Equity Release in Scotland

House prices in Scotland have risen significantly in recent years. In the year to December 2021 alone, they rose by over 11%, which is more than the UK average. That makes equity release a particularly attractive option for Scottish homeowners, as it offers a way to convert that growing property wealth into cash.

In this guide, we’ll explain the basics of equity release in Scotland and how you can find out more. Topics we’ll cover include….

Is equity release available in Scotland?

Yes it is, and on the same basis as in the rest of the UK. So, if you own your own home and you’re over 55 years old, you can access capital from your property in the form of tax-free cash to spend however you choose.

However, not all providers cover the whole of Scotland. Some operate in the mainland but not in the islands. It’s still possible to find an equity release deal, but you’ll have fewer providers to choose from.

You could also encounter problems due to construction types that are more common in Scotland than in England. For example, you may have a corrugated iron roof – a familiar sight across the Highlands. Some providers won’t lend against this type of property, though others will. You’ll have to look a little harder for the right deal.

If you’d like to see how much equity you might be able to release from your own property, take a look at our calculator here:

How to apply for equity release

If you’re a homeowner in Scotland and you’re interested in unlocking capital from your property, you should follow these steps.

Step one: Seek advice

Proceeding with equity release is a major decision. It’s important that you understand every detail of how it works and how it will affect you and your family financially, and that you’ve considered all your options before choosing this one.

You should discuss your situation with an expert that you trust. Choosing a broker based in Scotland will ensure that they fully understand relevant details, in terms of your property type and location.

If you get in touch we can arrange for a local equity release broker to contact you straight away.

Step two: Find the right deal

Your broker will explain the multiple types of equity release products that are available, which work in very different ways. They will recommend which is best for you, based on your circumstances and needs.

Since some providers do not cover all parts of Scotland, you’ll need a broker who has access to the whole market and can compare products from all providers. Otherwise, you might miss out on the best deal for you.

Step three: Make your application

Equity release rules do not normally allow you to apply directly, so your broker will do this for you. Once the provider receives your application, they will conduct a valuation of your property and provide an illustration of how much they can offer you and under what terms.

This will depend on:

• The property value
• Your age, and your partner’s age when making a joint application
• Your health and life expectancy

Generally, you’ll have access to more money later in life. You may also be offered more from the equity release provider based on health conditions and lifestyle factors (such as smoking) that reduce your life expectancy. Your broker will help to negotiate a deal based on all of these factors.

Once you have discussed the details with your broker and accepted the provider’s offer, your chosen solicitor can complete the process and arrange for the transfer of money to your bank account.

Types of equity release in Scotland

There are two main types of equity release products:

Home reversion plans

A home reversion plan involves selling your home, or part of your home, to an equity release provider for a lump sum (or sometimes regular payments). You will agree on a price for the portion of the property you wish to sell, e.g. £50,000 for 50%. That price will usually be significantly below the market value of the property.

You will have the right to live in the property, rent-free, for the rest of your life. The portion of the property you own will remain the same, unless you choose to sell more to your equity release provider.

After you die or move into long-term care, the equity release provider will sell your home. If you chose to retain ownership of a portion of the property, you can pass this on to loved ones in your will. They will receive a payment for that portion of the property only.

This type of equity release is the less popular of the two and is rarely recommended by experts. The major drawback is that it requires you to give up ownership of all or some of your home, unlike the alternative. Another drawback is that it’s usually only available for people aged over 60 or 65, depending on the provider.

Lifetime mortgages

A lifetime mortgage is a loan secured on your home, available to people aged over 55. You’ll receive cash that you won’t need to repay in your lifetime. How you’ll receive that cash depends on which category of lifetime mortgage you choose. Homeowners in Scotland have access to all three categories:

• With a lump sum lifetime mortgage, you’ll receive the total loan amount as a lump sum. This will need to be repaid, with interest, at the end of the agreement (usually after you die).
• With an income lifetime mortgage, you’ll receive the loan amount in installments, as a regular income. The total loan and interest will be repaid at the end of the agreement.
• With a lifetime drawdown mortgage, or flexible lifetime mortgage, you can withdraw small portions of the total available loan amount, as and when you need. You’ll only pay interest on the money you’ve taken, not the total available.

The downside of a lifetime mortgage is that your outstanding debt grows over time as you accrue interest. So, you will not retain ownership of a fixed portion of your property, as you would with a home reversion plan. How much you’ll be able to leave to your loved ones depends on how much of the property value is left over once the debt is repaid.

Providers and rates in Scotland

Different providers offer different rates on equity release mortgages, and the rate can also vary depending on your age and life expectancy. At the time of writing (May 2023), typical rates are between 5% and 6%.

The leading provider of equity release based in Scotland is Scottish Widows, which has a head office in Edinburgh. However, you don’t have to choose a provider based in Scotland, you can also choose from others in the UK.

There are 14 providers in the UK that are approved by the Equity Release Council, meaning that they’ve agreed to certain rules that are in place to protect customers. These include Standard Life, Aviva, LV, and Nationwide.

Applying for equity release is typically only possible with the help of an adviser or broker. If you contact a provider directly, they will connect you with an adviser, but that adviser will only be able to recommend products from that provider. To ensure that you’re getting the best deal, you should speak to a broker who has access to the whole market.

Getting matched with an equity release broker in Scotland

Whilst you don’t have to work with a broker in Scotland, you might want to choose someone with knowledge of your location, property types that are common locally, and providers who serve your area.

Our broker-matching service aims to connect you with a broker who has exactly the right experience for your situation, whatever it may be. We’ll ask you for the important details and put you in touch with one of the many brokers we work with for a free, no-obligation chat.

There will be no rush to make an application. You can start by asking any questions and finding out more about your options. Just give us a call on 0808 189 0463 or make an enquiry online.