How much equity can Scots release from their homes?

Growing numbers of Scottish homeowners are releasing money from their homes in the form of equity release.

Equity release is a way of accessing tax-free cash from your home without having to move.

According to the Equity Release Council, the body that represents the industry, last year people accessed a combined total of £3.89bn from their homes.

The amount of money being accessed varies hugely from region to region, as it goes hand in hand with the value of our properties.

Unsurprisingly, those in London are releasing the most amount of tax-free cash from their homes with an average of £147,366, the south east of England are releasing the second highest amount at £84,845 – and the homeowners in this region are also securing the lowest average interest rates.

Those in Scotland, Northern Ireland and the North East are releasing the least but are still managing to secure average interest rates below 4%.

Industry expert explains the findings

Andrew Morris, senior equity release adviser at Age Partnership, who carried out the research, explains the findings in more detail. “The amount of equity that you can release from your home is determined by two main factors, the value of your home and the age of the youngest homeowner.

“For example, a 55-year-old with a home worth £200,000 would be able to release up to £50,000, whereas a 75-year-old with the same value home could release up to £95,000.

“It’s not surprising to see London in the top spot for the amount of money being released, as this is largely down to the price of housing in the capital.

“The interest rates that people are securing at the minute are amongst the lowest we have seen. Unlike a standard mortgage, with equity release the rate that you secure is fixed for life, so if you can secure a rate as low as 3.2 per cent now, knowing there is no chance of that rising in say 20 years’ time. The actual rate that you can secure will vary from person to person.”

What is equity release?

Equity release is a way of accessing tax-free cash from your home without having to move. There are different types of equity release such as a home reversion or a lifetime mortgage, but lifetime mortgages are the most popular. The Equity Release Council state that these account for 99 per cent of all plans arranged.

With a lifetime mortgage, you have the option of not making any monthly repayments, as the money that you release, plus the interest that you build up, is repaid once you die or move into long-term care.

You can choose to access the money as a lump sum or as smaller amounts over time as and when you need it, whichever works best for you.

The loan is secured against your home, but you still own all of your home and have the right to live in it for the rest of your life.

You can take out equity release even if you already have a standard mortgage; you will just need to use some of the money that you release to repay your original mortgage. But once you’ve done that, the tax-free money is yours to spend how you wish.

Get specialist advice

Andrew Morris adds: “Anyone considering equity release should get advice from a whole-of-market specialist adviser and get a written quotation which is bespoke to your individual requirements.

“Advisers such as us at Age Partnership will provide this initial quotation for free, as it helps you to fully explore whether equity release is the right solution for you explaining all of the features and risks involved.

“Only if you choose to proceed and your case completes would a typical fee of £1,795 be payable.

“During the quotation the adviser will also talk to you about alternatives to equity release, such as unsecured lending, downsizing, grants, benefits, taking in a lodger and using savings or pensions. And will also explain how equity release could affect your entitlement to means-tested benefits, both now or in the future.

“The adviser will also encourage you to discuss your equity release plans with family and friends to see what they think and involve them in the process, as it’s likely to impact them later down the line.”