Equity release on properties at risk of flooding

Page last reviewed: 22nd October 2024 ︱Next review date: 22nd October 2025

Does a risk of flooding hinder an equity release application?

Written in line with our editorial policy.

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?
• How common is flooding in the UK?
• 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 0808 178 3055, 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.

Flood zones are areas that the Environment Agency designates as being at risk of flooding. These zones are categorised by the likelihood of flooding, with Zone 1 being the lowest risk and Zones 2 and 3 representing higher risks.

By understanding your property’s risk level, you and your adviser can explore your options and potentially find lenders willing to accept the increased flood risk, depending on the property’s specific circumstances.

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.

According to Pure Retirement, a property’s location in a flood zone can significantly impact a lifetime mortgage application, as such areas pose a higher risk for future property damage or devaluation. However, the lender also points out that it focuses “on overall risk rather than fine-grained distinctions between subzones”. 

So, while the UK’s flood zones are relevant, Pure Retirement work closely with surveyors and flood risk experts to make a fair evaluation and assess a property against its range of products and lending criteria.

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 0808 178 3055 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.

How common is flooding in the UK?

Flooding is an increasing concern across the UK, as climate change leads to more frequent and severe weather events. According to the Environment Agency, around 5.2 million properties in England alone are at risk of flooding, including from surface water, river and coastal flooding. This represents roughly 1 in 6 homes, highlighting the significance of the issue. 

Additionally, data from the Met Office shows that 2011-2020 was 9% wetter than 1961-1990. From the start of observational records in 1862, six of the ten wettest years across the UK have occurred since 1998, further contributing to flooding risks.

For instance, in early 2020, Storms Ciara, Dennis and Jorge caused widespread flooding, impacting over 3,100 homes and businesses across the country. The Met Office confirmed it was the wettest February on record. 

According to the Met Office, the frequency of such extreme weather events is expected to increase, placing even more properties at risk.

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 gives 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.
• Canada Life will not accept any properties known to have flooded in the past five years.
• Legal & General will not accept any properties known to have flooded in the past five years, or where its flood risk data indicates a higher risk of flooding.
• Pure Retirement say that several of their lifetime mortgage products accept properties in flood zone 1 provided the property hasn’t flooded in the last five years. Their Heritage and Sovereign plans will also consider flood zones 2 and 3 provided there has been no flooding in the last five years, with some additional conditions that vary between plans. With the Heritage plan for example, you must have proper flood defences in place and no loadings in insurance.

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 0808 178 3055, 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