if you could please advise me on what kind of sum I would be allowed to borrow if my wife and I were to release equity from our home?
We have a four-bedroom property in an outer London suburb which is probably likely to be valued (according to Zoopla) at around £550,000. My wife is 70 and I am 74. We are both retired although my wife sometimes helps my daughter as a receptionist in her business, but she earns a small amount doing this.
We are keen to release money to gift to our three children to help them move/buy a home. But we are not sure how much we can release. Can you help please?
Mark’s answer
The maximum amount you are able to borrow with equity release depends upon three factors. These are the age of the youngest borrower for joint plans – in your case your wife who is 70.
Lenders also consider the value of the property and its location.
Your income and outgoings are not part of the calculation when considering equity release plans.
A point I always make to clients looking to take the maximum amount is to be aware – the higher the loan-to-value (LTV) that you borrow, the higher the interest rate on your plan will be.
Additionally, only apply for the amount you actually need. If you don’t need the maximum lump sum, or you don’t need to take the full amount upfront, then look towards a drawdown plan that allows you to release equity over a period of time, thereby reducing the interest you will be charged.
At age 70 and with a property valued at £550,000, the maximum you could borrow is 47% of the value of your home – or £258,500. If either you or your wife have any pre-existing medical conditions, this could be enhanced to 54.5% – or £299,750 depending on the severity of those ailments.
We offer a comprehensive range of calculators on the Equity Release Supermarket website, which are free for you to use.
If you would like to see the range of plans that could meet your needs, and find out exactly how much you could borrow, then smartER is also available for you to use on our website.
It is the UK’s first equity release search engine and based upon your personal details, smartER will search the entire marketplace and present a shortlist of plans that could meet your needs.
Mark Gregory is founder and CEO of Equity Release Supermarket
You can read more of Mark’s advice on equity release here. If you would like to ask Mark a question about later life lending, including equity release, email our digital editor Kate Saines at kate.saines@emap.com
