Why are some properties not eligible for equity release?

Page Last Updated: 15th April 2024

Properties not suitable for equity release: what are the criteria?

Written in line with our editorial policy.

Well-maintained residential properties are generally suitable for equity release. But there are some that will be declined or will need special consideration.

Repaying an equity release provider typically involves your home being sold at an unspecified future date. That’s why providers don’t accept every property and have criteria for what’s eligible.

In this guide to properties not suitable for equity release, we’ll be taking a look at the following:

• How does equity release work?
• Why do lenders refuse applications on some properties?
• Which types of property construction are not eligible for equity release?
• Are listed properties accepted for equity release?
• Can a mixed-use property qualify for equity release?
• Does spray foam insulation make properties not eligible for equity release?
• Which locations mean that a property is not eligible?
• How can a property’s condition affect its eligibility?
• Are there other property criteria for equity release eligibility?
• Find out if your property meets equity release criteria.

We hope this article gives you a better understanding of property criteria. We can of course help you find out more or explore your options for taking out an equity release plan. Please call us on 0808 178 3055 or request a call back at a time that suits you.

How does equity release work?

If you are a homeowner aged 55+ you may be able to use equity release to unlock tax-free cash from your home. Thousands of people each year use equity release to meet their financial needs.

A lifetime mortgage is the most popular type of equity release. It’s a loan that doesn’t have to be paid while you continue to live in your property. Instead of monthly repayments, the loan plus interest are paid back through the sale of your home when you pass away or move into long-term care.

You would need to use the money you release to clear any outstanding mortgage. But after that, you can spend the money just about however you wish. Popular reasons for equity release include home improvements and boosting retirement income.

How much you can release will depend on factors including your age and your property’s value. You can check your eligibility and see how much you could unlock from your home.

Why do lenders refuse applications on some properties?

There is an element of risk for equity release providers. That’s because they typically recoup the money they lend through the sale of your property. This is unlike traditional mortgages where you repay the loan through monthly repayments.

Providers therefore need the property’s value at the end of your plan to cover the amount due. They will also want to sell the property without unnecessary delays. This is why there are several types and categories of properties not suitable for equity release.

The table below shows some of the main reasons why some properties are deemed unsuitable for equity release. Do remember, each lender has its own criteria: even if your home falls into one of the categories below, that isn’t to say that one of our selected advisers won’t be able to find you a lender who will accept your home.

Read on to discover other property restrictions and why some lenders might refuse certain property types.

Which types of property construction are not eligible for equity release?

The first issue that could affect a property’s eligibility for equity release is its construction type. Among the types of properties not suitable for equity release are non-standard construction properties.

• ‘Standard’ construction. Usually means that the main materials used are ‘bricks and mortar’. It will also typically have a pitched tiled or slate roof. 
• ‘Non-standard construction’. These properties may feature timber frames, glass walls, steel frames or concrete construction. Thatch, tin, felt or rubber roofs are also generally considered non-standard. This category also includes prefabs, houseboats, static homes and caravans. 

It’s important to stress that providers each have their own criteria. One lender may refuse your property, while another may accept it.

Also, the above list of non-standard properties is quite broad. Lenders often work to more precise definitions. As an example, Canada Life accepts steel frame properties built after 31 December 2000. But they decline all ex-local authority steel frame properties. 

Please see our article ‘Can you get equity release on a non-standard property?’ for more information?

Even if your property is in a non-standard category, it may still be eligible. There are multiple equity release providers, each with their own property criteria. Please contact us to discuss your property with one of our selected advisers.

Are listed properties accepted for equity release?

Some owners of listed buildings may be unable to get equity release. This is because the rules and regulations associated with listed status can make some properties harder to sell.

Some lenders accept applications for Grade 2 and Grade C listed properties. However, they typically decline Grade 1, Grade 2 Star, Grade A and Grade B listed properties.

Can a mixed-use property qualify for equity release?

Another issue is whether your property combines the owner’s living accommodation with commercial usage, such as:

• Farms.
• Hotels.
• Guest houses.
• Takeaways and restaurants
• Bed and breakfast accommodation.
• Catteries.
• Kennels.

These properties are often declined for equity release. However, providers have recently become more flexible in this area. As with other questions around property eligibility, please contact us for more information.

Does spray foam insulation make properties not eligible for equity release?

Spray foam insulation can insulate and weatherproof properties, including in lofts. But its effect on mortgage and lifetime mortgage applications is less positive.

Lenders worry that spray foam might damage properties in the long term. This could affect their value or make them less easy to sell. It’s why properties not eligible for equity release very often include those with this insulation.

In general, a lender might accept a property if the builder installed spray foam at the time of construction. Acceptance is much less likely if you have had spray foam installed since the property was built.

But all may not be lost if a lender initially refuses your property. You may be able to submit a successful application after having the spray foam removed. This is a considerable and expensive undertaking, however. That’s why we suggest talking to an equity release adviser BEFORE having the spray foam removed.

Another option is to take out a home reversion plan rather than a lifetime mortgage. This is where you sell all or part of your home at less than market value. You then remain in your home rent-free for the rest of your life or until you move into long-term care. Providers of home reversion are more likely to accept properties with spray foam insulation.

Which locations mean that a property is not eligible?

Location is another aspect of the providers’ lending criteria. UK mainland properties will typically be acceptable as long as they meet other criteria. Some providers won’t accept properties on the Scottish Islands, Northern Ireland or the Channel Islands. However, living here doesn’t automatically rule you out. 

Lenders will also look in the finer detail of your property’s location. This includes seeing if there is anything close to your home that could affect its saleability or value. These might include shops, commercial or industrial businesses that affect residents, such as noisy pubs or clubs, or smelly fast-food restaurants. 

Proximity to certain infrastructure can also raise a red flag with equity release providers, including:

• Wind farms.
• Electricity power lines and substations.
• Railway lines.
• Mine workings or other activity that may cause subsidence or movement.
• Sewage works.
• Contaminated land.

Lenders consider each case on its individual merits. The distance between your property and the issue of concern will be a factor. So too will the precise nature of the infrastructure involved.

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

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.

How can a property’s condition affect its eligibility?

As we have seen, equity release providers prefer properties that will have sufficient value to repay the loan. A property’s condition is therefore an important part of the lending criteria.

It is likely that the provider will carry out a survey as part of the application process. Issues of concern may include damp. Cracks can also be a problem, especially those indicating structural movement or subsidence. Signs of structural repairs such as underpinning may also give providers cause for concern.

A provider may need you to carry out repairs if there are any significant issues with the property’s condition. They may then ask their valuer to re-inspect the property to confirm that the work has been done.

Some providers may agree to release money to fund the repairs, as long as it’s done within a certain timeframe. In some cases, however, they may be unable to approve you for equity release.

Did you know?

It isn’t just the type and location of your property that providers consider during the application process. Having a lot of clutter or mess in your home may see your property being refused for equity release. If the valuer is unable to move around freely and access the walls to undertake a mortgage valuation, it may be seen as an indication of poor property maintenance. 

Japanese knotweed and equity release

Japanese knotweed infestation is becoming a real problem in the UK. It can seriously affect a property’s condition by damaging its walls or foundations. As a result, it can affect the saleability and value of a property. That’s why providers may be reluctant or unable to lend against properties with an infestation.

Read more: Japanese knotweed and how it affects equity release.

Are there other property criteria for equity release eligibility?

Several other factors about your property will also be considered when you apply for equity release. These include:

• Its value: the minimum value for equity release is typically £70,000.
• Whether it is freehold or leasehold.
• How much mortgage if any is still outstanding.

Lenders each have their own approach for these and other criteria. For example, Canada Life and Pure Retirement typically do not offer equity release on any ex-local authority flats, whereas Just will consider some ex-council maisonette flats.

Likewise, some lenders insist that the property is your main residence. However, there are exceptions and some providers offer second home equity release and buy-to-let equity release plans.

Please see our guide to equity release eligibility for more information.

Find out of your property meets equity release criteria

Our selected equity release advisers would be happy to help you with any query relating to your property’s eligibility for equity release. To arrange a no-obligation appointment, please call 0808 178 3055, or request a call back at a time that suits you.

FAQs

What types of properties are unsuitable for equity release?

Some lenders deem certain properties not suitable for equity release because they have concerns about future saleability. Each lender has their own criteria, so it does differ depending on who you speak to. But generally speaking, properties not eligible for equity release might include:

• Studio or basement flats
• Flats or maisonettes in a local authority or housing authority block of more than four storeys
• Retirement properties
• Static or mobile homes
• Houseboats
• Farms
• Hotels
• Guest houses and B&Bs

What can I do if my property is refused equity release?

If you have already made an equity release application and found that your home has been deemed unsuitable for a plan, don’t lose all hope. All equity release providers have their own lending criteria, so you might find that your property type may be acceptable to a different lender. 

As specialists in their field, our selected equity release advisers will be very happy to carry out a search to help find you a different lender that will accept your property. Contact our friendly team today on 0808 178 3055, or request a call back to get started.

What are the most common reasons for a property being refused equity release?

A 2023 study by More2Life found that the most common reason for a property being refused equity release is if the home is a flood risk. Properties that were close to commercial properties, houses that needed significant repairs and single-skin construction dwellings were also top reasons for properties being rejected.