Equity Release Companies – Best Options Reviewed

If you’re keen to understand more about equity release plans, you’ve come to the right place. Here, we’ll delve into the top 10 equity release companies of 2023. We’ll answer common queries like:

• How does equity release work?
• What is the best type of equity release?
• How can you spot a good equity release company?
• What are the benefits and risks of equity release?

We know that the world of equity release can feel a bit confusing. It’s a big decision to make, but don’t worry; we’re here to help. Every month, more than 7,000 people use our website to get clear, simple advice on equity release.

We’re on your side. We’ve been through the same challenges and questions ourselves. So we understand how you feel. We’re here to help you make the best decision for your future. Together, we’ll explore the world of equity release and make it easy for you to understand.

Let’s get started.

What is equity release used for?

Because equity release plans are exclusively available to people over 55, they are used to access a lump sum or drawdown facility that can help fund their retirement and improve the quality of life in their later years. Some people may just use the money to pay for everyday expenses and make their life more comfortable, while some earmark the money for home improvements, holidays, new cars and so on. 

You are allowed to give some or all of your equity release money away to friends and family, which may go towards helping them get on the property ladder themselves. You do however need to be aware of any potential inheritance tax implications when gifting money. 

This should be discussed with your financial adviser, but any financial gifts given within the seven years before you die can be subject to inheritance tax.

What is the best type of equity release?

It is not possible to say which type of equity release is the better option, as it will be determined by personal circumstances. This is why it is important to get independent financial advice before making a decision. 

Although it is not possible to say what is the best type of equity release for everyone, lifetime mortgages are notably more popular than home reversion plans. This may be due to a number of factors, not least that home reversion plans are instantly expensive compared to how a lifetime mortgage debt builds up over time.

Moreover, many lifetime mortgage providers allow the homeowner to make voluntary interest repayments to stop the debt from growing too big. 

What is the best equity release company?

Just how there is no way of saying what the best equity release plan is for everybody, there is also no way of saying what the best equity release company is for everyone. 

What the best equity release plan is for you will be based on individual circumstances and based on the time that you apply. This is why you should complete timely research when you are ready to apply. If you are unsure or apprehensive about how to research and apply to equity release companies, you may want to use credit brokerage services that do it for you. There might be a fee for these services. 

You should only consider an equity release company that is a legal lender. 

It should also be mentioned that in the event that the equity release company you’re currently dealing with goes bust, your debt will be taken over by another company, and your plan’s conditions will remain the same.

Where do you get equity release?

Equity release is predominantly provided through specific companies that offer either lifetime mortgages, home reversion plans or both. Sometimes these companies offer other financial products or even insurance policies. For example, Aviva is one equity release company in the UK that offers both, as well as other products and services. 

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What are lifetime mortgage interest rates?

The interest rates on lifetime mortgages can vary depending on your age and other factors, including your property’s projected value in the future. Average interest rates can therefore range from 2-8% with the most popular equity release companies. 

How to spot legitimate equity release companies

Legal lenders and equity release companies must be authorised and regulated by the Financial Conduct Authority. If they are, they usually state this on their website at the bottom of the page and this information is verifiable online.  

A shortcut to know if an equity release company is authorised and regulated by the FCA is to only use a lender that is a member of the Equity Release Council. 

The Equity Release Council is a group that offers voluntary membership to all financial advisors companies and all equity release companies in the UK. Membership is optional but only available to legitimate and legally-operating companies. 

There are additional reasons to choose a member of the Equity Release Council. All members must follow the rules and guidelines set down by the council, which have been written in the interest of homeowners using lifetime mortgages or home reversion schemes. You can get extra peace of mind and assurances by choosing a member of the Equity Release Council. We take a look at some of the groups’ rules and guidelines later in this guide, including the negative equity guarantee.

Or you can read our dedicated post about the Equity Release Council here. 

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Some equity release companies to consider

The interest rates you are offered will depend on your age, specifics about your home and the lender. It can be difficult to identify the best equity release companies without this information, especially if you want to compare interest rates to find the best deal. Nevertheless, there are other things to consider which make an equity release company worth considering.

Here are five current options in the UK:

#1: LV

LV are a great option if you are concerned about early repayment charges. Between 0-5 years the charge is just 5%, decreasing to 3% thereafter until after 10 years when all fees are wiped for repaying early. 

#2: More 2 Life

More to Life offers one of the most flexible plans on the market. They have some of the lowest early repayment charges and no fees will be applied for early repayment after ten years. They also allow you to downsize with no substantial fees and let homeowners add or remove names from the plan with minimum fuss. 

#3: One Family

One Family is known for providing great customer service. They also offer financial advice at a fixed price, which is somewhat rare with most companies charging a percentage of your loan. This could be advantageous if you plan to release a lot of equity. 

#4: Legal & General

Legal & General are an option for people who want to release astronomical amounts of equity on expensive property. Their equity release plans are available to provide loans up to £2 million. 

#5: Aviva

Aviva is a household UK name and has lots of positive reviews, but one thing to watch out for is their expensive early repayment charges which are at 25% at the time of writing. 

How long does it take to get equity release?

On average, it takes around eight weeks to make your application and get approved for equity release. The process can be lengthy because it involves a re-evaluation of your property, specialist equity release advice and legal services. 

What are the benefits of using an Equity Release Council?

Earlier we told you about the Equity Release Council and how their members are more appealing because they must stick to the group’s rules that have been made in your interest. Some of the additional benefits of choosing a member of the Equity Release Council are:

1. The negative equity guarantee – this is probably the most well-known benefit for choosing an Equity Release Council member, although some lenders also agree to provide a negative equity guarantee without being a member. The negative equity guarantee states that the homeowner will never have to pay any outstanding debt that is in excess of the sale proceeds of their home. So if your lifetime mortgage grows beyond the value of your home, no additional money will be requested from you or your estate. 

2. You can move home – you must be allowed to move to suitable alternative properties when desired. A suitable property would be a home that is just as easy to sell in the future so the equity release company gets its money back.

3. You cannot be evicted and forced to sell – in no normal circumstances can the equity release company evict you and sell your home early to recover the debt. This is a big concern to most people considering equity release. The only time the lender may be allowed to ask you to sell and pay the debt early is if you have lied on your application or have stopped living at the property but are hiding this fact. 

Does a lifetime mortgage affect your state pension?

When you take out a lifetime mortgage and receive a tax-free lump sum amount, your wealth instantly increases, which can make you ineligible for some means-tested state benefits. The good news is that your state pension is not means-tested and you will carry on receiving the basic state pension payments no matter how much you have in the bank.

However, pension credit payments that are given to low-income households may be affected by any new-found wealth from your lifetime mortgage. Your payments may decrease or may be stopped. And if you lose access to pension credits, you may simultaneously lose access to other benefits, including council tax reductions.

There may be ways to stop your lifetime mortgage from having a negative impact on means-tested benefits, such as choosing a drawdown lifetime mortgage so your finances don’t grow as significantly at once and might keep your new wealth below the relevant thresholds.  

Things to consider

Equity release will involve a home reversion or a lifetime mortgage, which is secured against your property and will reduce the value of your estate and impact funding long-term care. Our equity release partner, Age Partnership provides a personalised illustration to explain the full details. The money you release, plus the accrued interest is then repaid when you die or move into long-term care. Advice is required before proceeding with equity release and any existing mortgage must be repaid. Age Partnership provide initial advice for free and without obligation. Only if your case completes would Age Partnership’s advice fee of £1,895 be payable. Other lender and solicitor fees may apply.