How Property Type Affects Equity Release

For many over 55s who own a property, equity release can be a useful way to free up some capital and supplement retirement income without having to sell your home. 

Not all types of property are eligible for an equity release loan to be arranged, so in this article we’ll work through the most common non-standard property types we get asked about and explain why they may or may not be acceptable.

How does property type affect equity release eligibility?

Some property types are considered riskier than others for mortgage providers, as they may not feel the construction or condition of the property guarantees it holding its value. As a result, your lender might be concerned about recouping the debt at the end of the term if your home falls into the ‘non-standard’ property category.

An equity release mortgage works on the basis of a lender effectively lending you some of the money that’s tied up in your home, on the promise that you will pay it back when the property is sold in the future, normally either when you die or go into a care home. Interest charged will be added to the total to be repaid, so lenders will want to be sure that they can recoup both the capital and the interest from the sale of your house.

How a broker can help

Because equity release can be complex depending on property type, it’s a good idea to get expert advice before you start from a broker who specialises in this type of finance. They will be able to use their experience and knowledge of the whole of the market to find the lenders who are most likely to accept your property type and give you the best possible rates.

If your property type is classed as ‘non-standard’, we can match you with a specialist equity release advisor  who will be able to identify the right lender, offering the best, most cost effective, deal that suits your circumstances.

Property types that are acceptable for equity release

While equity release on a standard construction house may be relatively straightforward, you may need to check whether or not you’re eligible if your property is of non-standard construction or ownership model.

Let’s take a look first at where it is possible to get equity release on non-standard properties:

Leasehold properties

It’s usually possible to get equity release on a leasehold property, including leasehold flats. You just need to make sure you have plenty of time left on the lease. The minimum remaining lease required will vary from lender to lender, but is likely to be 75 years as a minimum and sometimes more.

Lenders may also look at things like ground rent, service charges and sell on clauses and some may have specific requirements such as requiring a lift for flats over a certain number of floors.

Non-standard construction

Non-standard construction refers to any property not built of traditional bricks and mortar, so this could include concrete construction, steel-framed or timber-framed properties or prefabricated houses as well as non-traditional roof types such as tin roofs or thatched roofs.

Equity release on a non-standard construction property is harder because it’s seen as a riskier option for lenders, but it’s not impossible. If you’re concerned that your property construction is going to restrict your options then talk to an advisor who specialises in equity release – they’ll be able to guide you to the lenders best suited to your circumstances.

Retirement accommodation

While not as widely available as on traditional properties, there are some lenders who are willing to offer equity release on retirement flats or accommodation, depending on the circumstances. There are also lenders who will consider transferring an existing equity release loan to a retirement property if you’re looking to move, although this is by no means guaranteed, so take advice if this is something you’re looking to do.

If you’re property falls into any of the above categories and you’d like to have an idea of what equity you could release from it, take a look at our calculator here:

Property types that aren’t acceptable for equity release

Some property types are not eligible for equity release finance either because they are deemed too high risk or because of issues over land ownership or property use.

Park homes

Even though a park home may be your permanent residence, that doesn’t unfortunately make it eligible for equity release. Park homes aren’t legally set up in the same way as traditional properties and you won’t own the land the home sits on, technically classing it as a mobile home. Equity release lenders need to be able to secure the loan against the registered title and as you don’t own the land or the leasehold there’s nothing for them to secure the loan against.

Shared Ownership

If you part-own your home through a Shared Ownership scheme you will not be able to apply for equity release as lenders require you to own 100% of your property. Similarly if you jointly own a property with a family member or friend then you won’t be able to get equity release on your share.

Property used for commercial purposes

You won’t be eligible for equity release on your property if it is used either completely or in part for commercial purposes. This includes bed and breakfasts, AirBnB properties or buy to let.

Very low value properties

Most lenders have a lower limit on the value of the property they are prepared to lend against, and you’ll struggle to find anyone willing to offer equity release on a property worth less than £70,000.

Holiday homes

The property you’re applying for must be your main UK residence, so holiday homes or second homes aren’t eligible for equity release. This includes holiday properties within the UK as well as abroad.

Other property types ineligible for equity release

There are several other niche property types where you might find it difficult or impossible to get equity release finance, including houseboats, studio or basement flats or mobile homes. If you’re in any doubt, get advice from an expert broker.

Get matched with a specialist equity release broker

Although equity release finance can be complicated to understand and secure with non-traditional property types, it’s often possible with the right expert support. The advisors we work with have particular experience in securing equity release finance for unusual property types and constructions and will be able to quickly and expertly guide you through the whole process, securing you the best rates and terms.

Our free broker-matching service will assess your individual circumstances and quickly match you with an advisor who best meets your needs. Give us a call on 0808 189 2301 or make an enquiry and we’ll arrange a free, no-obligation consultation with a specialist equity release advisor today.