Equity release on properties at risk of flooding

Does a risk of flooding hinder an equity release application?

Properties at risk of flooding can cause problems in an equity release application. However, having a property in a flood risk area doesn’t necessarily mean that you will struggle to find an equity release plan.

To help explore the impact that flooding risks can have on your home’s eligibility, we’ll be discussing how receptive providers are to arranging equity release on homes at risk of flooding, together with the following:

• What is equity release?
• Why is flooding a concern for lenders?
• What damage can flooding cause?
• Can I get equity release if property has flooded in the past?
• What do equity release lenders say about homes at risk of flooding?
• Talk to an equity release adviser for further help. 

We hope the following information helps you as you explore your equity release options. To speak to one of our selected advisers about which providers will be more likely to accept your application if you have had previous flooding to your home, call our friendly team on 0800 096 2215, or request a call back and we’ll arrange an appointment. 

What is equity release?

Before we get into the impact of flooding risks on equity release applications, it’s worth understanding how an equity release plan works. 

Equity release is a financial product aimed at later life homeowners who want to unlock some of their property wealth without having to make any mandatory monthly repayments. The most popular form of equity release is a lifetime mortgage and is available to homeowners aged 55+. 

After releasing a percentage of your home’s value, you’ll retain full ownership of your property. The loan plus interest is typically paid back through the sale of your home when you pass away or move into permanent long-term care.

Not 55 yet? Read our article: “How to unlock equity if you are under 55.”

Want to know how much you could unlock from your home? Check your eligibility and get your free quote now!

Why is flooding a concern for lenders?

Natural features can impact whether a lender will accept a mortgage or equity release application. For example, being on or near a flood area can rule a property out. When enquiring about mortgages or equity release, you will need to know if your property is in a flood zone. Your lender will also consider whether there has been recent flooding locally.

So why does flooding affect an equity release application? It’s to do with future-proofing the sale of your home one day. 

You or your estate typically repays your equity release loan and the accrued interest when you pass away or move into long-term care. Your provider will recoup their money through the sale of your property. That’s why they won’t want to lend on a property that could be difficult to sell in the future.

Ultimately, lenders need your home’s value to remain high enough to cover the full amount due. They will also want to be able to sell the property without unnecessary delays. This is why there are some types of properties that may not be suitable for equity release, including some with a history or a risk of flooding.

Different lenders have different criteria about what may affect an equity release application. Our selected equity release advisers will do everything they can to find a lender who accepts your property. Please call us on 0800 096 2215 or request a call back and we’ll arrange a no-obligation appointment for you.

What damage can flooding cause?

In addition to your home being potentially more difficult to sell one day if it has a history of flooding, the risk of future damage to your home can be significant. Some flooding risks are so severe, such as structural issues, that your house value could potentially fall dramatically if flooding struck again.

Even if you haven’t had any severe damage to your home previously, if your home is at risk of flooding then any of the following could potentially happen if flooding occurs again:

Structural issues. Flood water can erode the soil around your foundations, leading to cracks and leaks around your property. In severe cases of flooding, your foundations may even wash away, causing severe structural issues.

Damage to walls, ceilings, and floors. Wet plaster may have to be removed as water damage may cause wood rot in your walls and ceilings, which can result in structural damage.

Mould. Mould and mildew can grow within a day or two of flooding taking place in your home. This can cause serious health problems for you and your family. 

Damage to electrical systems. If floodwater reaches your electrical wiring, it can pose a fire hazard to your property.

Can affect plumbing systems. Flooding in your home can cause significant issues with your plumbing system, leading to further flooding around your property.

Can I get equity release if my property has flooded in the past?

You may well be able to arrange equity release if your property has experienced flooding – though how long ago it took place can make a big difference to your application. 

Typically, if it has been more than five years since any flooding has taken place on your property then you are more likely to find a lender who will accept your application.

Your home will also need to be in a good state of repair. It might be wise to ensure any water damage to your home is repaired before you make your application.

Remember, equity release plans today come with a strict ‘no-negative equity’ guarantee, which means that whatever happens, you will never owe more than the value of your home. This helps prevent any equity release horror stories from happening in the future.

This means that if a lender agrees to equity release on a home at risk of flooding, they are taking on the risk of that house experiencing water damage in the future and falling in value. Naturally, lenders need to practise a degree of caution when deciding which properties to accept.

What do equity release lenders say about homes at risk of flooding?

Some properties may automatically be a ‘no’ for equity release – unfortunately a history of flooding can make it more difficult to find a provider who will accept you.

There are exceptions though and it ultimately comes down to the lender’s criteria. Here are some examples of what different equity release providers say about homes at risk of flooding.

• Aviva does not have a blanket ‘no’ on any specific flooding risks. However, they ask your adviser to check with them if you live in a flood risk area. So applications to this lender will be considered on an individual basis.
• Just say they will consider “properties in significant risk of flooding areas with active flood management mitigations in place and acceptable building insurance in place to cover flood risk on acceptable commercial terms.” Just does however give an automatic ‘no’ to “properties – including any outbuildings or garden land – that have flooded in the last five years, are threatened by coastal erosion or are in a significant risk of flooding area with no active flood mitigation management in place.”
• Canada Life will not accept any properties known to have flooded in the past five years.

Talk to an equity release adviser for further help 

The best way to find out if you and your home could be eligible for equity release is to speak to an equity release specialist who can search for a plan that offers what you need. 

Our selected advisers will be able to compare plan features and providers on your behalf and help you understand which type of plan will work best for you. 

Please call 0800 096 2215, or request a call back for a time that suits you. Alternatively, check your eligibility and get an initial indication of how much tax-free cash you could release.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn