By Tom Philips at August 22, 2022

Can You do Equity Release Twice?

If you have ever released equity from your home, then you might be wondering ‘can you do equity release twice?’

Whilst you can do equity release twice, it is important to understand that there are a number of factors that will influence a lender’s final decision.

What is equity release?

Equity release is a scheme and form of mortgage, available to those aged 55 or over. Equity release allows you to access the equity within your property as cash. Individuals are then able to spend this money in whichever way they want to.

Lots of people opt for equity release if they are experiencing an issue or shortfall with their pension, or need to pay a large expense such as home improvements. By releasing equity from your home, you will finally have access to the wealth you have built up over the years by your monthly mortgage payments.

The equity you receive within your home will be a combination of your monthly mortgage repayments, your initial deposit and the value of your home.

With equity release, you do not have to repay anything until after you pass away, and you are able to remain living in your home until you pass away or move into a care home.

Can you do equity release twice?

Yes, the answer is that you can do equity release twice. This is because there might be additional funds in your property which you can release from either a drawdown equity release fund or by another advance.

If you are looking for another option, you can always opt to replace your current equity release scheme with a new one that allows you to release more money.

If you are considering taking equity release out for the second time, then you will still need to speak with an equity release advisor for advice and support, just like you did the rest time round.

Equity release interest rates have been falling in recent years, so by replacing your fixed equity release interest rates with newer ones, you might be able to save yourself money.

However, whether you are able to release equity from your home for a second time will depend on how much money is left outstanding on your existing equity release mortgage.

It is important to understand that a lender will also take into consideration your current health, age and the current value of the property.

Even if these things were assessed initially, they will need to be assessed once again so that a recent and thorough assessment can take place before any funds are released into your account.

Lifetime Mortgage Vs Home Reversion Scheme

If you are considering releasing equity from your home, then you will need to choose between a lifetime mortgage equity release plan and a home reversion scheme.

Usually, you are able to borrow between 55% and 60% of the total value of your property on a normal equity release plan. How much money you are able to release will depend on your age, your current health and the value and condition of your home.

All interest rates on an equity release plan will be fixed, and if they do happen to be on a variable term then you will have to agree to set a limit in place.

When it comes to interest rates, they tend to be very similar to that of a regular mortgage, or are generally slightly higher.

However, the key difference is that with an equity release plan, the interest rates factor into how long you are likely to live before you pass away and have to repay the loan. These tend to fluctuate between 2% and 6%.

The two form of equity release plans are lifetime plans and home reversions plans, which are both discussed in more detail below.

1. Lifetime mortgages

A lifetime mortgage allows individuals to borrow a percentage of your home. However, with a lifetime mortgage you do not have to repay anything each month, as you would with a normal mortgage.

However, it is important to understand that you will have to repay this loan back after you pass away, which will mean that you will leave less to your family and next of kin in the way of inheritance.

This loan will be sold back when your family sell your home after you pass away or move into a long term care home for health reasons.

2. Home reversion plans

A home reversion equity release plan is a little different. With a home reversion plan, you are able to sell anywhere between 25% and 100% (your whole home) to the lender, in return for the sums.

However, it is important to understand that with a home reversion plan, you will receive less than the market value for your home. If you were to sell your home now, it would sell for more than you would receive through a home reversion plan.

However, most people who opt for a home reversion plan are doing so because they wish to remain living in their home for the duration of the rest of their life.

With a home reversion plan, you are able to remain living in your home until you pass away or move into long-term care. However, when this happens, instead of your next of kin receiving the money, the bank will receive whatever percentage of the house they bought from you and now own.

If your property increases in value, then the provider’s share of the property also rises in value. Likewise, if the property value falls then when you sell your home, it might not cover the debt.

Most people find that a home reversion plan is often the most expensive plan versus a lifetime equity release mortgage. You could also end up leaving less money to your next of kin than if you were to opt for a lifetime equity release mortgage.

With both a lifetime mortgage and an equity release plan, you are able to opt for your money in one lump sum, or can ask for smaller, monthly repayments.

Likewise, if you are choosing to release equity from your home for the second time, then you can opt for either one large lump sum, or a number of smaller payments over a number of months.

Will I Save Money if I Switch to a New Equity Release Plan?

Lots of people choose to release equity from their home for a second time, in an attempt to save some money.

Firstly, the equity release advisor will ask you about your current equity release scheme, and why you chose to opt for that scheme in the first place. They will also ask you a series of questions about your current situation, to find you a better, new scheme for your financial needs.

From then onwards, the advisor will need to understand how much you currently owe on your current equity release scheme, and will need to know if you have ever repaid anything early.

Once this has been completed, your advisor will then be in a position to find you a better and cheaper equity release plan that works for you. They will then work with you to work out how long you and the lender expect the equity release plan to last, which will affect the overall costs.

Generally, when you opt for a second equity release scheme, you are able to save some money through cheaper interest rates, or an increased or inflated property market.

What are the eligibility criteria when it comes to releasing equity for a second time?

There are a number of different rules when it comes to releasing equity from your home. For example, anyone entering the agreement must be aged 55 or over, or 65 or over if you are opting for a home reversion plan.

You must also still own your property in the UK, and this must have remained above £70,000 in value.

You must also avoid suffering from any debt, and pay off any existing debts or loans you might have.

Does the value of your property matter when it comes to releasing equity for a second time?

In order to release equity from a property for a second time, the property must still be worth at least £70,000 as a minimum.

This means that if your property has dipped below this market value since you first took out your initial equity release plan, then you might no longer qualify for a new equity release scheme the second time round.

Additionally, if your property is worth more than one million pound, then you might not qualify for equity release a second time round.

If you are considering releasing equity for a second time round, then you will need to have your property revalued for a second time. This means that someone will need to attend your property and will need to do a thorough and full assessment, both internally and externally.

They will also assess the local area and any damage to their property in order to make a full, fair and accurate assessment.

How does the condition of your property affect equity release?

If you want to release equity from your home for a second time, then your property will need to be in good condition in order to qualify and be valued fairly.

In order to get an impressive valuation for your property, you should make sure that your property does not suffer from any structural issues, such as subsidence. You should also make sure that your roof is in good condition, and that you have a relatively new boiler.

You should also consider doing minor home improvements to your property, in order to increase the value such as a new bathroom, new carpet or plastering.

If your property is not in a good condition, then the valuer might value your home for less, and you might not be offered what it is worth.

Whilst some lenders are better and more flexible than others, it is always a good idea to look into what you can do to increase the value of your home at a low cost before you release equity from your home.

Is the location of your property considered when releasing equity for a second time?

It is important to remember that a valuer will also take the location of your house into account.

Whilst most areas stay the same in terms of desirability, it is important to think and consider how your local area might have changed over the last few years, and how this could have subsequently changed the value of your home.

For example, if your local area has increased in market price recently, then your house might be worth more. For example, if a local school has improved, then the property prices in that area will most likely have increased in price.

However, if your local area has worsened in any way due to increased crime rates, for example, then your house might have decreased in value since the last time you took out an equity release plan.

It is also important to understand that if you live in England, Wales or Scotland, then you will have access to the majority of equity release lenders. However, if you live in Northern Ireland then you will only have access to just two lenders.

Likewise, if you live on the Isle of White then you will have access to a few lenders, but if you live on the Isle of Man then you will not.

What is the minimum and maximum amount that you can borrow?

Unfortunately, the minimum amount you are able to release from your home is £10,000. However, this can turn out to be a positive as it ensures that you have a lower interest rate.

The maximum amount of equity you are allowed to release from your property depends on a number of different factors. For example, this will take your health, your age and your property value into consideration.

Most lenders cap the amount people are able to borrow at two million pounds, which is usually the highest amount a lender is willing to lend to someone.

Can I Release Equity On A Flat or Commercial Property?

It is important to understand that equity release is not limited to just houses. More and more people aged over 55 are living in flats which they have bought.

You are able to release equity on any flats, houses or bungalows. In addition to this, some lenders are now even allowing individuals to release equity on a house with an annexe, a flat-roofed property or any property which operates under commercial or business purposes.

However, whether your lender approves you for an equity release loan on one of these properties very much depends on the type and age of the build and property.

If you own a flat or commercial property and are wondering if you can release equity from your home, then speak to an equity release advisor from Equity Release Warehouse for advice and support.

Will You Qualify for Equity Release if You Own a Leasehold Property?

If you own a leasehold property and want to know if you can release property from your home, then it is important to understand that you most likely will qualify for equity release, provided that you meet the lender’s criteria and requirements.

For example, you will most likely need to have a property lease at least 160 years less than the age of the youngest leaseholder on the property.

However, if your lease length is not older than you might be able to request an extension on your lease so that you are able to qualify for an equity release plan. Whilst this does include some initial costs, if you do qualify for equity release then it will be worth it in the long run.

Can You Release Equity if Your Property is an Ex-Local Authority Property?

Once again, if you own an ex-council or local authority property then you will most likely qualify for an equity release plan. Nevertheless, the lender will need to know just how many properties on your road and local area are still council owned, in order to make a fair judgement and valuation on the property.

When it comes to ex-council-owned properties, if you own an ex-council flat then your flat will now need to be valued at £200,000 or more.

Whilst releasing equity from an ex-council-owned property is still doable, the process is a little more complex and therefore longer.

If you own an ex-council-owned property, then speak to a member of the Equity Release Warehouse team so that one of our independent advisors can talk you through the process.

Will I Be Taxed on My Equity Release Loan?

It is important to understand that equity release is exempt from tax. When it comes to releasing equity from your home for the first or second time, there are two different types of tax you need to consider, being income tax and capital gains tax.

However, you will not be charged for any when you release equity from your home.

Lots of people choose to opt for a drawdown plan when they opt for a lifetime mortgage, which allows you to release money in monthly smaller payments, which means that you also benefit from a reserve, which does not build up interest. You can withdraw this money whenever you need it.

Whilst you do not need to pay tax on any of this money, if you invest this money into a savings account then you might be subject to paying tax on this.

If I Release Equity, How Will this Affect my State Pension?

When you reach a certain age, you will be able to claim your state pension. The state pension is due to increase to £141.85 for the basic state pension, and £185.15 for the full state pension [1].

However, this amount will change depending on how much you have contributed through your national insurance payments over the years.

It is important to understand that with an equity release plan, any money you receive will not impact the amount you are due through your state pension. This is mainly because the money you receive through your equity release plan is classified as a loan, instead of income. When it comes to your state pension, only additional income will affect this.

Nevertheless, receiving equity release does have the potential to affect whether you are due to receive any pension credit or other forms of benefit allowance.

If you are wondering about your state pension and how this will work in tandem with an equity release plan, then speak to a member of the Equity Release Warehouse team for advice and support.

How Much Does Equity Release cost?

Whilst you do not have to repay your equity release loan whilst you are alive, and will not have to repay any tax on this loan, the set-up costs can cost a considerable amount of money.

For example, you will need to bear in mind the following set-up costs when you are considering equity release.

Valuation fees – which will need to be carried out at the start of the process
Arrangement fees – these can cost thousands of pounds
Consultation fees – the cost of an equity release consultant and advisor can be expensive, and usually costs 1% – 2% of the total loan amount that you borrow
Solicitor fees – these are very similar to when you buy your home for the first time, and can cost up to £1,500

It is also important to bear in mind that you will also be charged for any early repayment charges (ERCs) whether you are taking out equity release for the first or second time.

How Can The Equity Release Council (ERC) Help?

If you are considering releasing equity for a second time, then it might be worth looking into what the Equity Release Council (ERC) says about releasing equity twice.

The Equity Release Council independently represents the equity release industry, and makes sure that all lenders are playing by the rules and promoting best practices.

They also make sure that all individuals who have released equity from their home have done so in a safe and sensible way [2].

They help to get rid of any myths that exist within the sector, and are able to provide equity release advisors and individuals with the help and support that they need to make informed and financially savvy equity release decisions.

If you are considering releasing equity in your home for a second time, then speak to a member of the Equity Release Council, or to a member of the Equity Release Warehouse team for advice and support.

Our fully trained and independent advisors are able to speak with you directly about any plans you might have, or concerns you might suffer from when it comes to equity advice. Our advisors will talk or meet with you a number of times before you make your informed decision, and will not push you into a decision before you are ready to take action.

You can start today by calling our team for free on 0330 058 1579 or by visiting us online at www.equityreleasewarehouse.com for advice and support on how to take the first steps to releasing equity from your home.

References

[1] https://www.gov.uk/government/news/state-pension-and-benefit-rates-for-2022-to-2023-confirmed

[2] https://www.equityreleasecouncil.com