What are the Best Equity Release Companies?

Equity release companies sell equity release products to consumers who are interested in unlocking the value of their property. In other words, customers can take out equity from their home and use the funds to boost their retirement income, or their general income in later life.

The way this works is that the customer receives a loan, either as a lump sum or in regular instalments, and the money they owe is repaid through the sale of their property when they pass away or move into a care facility.

Equity release companies provide equity release plans to eligible homeowners, but they also monitor the equity release process from start to finish, which may include inspecting homes, responding to customers’ queries and complaints, and updating their schemes so that they align with new equity release standards.

At the end of the equity release scheme, when the consumer has passed away or gone into long-term care, it will be the equity release company that is contacted by the homeowner’s family members.

The company will then arrange the sale of the homeowner’s property, and they will take enough money from this sale to cover the cost of the remainder of the loan.

This process works differently depending on whether the equity release consumer had a home reversion or took out a lifetime mortgage, but either way, it is the equity release company’s role to finalise the equity release scheme and communicate with the homeowner’s loved ones.

Please call our 24-Hour Helpline: 0330 058 1579

What Should You Look For in an Equity Release Company?

We advise you to be selective when finding an equity release company, as this is the best way to ensure you are not vulnerable to scams. Keep in mind all of our suggestions when you are assessing the stability of an equity release company, but also speak to an adviser and other equity release consumers about your decision.

1. Companies that are regulated by the Equity Release Council

If you are familiar with our website, you will know that we are big advocates of the Equity Release Council. This is because we believe ERC-regulated equity release companies are the most trustworthy, and therefore they provide customers with the safest equity release schemes.

If an equity release lender is a member of the ERC, they cannot pick and choose which rules to apply and when. They have to conform to the Equity Release Council’s standards, which immediately makes them more flexible than many other equity release companies.

For example, if you release equity with an ERC member and you realise you want to downsize, they have to allow you to do this without charging you. Another example is that if you want to protect your inheritance for your family, an ERC member must allow you to do this.

It is possible for you to find a reliable equity release provider that is not an ERC member, so do not feel limited by this suggestion. However, it is much simpler to look for ERC status as this guarantees your lender is regulated.

Something else to note is that ERC members can still make mistakes, so you may hear equity release horror stories from people who took out equity with a company that was regulated by the ERC.

However, in this situation, the ERC would reassess the lender and handle the situation professionally if it turns out the customer was mistreated; you can always depend on the comprehensive complaints process.

2. Companies with competitive interest rates

The interest rates vary widely across equity release companies and equity release plans. For this reason, it is extremely important that you look into the interest rate of your preferred equity release company before taking out a loan with them.

Fixed interest rates are best

We advise that you choose a lender and a plan that offers a fixed interest rate. This is because you will be able to work out how much interest you will owe each year, keeping in mind that equity release involves compound interest.

To do this, you would have to figure out your estimated loan amount, the interest rate quoted by the company, and then calculate how much interest you would be paying on both the loan amount and the established annual interest.

Let’s say your loan amount is £50,000 and your interest rate is 4%. In the first year, you would be charged 4% interest on the loan, which would be £2000.

As a result, the amount of money you owe would rise to £52,000 (assuming you didn’t make any repayments).

Then, in the second year, you would be charged 4% interest on the new loan amount, which is 4% of £52,000 = £2080. The new loan amount would be £54,080.

This occurs each year for the rest of the equity release scheme, so as you can imagine, the remaining loan amount can reach a very high value.

However, with a fixed interest rate, at least you can accurately predict how much interest you will owe and decide whether it is something you are prepared to do. If you go for a variable interest rate, you are risking financial precarity as you will not be able to calculate the amount of interest you will owe, given that it could change.

If you are set on a variable interest rate, make sure you at least find a company that has a cap on its interest to ensure they do not move the interest above a certain percentage.

Low interest rates are best

It goes without saying that lower interest rates are more beneficial for equity release consumers, as it means they will not owe as much interest overall.

It is best to look for lenders offering interest rates as low as 3–5%, as these are the lowest on the market. Some companies charge as much as 8% interest, but this is on the upper end of the scale.

In certain situations, homeowners may be better off going for higher interest rates if it means they can access other great product features, such as downsizing protection, inheritance protection, or a no negative equity guarantee. However, this is your decision to make, and we advise weighing up the pros and cons with an equity release adviser.

Please call our 24-Hour Helpline: 0330 058 1579

3. Companies that offer a no negative equity guarantee

One of the common equity release horror stories that we hear is customers not repaying their interest, and ending up getting into irreversible debt as a result. This occurs because they end up owing more money than they borrowed to begin with.

As the money is only owed when the homeowner dies or goes into permanent care, this ends up being their family’s burden to bear. The family would be expected to cover the cost of the loan, including all of the interest that built up.

However, the best equity release companies offer a no negative equity guarantee, which prevents your family from having to contribute to your debt when you pass away.

Even if your lender sells your property and still does not have enough money to cover your interest, your family would not be responsible for the debt.

The no negative equity guarantee provides reassurance to equity release consumers, as it means they can spend the loan on whatever they want without fearing that they are putting their family in a vulnerable position.

However, this does not mean that you should always spend your full loan amount. If you have other income, we would recommend only releasing the amount of money you need, as it is always better to keep the compound interest low if you can.

4. Companies that offer inheritance protection

Most equity release consumers want to leave some money to their family when they pass away, but they are unsure whether this is compatible with reducing the amount of equity in their property.

It is certainly possible to find an equity release company that is willing to provide you with inheritance protection. If you get a lifetime mortgage, you can put aside some money for your family. These funds would go untouched until you reached the end of your life, at which point they would be passed on directly to your family.

If you had a home reversion, you would be able to save a share of your property for your family. If the lender’s share increased in value, your family would not benefit from this. However, they would benefit from a rise in value of their own share, and they would be able to sell the share when you died and take the money from the sale.

If you want to find an equity release company that allows you to reserve funds for your loved ones, simply search for equity release products that include ‘inheritance protection’.

If your favourite equity release lender or plan does not offer this, something else you could do is help your family financially while you are still alive. You could pay for things for them, such as education, weddings, and housing, or you could gift them money from your loan.

In doing this, you would be avoiding inheritance tax (which is perfectly legal). This is because equity release funds are not liable for inheritance tax as long as you live for seven years after gifting the money, and you do not receive any of the money back in this time.

Please call our 24-Hour Helpline: 0330 058 1579

5. Companies that do not charge for early repayment

You may believe that it would always cost you money to repay your equity loan early, but this is a common myth of equity release. It is based on truth, as it used to be the case that early repayment charges were very common.

However, there are currently many equity release companies that allow you to make repayments on your loan, either partial repayments or full repayments, without charging a fee. For example, all members of the ERC allow you to do this per ERC standards.

The reason we recommend finding a company that doesn’t charge for early repayment is that it gives you much more flexibility. You never know how your situation may change as you get older, so it is always sensible to have a way out of equity release that does not involve paying a significant amount of money.

Some common reasons for making repayments are: increasing the inheritance you can leave to your family, wanting to downsize, no longer being interested in equity release, and needing to move to a different equity release property for reasons relating to family, health, or location.

Even if you do not take our advice to avoid early repayment entirely, try to find a company with affordable repayment fees. Some companies charge 25% of the remaining loan amount, which can make customers extremely vulnerable if they need to move house.

However, others have early repayment charges on a sliding scale, so you will owe less money the longer you have been an equity release customer. If you took out equity 10 years ago, you may only owe 1% of your remaining loan amount, which is much more affordable than the aforementioned 25%.

6. Companies that offer a wide range of equity release plans

On one hand, it may not be necessary for your equity release company to offer a wide range of plans, as you may be set on one plan and one plan only.

Yet, it is often a very good sign if a lender has many equity release products, as it means they are flexible, and they cater to a wide range of customers. This is important when it comes to personalising your plan, as they most likely have various options for you.

What’s more, if you wanted to switch your equity release plan, you would be able to do this if your lender had many arrangements available. We believe this is incredibly important, as your situation can change and result in your original plan no longer being suitable for you.

For instance, you may take out a drawdown lifetime mortgage in order to benefit from the initial lump sum and the cash reserve. However, you may then become concerned about the compound interest, and decide that a voluntary repayment scheme would be better for you.

If your equity release company did not offer this, you would either have to try to change companies (which can be very tricky) or repay your loan to exit equity release. However, a diverse lender would most likely allow you to change plans.

The ideal situation would be to find an equity release company that offers home reversions, and many different types of lifetime mortgage, i.e. buy to let, second home, voluntary repayment, income, interest only, enhanced, lump sum, and drawdown.

Please call our 24-Hour Helpline: 0330 058 1579

7. Companies that approve a wide range of properties

Again, if you have a standard freehold property and you have paid off the conventional mortgage for it, this point may not be relevant for you.

However, not everyone is in this position, and therefore they should consider finding an equity release company that is open to approving a range of properties, including leasehold properties and retirement apartments.

The only way to find out whether a lender would accept you with one of these properties would be to speak to an equity release adviser and ask them to point you in the direction of a suitable lender.

It is important that you do this before applying directly to a lender, as you could waste your time and money if they have a rule against accepting your type of property, and an adviser would be able to investigate this for you.

If you have been rejected by an equity release company for having a leasehold property or a retirement apartment, don’t give up on the scheme completely. It is possible that there is a lender out there for you, you just have to shop around with the help of a professional adviser.

8. Companies that have affordable application fees

Equity release is not a free scheme, so you will have to pay to make an application to a lender. It is best to compare prices and find a lender with budget-friendly application fees, whilst also ensuring they are reliable and regulated.

In the event that your application is rejected, or you change your mind about equity release, it would be better to have not spent a significant amount on the application. Some customers are passionate about releasing equity, but they are disappointed with their quoted loan amount. If they did not spend a large amount on the application, it is less disappointing when they either choose to apply to another lender, or pursue an alternative to equity release.

9. Companies that have affordable administration fees

Similarly, we would recommend finding an equity release company with affordable administration fees. At the beginning of the scheme, this will help you to keep your spending to a minimum and ensure you have as much money as possible for retirement.

Beyond this, there may be certain adaptations you want to make to your equity release plan that will cost money, so it’s better for these changes to be affordable. For example, try to find a lender that allows you to add and remove people from your loan at a low cost.

Being able to add and remove people is vital in the event that you split up with your partner and decide that only one of you is going to continue with equity release.

Alternatively, you may take out equity when you are single and then later get into a relationship, so it would be ideal for you to be able to make the switch to a joint application easily and affordably.

Some couples even choose to put one name down initially, as one of them is not eligible for equity release yet, and then they later ensure both names are on the plan. This may be necessary if you or your partner is not yet 55 years old, which is the minimum age for equity release.

Please call our 24-Hour Helpline: 0330 058 1579

10. Companies that take into account your individual circumstances

The best equity release companies will tailor their services to you, which involves asking you about your personal circumstances and deciding which of their product features would be suitable for you and your family.

For example, it is very important that they ask which plan you are interested in, to ensure you end up with the right loan for you. They should place an emphasis on the difference between home reversions and lifetime mortgages, but also the unique aspects of each of the eight lifetime mortgages.

Another thing equity release companies should consider is your property value. Properties under £70,000 should be immediately disregarded, but as well as this, there should be a distinction between lower value and higher value properties.

This is because you can release more money from a higher value property, whereas lower value properties are not as profitable. You need to know how much money you would be able to take out early on so that you can make an informed decision on whether an equity loan would be worth it for you.

Which Equity Release Companies are Regulated By the Equity Release Council?

We have emphasised the importance of ensuring your equity release company is regulated, as this increases the chances that you will have a positive experience of equity release.

To help you with this, here is a list of some equity release companies that are ERC members:

• Responsible Lending
• Canada Life
• Standard Home Finance
• Retirement Bridge Group
• Hodge
• OneFamily
• LV
• Aviva
• Scottish Widows
• Nationwide Building Society
• More2Life
• Legal & General
• Pure Retirement

This list is not comprehensive, so if you are unsure whether one of your preferred equity release companies is a member of the ERC, or you want to start from scratch to find one, use the search tool on the ERC website (1).

Furthermore, not all of these companies will be right for you. You may not be eligible for all of them, and you may find that some of them would not meet your needs. This is why it’s important to do adequate research into equity release, and to have meetings with advisers.

Please call our 24-Hour Helpline: 0330 058 1579

What are the Best Equity Release Companies?

To a certain extent, the best equity release companies are different for everyone, as each homeowner has a completely unique experience of equity release, even with the same equity release company.

However, we will give you a brief list of the most reliable equity release companies in the industry so that you can get an idea of the companies that are the most popular for equity release consumers:

• Aviva
• More2Life
• Age Partnership
• JustRetirement
• Canada Life
• OneFamily
• Legal & General
• Nationwide

As you can see, the majority of these companies are ERC members, which supports our point that it is best to go with an equity release company that is affiliated with the ERC.

Is it True that Banks and Building Societies Can Offer Equity Release?

The vast majority of banks do not offer equity release, but the exceptions are Scottish Widows and Nationwide. As for building societies, the only provider is Nationwide (2).

However, some building societies do offer retirement interest-only mortgages, which differ from standard mortgages.

What is an Equity Release Broker & Should I Use One?

Equity release brokers help you to find the right equity release product for you by comparing all of the options that are out there. We recommend using an equity release broker as it is a great way to ensure you have considered all your options, as well as helping you to avoid equity release scams.

It does cost money to get an equity release broker. You will have to pay an upfront fee in most cases, but some equity release brokers charge a commission on your equity loan instead.

Please call our 24-Hour Helpline: 0330 058 1579

What Happens If You are Not Eligible For Your First Choice Company?

If you do not qualify for a loan with your favourite equity release company, you can still look at your other options and try to find the right lender for you. This may involve simply switching lenders, but it could require you to change the type of plan you want to enrol on.

It goes without saying that we do not recommend doing this if you are not drawn to any of the other equity release plans. In this situation, we would advise you to look at the alternatives to equity release.

However, it is unlikely that there will not be another suitable plan for you, as more and more equity release products are being introduced every year, and therefore the scheme is very diverse in 2022.

In terms of how you would deal with the practical side of being rejected by a lender, you would simply speak to an adviser and ask how to apply for equity release with a different lender, or how to apply for a different scheme with the same lender.

This process is straightforward, and is made even easier by the fact that the equity release adviser is able to fill out most of the application on your behalf. As for the rest, they can help you with what to write if you are unsure.

What Happens If Your Preferred Company is Not Regulated?

If you are set on choosing a particular lender but they are not regulated by the ERC, we strongly advise you to find a professional equity release adviser who is affiliated with the ERC and ask them to investigate your chosen company.

As we said earlier, not all equity release companies who are not regulated by the ERC are unreliable, so an adviser may tell you that you can release equity safely with your preferred lender.

However, you should check that the company has a complaints process, otherwise you may be stuck if you were unhappy with their services later down the line and had no way to resolve it.

Please call our 24-Hour Helpline: 0330 058 1579

What Happens If Your Equity Release Company Goes Bankrupt?

It is very unlikely that your equity release company would go bankrupt. If this did occur, your plan would most likely be transferred to a different lender, and the regulations would be identical.

There would be zero changes to your loan amount, your interest, your type of plan, and the proposed process for closing the scheme i.e. selling the house.

You are less likely to be subject to your company going bankrupt if they are well-known and regulated, so again, we would advise finding an ERC member when you are looking for someone to purchase an equity release product from.

What About Equity Release Warehouse?

We highly recommend reaching out to us about releasing equity, as we offer an initial consultation that is completely free of charge, and full of high-quality advice.

Our advisers are exceptionally welcoming, so they will not make you feel as though you have to make a decision on equity release immediately. They are also incredible at what they do, so they will have an answer to all of your questions about the equity release scheme, no matter how niche they are.

Finally, they are non-judgemental, so any personal questions they ask you will be posed as a means to understand your situation, not to shame you.

The quickest way to get a consultation is to call us on 0330 058 1579 and let us know you are a new customer. You could also fill out our callback form and await a call from a member of our lovely team.

There are some resources on our website that will give you a better idea of how equity release would work for you, and you can access these before you even speak to an adviser.

One of these is the free equity release calculator, which requires you to enter your age, property type (house or flat) and property value, and then you will receive a loan estimate.

Please remember that this is merely an estimate, and you will only get an accurate estimate once a surveyor has valued your property. However, it can help you to decide whether it would be worth it to take out equity, or whether it wouldn’t be very profitable.

Please call our 24-Hour Helpline: 0330 058 1579

References

[1] Find a Member https://www.equityreleasecouncil.com/find-a-member/advisers/

[2] Equity release from Nationwide https://www.nationwide.co.uk/mortgages/over-55s-mortgages/equity-release/