Thinking about equity release but not sure if your property qualifies – Equity Release On Non Standard Property?
We know everyone’s circumstances are different, so we work with mortgage brokers who are experts in all different mortgage subjects including Equity Release On Non Standard Property.
Why lenders won’t allow for equity release on certain properties
For lenders, it’s all about the resale further down the line and making their money back. Any factors that put the ability to re-sell into question will raise a red flag for them unless they’re an easy fix. Issues can include safety problems such as a property based in a flood zone, one that’s located near high-voltage power lines or a home that contains asbestos.
Other undesirable features include a property with commercial neighbours, one with single-skin walls or a house in an unattractive area. Some of these issues could be remedied and a broker would be able to suggest how best to address them ahead of the application process.
Properties that don’t qualify
These are the property types; in which lenders take a harder stance.
Park homes: As a mobile home situated on a protected site, the property is considered non-standard as well as being land that the property owner doesn’t own or have a leasehold for. This means the lender has nothing to secure the loan against and makes equity release on a park home not possible.
Shared Ownership properties: Lenders require a borrower to have 100% ownership of a property in order to consider equity release. In this situation, owning only a portion of your property with either a developer or local council as a co-owner means you wouldn’t be able to take equity release on a Shared Ownership property.
Commercial properties: If you use property, even just on a part-time basis, for any commercial endeavours, you’d be unable to do an equity release – farms.
This includes instances where a property is rented out on Airbnb, leased to long-term tenants or run as a hotel.
Holiday homes: One of the stipulations for equity release is that the home you’re taking the money from is your main residence. A holiday home or even a second home wouldn’t qualify under this criteria, though you can use the funds to help you purchase a second property.
Studio and basement apartments: In general, lenders tend to be averse to studio and basement flats and unfortunately that transfers through to their equity release products.
Properties with caveats
There are some properties that fall in between these two categories meaning that for some lenders equity release involving one is a hard no but for others, potentially more specialist lenders, it remains an option. If you have one of these properties, it’s best to consult an equity release advisor for advice on where to make your equity release application.
Properties of non-standard construction
If made from anything other than bricks and mortar – perhaps it has a timber or steel frame, a thatched or tin roof or is made of concrete – then a property is considered non-standard. This equates to a higher risk level for lenders making equity release on non-standard properties harder to come by.
Listed buildings: Protected by Historic England
there are certain rules and stipulations on listed buildings in order to preserve them. This could affect a future sale and makes a lender for this type of property harder to find. There are however specialist lenders offering specific equity release products for properties considered as Grade I, Grade II, or Grade II*.
Lenders are generally willing to offer equity release in this scenario as long as what’s classed as the discount period set by the local council has passed. How many other properties in the area are still owned by the local authority will also be part of the lender’s consideration.
Typically, getting equity release on a leasehold flat or house isn’t an issue as long as there’s significant time left on the lease. A minimum 75 years is the usual stipulation, but some lenders may require it to be as long as 80 or even 90 years. If the freeholder is the council, be aware that a lender could also ask that you buy the freehold to get equity release.
This isn’t usually much more difficult than equity release on a standard house, though there are fewer lenders who will consider it.
Historically, properties with an annexe, those with flat-roofs and those containing a specific form of spray foam insulation have also been harder to get equity release on.
In this situation, a broker would be able to quickly consult and advise on whether the property in question would qualify for an equity release arrangement.
If it falls into a grey area, they can then advise on how to mitigate against any risk lenders may see and recommend a lender that has a track record of offering equity release on such properties.
They’d also be able to:
Guide you through the application process for equity release.
Offer a calculation on what they believe you could feasibly ask to borrow.
Connect you with specialist lenders who can’t be accessed by the general public and may be more willing to offer lower interest rates.
Other factors lenders consider
Lenders won’t only be looking at the property type when they assess your eligibility for equity release. They’ll also want to know:
That you own the property in question – If you co-own it with a friend, family member, local council or developer, equity release wouldn’t usually be an option you could pursue.
That you live in the UK for over 6 months of the year
Many retirees may choose to travel and spend time abroad. Even if you’re a UK citizen, to qualify for equity release, lenders will want proof you spend a significant amount of time in the country to qualify.
The current value of the property
A full valuation will be conducted by a surveyor sent by the lender to determine how much it’s worth. If a property comes in lower than £70,000 you may struggle to find a lender willing to offer an equity release mortgage and if over £1 million, a lender may ask for additional underwriting checks.
The state of the property
A lender will also want to see that the property is in what they class as “sellable condition.” This is because they’ll need to sell it at the end of the term and if it isn’t of a certain standard that will make it harder to do so.
As with any mortgage application, lenders will also be factoring in a borrower’s age, income if still working, the amount looking to be released as well as any future.
Differing from the traditional mortgage application process,
Obtaining an equity release mortgage can be complex which is why it’s worth having an expert in your corner. As a specialist in the equity release market, they’ll be able to assess whether your property is eligible for such a loan, recommend which lender is likely to give you the best deal and help navigate the application process with you.
Can you get equity release on a prefab house?
A prefabricated house is one that’s usually made elsewhere and then assembled on-site at a later date. Such a property is considered non-standard by a lender. This means it will be harder to find a lender willing to offer equity release on such a house, but it isn’t out of the question =PRC.
Can you get equity release on a Grade 2 listed building?
Yes. There will be fewer lenders willing to do so on this type of property given it may be harder to sell in the future, but it is possible. A broker would be able to recommend a specialist lender for listed buildings.
If you’re over 55 and own your own property, equity release can help you unlock cash from your home that can be used for many purposes.
Paying off equity release early – Equity Release On Non Standard Property
If you have an equity release plan but don’t want to be stuck with a potentially hefty debt for the rest of your life, there’s a solution.