Can I use equity release if I own a leasehold property? 

Equity release can be useful if you’re looking to unlock some of the value of your home. 

There are different equity release products to consider, as well as various pros and cons.

If you have a leasehold property, you may wonder if you can use equity release.

The good news is you can get equity release for a leasehold property, but there are many important factors you need to consider first.

Can I use equity release if I have a leasehold property?

Yes, you can get equity release with a leasehold property.

However, you should seek a qualified mortgage broker to determine if it's right for you and what conditions you need to meet to be eligible to release equity.

What is equity release? 

Equity release allows you to access cash that is tied up in your property while still living there. 

You can access your money as a lump sum, multiple smaller amounts, or both. 

However, you must meet certain criteria for equity release, which we’ll explore in more detail later.  

The money you borrow via equity release (plus any interest if you choose to roll this up) is repaid by selling your home when you either move into long-term care or pass away. 

If you decide on equity release, make sure you choose a provider with a ‘no negative equity guarantee’ so your debt won’t be more than the sale value of your property.  

What is a leasehold property? 

If you have a leasehold property, you own it for the length of your lease agreement with the freeholder, who owns the land. 

The freeholder will own the property when your lease expires unless you extend it.  

In contrast, with a freehold property, you own both the land and the property. 

What types of equity release can you use for leasehold properties? 

There are two products you can use for equity release with a leasehold property, which are: 

• Lifetime mortgage: This is the most popular equity release product. You borrow a lump sum, which is repaid when your home is sold, or you go into long-term care. You can choose to pay the interest off during the term or let it roll up. You may also be able to ring-fence some of the value of your property as an inheritance.  
• Home reversion: You sell part or all of your home to your equity release provider in exchange for a lump sum or smaller, regular payments. The property is then sold when you die or go into long-term care. Similar to a lifetime mortgage, you can continue to live in your home. You can protect some of the value of your property for inheritance, but this will remain unchanged even if the value changes (unless you release more equity). 

You should ideally seek professional advice from an expert, such as a mortgage broker, to decide whether equity release is right for you.  

Who is eligible for equity release? 

Not everyone is eligible for equity release, and it’s not always the best option. 

To be eligible for equity release, you usually need: 

• To be at least 55 years old for a lifetime mortgage or 60 for a home reversion scheme. 
• To own property in the UK (or own a large share of it), which must be your primary residence and worth a certain amount (usually over £70,000). The property must also be in good condition. If you don’t own your home entirely, you’ll have to pay off the rest of your mortgage. 

You may need to borrow a minimum amount for equity release. If you have dependents, they’ll have to sign a waiver saying they understand they can’t continue living at their home if you die or go into long-term care.  

It’s a good idea to get legal advice if you’re asked to sign a waiver.  

What are the pros and cons of equity release? 

As with most financial decisions, there are many pros and cons to consider. 

It’s always recommended that you get professional advice about whether equity release is right for your circumstances or if any alternatives are worth considering. 

The advantages of equity release 

• You can access tax-free money and can live in your home until you die or move into long-term care. 
• You may be able to move into another property and may benefit from a rise in your home’s value. 
• You don’t have any monthly repayments if you let the interest roll up.  

The disadvantages of equity release 

• As equity release affects the value of your estate, you may end up having less to pass down to your beneficiaries.  
• If you choose a home reversion scheme, you’ll no longer fully own your property.  
• You may have to pay higher interest rates than a traditional mortgage, and the amount you owe could rise substantially if you let interest roll up.  
• You may lose access to certain means-tested benefits, such as Pension Credit and Universal Credit, if the equity released makes you ineligible. 
• You could be asked to spend more on care at home if it’s funded partially or fully by your local council. 

What factors impact getting equity release on a leasehold property? 

There are a few factors equity release providers will consider before releasing equity, including:

• How long is left on your lease: Equity release providers usually want between 70 and 80 years left on your lease – anything less than 70 years is seen as a higher risk. The more years you have on your lease, the more plans you can choose from with better terms and rates.  
• Minimum property value: Equity release providers usually want a minimum property value of £70,000.  
• Your age: You must be at least 55 or 60 years old to be eligible, depending on the product you choose.  

What other factors do equity release providers consider? 

Your age, the value of your home, and your lease are not the only things an equity release provider will consider.  

For example, they will consider the condition and location of your home. If it’s in good condition and in a desirable location, it’s more likely to keep or even increase in value.  

They’ll also look at your financial situation and income, as well as your credit score.  

It’s worth talking to a mortgage broker who can help you decide if equity release is right for you and find the right deal for your leasehold property.  

Unbiased can quickly connect you to a qualified mortgage broker.  

Can you use equity release to extend your lease for a leasehold property? 

Some equity release providers may allow you to use some of the money released to extend your lease if you don’t have enough years left on it to be eligible. 

However, this can be expensive and take a while to do. 

The cost varies based on how many years are left on your lease, ground rent, the value of your home, and any other provisions in your leasehold agreement.  

You’ll need to pay legal fees for a solicitor, a valuation report from a surveyor, freeholder costs, Land Registry fees, and a premium for the freeholder for the lease extension.  

It’ll likely set you back at least a few thousand pounds and will cost more if you have a lower number of years left on your lease. 

If you want to extend your lease, you should inform the freeholder and ask if they want to negotiate. 

As the process can be complex and can take up to a year, you should appoint a solicitor and valuation surveyor to guide you through it.  

What are the alternatives to equity release? 

Equity release isn’t right for everyone, but there are alternatives to consider, including: 

• Downsizing: You could sell your home and move to a smaller property to free up money. 
• Consider a retirement interest-only mortgage: With a retirement interest-only mortgage, you can borrow money, which is paid off when you die, sell your home or go into long-term care – you only have to pay interest payments on a monthly basis.  
• Remortgage: You could remortgage to release money from your home, but this will increase your loan term, costing you more. You could also increase your mortgage term to lower your monthly repayments, but this will cost you more in interest.  
• Renting out a spare room: Renting a spare room can help you bring in more money, but make sure you check your mortgage terms and do your research.  
• Working part-time: You could choose to work part-time to bring in some extra money.  
• Borrow money another way: If you need to borrow a small amount, you could use a personal loan or a 0% credit card but beware of the interest rates and 0% periods.  

Need financial advice? 

Unbiased can quickly connect you to a qualified mortgage broker who can help you decide if equity release is suitable for your needs and circumstances and help you find the right deal.