What is ‘loan to value’?
The loan to value (LTV) is the relationship between how much tax-free cash you can release and the value of your property. For example, if your property is worth £100,000 and the equity release provider offers you a maximum LTV of 30%, you can release £30,000 – either through a lump sum lifetime mortgage or over time through a drawdown lifetime mortgage. The rebound in UK property prices therefore has a potential impact on the amount you might be able to release.
Let’s take the example of a couple in their seventies with a property that was valued at £300,000 a year ago. If they were offered a maximum release at an LTV of 30%, they could have released £90,000.
Based on the average 4.7% annual house price increase reported by Halifax, the property would now be worth £314,100. With the same LTV of 30% available, the couple could now release £94,230.
This is just a simplified example based on the UK average house price increase. A number of factors affect how much you will be able to release, including your age and your own property’s value, type and location.
Please note also that lenders typically offer a lower equity release interest rate for smaller LTVs. You may therefore be able to reduce the interest rate by releasing less than the maximum available to you.
To find out how much you might be able to release, use our instant-result equity release calculator, or call us to arrange tailored quotations from leading providers. Our selected advisers will also help you assess the suitability of equity release and the different options available. Call us on 0808 178 3055 or request a call back and we’ll arrange an appointment for you.