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Equity release on properties in poor condition

poor condition house equity release

By Richard Groom • 10th August 2023 • 7 min read

Does your property’s condition meet equity release criteria?

You can be refused equity release if your property is in poor condition. But there are ways to improve the chances of your application being accepted. 

In recent years, equity release has emerged as a popular financial solution for homeowners approaching or in retirement. It’s a way to access the value tied up in your property without the need to sell or downsize. 

Equity release plans are typically aimed at homeowners with properties in good condition. However, if you have a property with issues with its condition, you may still have options open to you.

In this article, we look at a number of issues around the condition of properties and equity release:

  • How does equity release work?
  • Why does property condition matter in equity release?
  • What issues with your property’s condition may be a problem for equity release providers?
  • What can I do if a provider declines my property due to its condition?
  • Can I carry out repairs to improve my application’s chance of success?
  • Find out if your property meets equity release property criteria.

We hope this article gives you a better understanding of issues around your property’s condition and equity release. We can also help you find out more about your eligibility for equity release. Please call us on 0808 178 3055 or request a call back at a time that suits you. We will be happy to arrange a no-obligation appointment with one of our selected equity release advisers.

How does equity release work?

For homeowners aged 55+ with limited finances but equity tied up in their property, equity release can provide a lifeline. The funds released are tax-free, and the homeowner retains the right to live in their property.

You can use the funds released for almost anything. Perhaps you need home improvements, home adaptations, holidays, a new car, or even help with day-to-day living expenses. There’s also the flexibility of choosing lump sums or payment in instalments.

A lifetime mortgage is the most popular type of equity release, involving a loan that doesn’t have to be paid while you continue to live in your property. The key advantage is that there are no monthly repayments to worry about. Instead, the loan, along with accrued interest, is repaid when the property is eventually sold when you pass away or move into long-term care.

Equity release offers access to funds while allowing homeowners to continue living in their home. However, there are also potential disadvantages, many of which we have explained in our guide to the pitfalls of equity release. Be sure to weigh the benefits against the risks, seeking advice before committing to an equity release plan.

Why does property condition matter in equity release?

The condition of customers’ properties matters because of how they typically get their money back. You or your estate typically repay your equity release plan via the sale of your property when you pass away or move into long-term care

With a regular mortgage, the lender may also need to sell the property, such as after a repossession. But with typical repayment mortgages the balance owed to the lender will reduce over time. Even if the house sells at below market value, the proceeds may cover the amount due.

But with a lifetime mortgage, the amount due typically increases over time as there are no mandatory monthly repayments. Providers are especially keen to achieve market value from the sale when it’s time to repay the loan.

Providers will want to avoid accepting properties that could be difficult to sell at a market price in the future. They need your home’s future value to cover the full amount due, including interest that accrues on a lifetime mortgage. They will also want to avoid lengthy delays in the sale process.

As well as the property’s condition, there are other reasons why some properties may not be eligible for equity release.

What issues with your property’s condition may be a problem for equity release providers?

A surveyor or valuer will typically inspect your property on behalf of the equity release provider. They may look out for issues with the condition of your property, including:

  • Cracks, which may indicate structural movement or subsidence.
  • Signs of underpinning or other previous types of structural repair.
  • Evidence of damp, possibly through the use of specialist measuring equipment.
  • Japanese knotweed.
  • Asbestos.
  • Non-standard construction, such as steel or timber framing.
  • Visible issues with the condition of the roof.
  • Signs of flood damage or flood risk

The valuer/surveyor will report relevant issues to the equity release provider. The provider may request further information, for example by commissioning a damp and timber report. 

The provider may decide to refuse your application as a result of the information they receive. One provider, as an example, refuses properties that need ‘major essential works’ or ‘significant renovation or alteration’. However, the same provider will consider properties that ‘require minor works’. 

What can I do if a provider declines my property due to its condition?

Even if the provider doesn’t accept your application, all is not necessarily lost. There may be ways to still proceed with your application.

The first thing to bear in mind is that each equity release provider has their own property criteria. If one provider refuses you for equity release, another one may be willing to accept you. Also, if a provider refused your property some time ago it may now be acceptable as lending criteria does sometimes change over time.

Some lifetime mortgage providers might be more likely to cater to homeowners with properties in poor condition. They may focus more on the property’s potential and the homeowner’s financial situation rather than the current condition. They may however offer less competitive rates than other lenders.

Another option is a home reversion plan. These providers may be less concerned about property condition than lifetime mortgage lenders. With home reversion, the provider buys their share of the property (or the whole property) at below market value. This gives them some leeway when it comes to the future value of the property when it is sold to recoup their money.

Our selected advisers deal with a number of the leading equity release providers. They can therefore check your eligibility or submit applications to several providers to improve your chance of being accepted. Please call us on 0808 178 3055 or request a call back and we’ll arrange a no-obligation appointment for you.

Can I carry out repairs to improve my application’s chance of success?

This is another option if your property is declined for equity release due to issues with its condition. The equity release provider may give you the option of making the necessary repairs before resubmitting your application.

Find out if your property meets equity release property criteria

Even if your property has issues with its condition, it may still be acceptable. With multiple equity release providers each having their own criteria, you’ve nothing to lose by making an enquiry. 

Our selected advisers would be happy to help you with questions about the condition of your property. They understand the equity release market and leading providers’ criteria. To arrange a no-obligation appointment, please call 0808 178 3055, or request a call back at a time that suits you.

About Richard Groom. A writer with 20+ years’ experience across several sectors including financial services, Richard has a passion for writing clear and simple content on even the most complex of subjects. In his spare time, Richard loves exploring the hills and mountains of the UK on long walks with his faithful cocker spaniel. Follow Richard on LinkedIn

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