Equity Release on Jointly Owned Property? Complete Guide

Are you curious about equity release on a jointly owned property and how it works in the UK? You're at the right spot! This guide is here to answer your questions and help you understand better.

In this article, we’ll explain:

• What equity release is and how it works.
• How to get a realistic quote.
• If equity release has to be in joint names.
• How to get equity release with joint ownership.
• How equity release affects your state pension.

Equity release can be a bit tricky to understand, but there’s no need to worry. We’re here to make things clear and simple for you. We understand your worries and will help you figure everything out. Let’s dive in and uncover the facts about equity release on jointly owned property.

How does it work?

Equity release is a way for senior homeowners to take out some of their home equity as a cash lump sum or through regular payments known as a drawdown (or drawdown equity release). 

A lifetime mortgage is a loan secured on your home; you retain ownership. Interest that is not paid is added to the balance. The loan is usually settled when the last borrower dies or moves permanently into care, subject to the contract. Required or optional repayments vary by product.

Moving permanently into care can trigger repayment under the plan, normally when the final borrower moves. Other contract breaches may also lead to repayment; sale is not the only possible source of repayment funds. See related guidance.

Equity release plans come in two forms, either as a lifetime mortgage or as a home reversion plan. We explain the differences below:

Lifetime mortgage

A lifetime mortgage is a loan secured on your home; you retain ownership. Interest that is not paid is added to the balance. The loan is usually settled when the last borrower dies or moves permanently into care, subject to the contract. Required or optional repayments vary by product.

Illustration only: £65,000 at 6.4% interest compounded annually without repayments would grow to about £137,000 after 12 years, excluding fees.

Home reversion plan

A home reversion plan is a sale of part or all of your home, usually below open-market value, in return for money and the right to remain under the plan’s occupancy terms. It is not a loan. The provider receives its agreed share when the home is sold.

Illustration only: a provider may buy a 50% share of a home for less than half its market value. It then receives its agreed share on a future sale. This is a property sale, not repayment of a loan.

Only consider lenders that are authorised and regulated by the Financial Conduct Authority. 

What is it commonly used for?

Equity release is used by seniors to help them financially through their retirement or earlier. The money might be used to clear debts, go on holidays, pay for care services, complete home improvements or just general living expenses. 

Some seniors release equity to give the loan money to their family, often operating as the bank of mum and dad to help children get on the property ladder. 

Can you take equity out of shared ownership?

Shared ownership usually means owning a share under a housing-provider scheme and paying rent on the remaining share. Joint tenants and tenants in common are different forms of co-ownership; inheritance rules depend on the legal structure.

Many equity-release providers require full ownership. Shared-ownership applicants may need to staircase to 100% at completion if a provider accepts the arrangement; acceptance and funding must be checked with the housing provider, lender and solicitor.

Can you get it with joint ownership?

Two senior homeowners who have joint ownership of a single property can take out a lifetime mortgage or home reversion plan together. This is a common scenario with many senior couples deciding on an equity release plan. 

Does it have to be in both owners’ names?

If you own a property with another person, such as your spouse or civil partner, you must take out the equity release plan with that person. Both owners of the property must agree to the agreement to get equity release.

Jointly owned properties

A joint lifetime mortgage is normally repaid when the last borrower dies or moves permanently into care, subject to its terms.

If Ed and Julie are both borrowers, Julie normally continues under the plan when Ed dies. Any required payments and other conditions still apply. See related guidance.

Do both homeowners have to be over 55?

Most standard lifetime mortgages start at age 55, but some payment-term lifetime mortgages are available from 50 and require interest payments for an agreed period. Home-reversion minimum ages and all other eligibility rules depend on the provider. Check the youngest applicant’s age and the actual product criteria.

Can we remove the younger unqualified homeowner and then apply?

Some advisers will suggest removing one of the homeowners if they are too young to qualify for a lifetime mortgage. This is possible. 

But it can be a risk and could leave the younger homeowner homeless in the future because the debt will need to be repaid as soon as the older (and now sole) homeowner dies or moves into care. It is best discussed using legal advice services.

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Can two people take it out if only one name is on the deeds?

If you bought a property alone but now live with someone else, such as a new spouse or partner, you will need to add their name to the property ownership to take out an equity release plan in both names. This can sometimes be done as part of the equity release application and should be discussed with your adviser first. 

What if more than two people own it?

Adding another owner does not automatically protect a home from care-fee assessment or sale. Deliberate deprivation of assets can be challenged, and co-ownership has legal and tax consequences; obtain specialist advice.

The number and identity of permitted borrowers and owners depend on the provider. Do not remove an owner merely to fit criteria without independent legal advice on occupancy, tax and inheritance risks.

My partner is not part of my plan – what can I do?

Adding a partner depends on the lender’s current rules, their age and circumstances, the title and any new underwriting or legal work.

There is no universal rule that a partner must already have been 55 when the original plan began. Ask the lender for its actual requirements and any fees.

Do you pay tax?

A lifetime-mortgage advance is borrowed capital rather than taxable income. Home reversion is a property sale; gifts, investments and unusual property arrangements may have other tax consequences.

Equity release can have implications on the inheritance tax owed by estate beneficiaries. This should be discussed with your financial adviser. 

Can only one person take out a loan?

It is possible for one person to take out a secured loan on a jointly owned property. However, all parties must be aware of the loan and consent to it. 

Things to consider

Equity release includes lifetime mortgages and home reversion plans. A lifetime mortgage is a loan secured on your home; a home reversion plan sells part or all of the property. Equity release reduces what may be left in your estate and can affect means-tested benefits and future care funding. A lifetime mortgage is usually repaid when the last borrower dies or moves permanently into care, subject to the plan terms. Specialist financial and independent legal advice are needed. Any existing mortgage must normally be repaid from the proceeds or other funds. Age Partnership publishes an advice fee of £1,995 payable on completion; confirm the current fee in your personalised illustration. Lender and legal fees may also apply.