Can I Release Equity To Purchase A Second Home?

The age-old advice to put your money into bricks and mortar is generally good advice – but just because you own your home, doesn’t mean that you have the capital free to put a deposit down on a second property.

The great news is that owning your property could be the gateway that you need when acquiring a second home.

In this guide we take a deep dive into the options available to homeowners that want to buy a second home.

In this article

The UK Property Market at a Glance
Releasing Equity to Buy Another Property
The Process of Buying a Second Home with Equity Release
Associated Costs to Consider
Is Equity Release a Good Option for Me?

The UK Property Market at a Glance

In 2021 alone, UK property prices rose by more than 9.8%. 

For homeowners this is fantastic news as the amount of equity you hold increases as house prices increase.

With such big increases in such a short space of time, property owners are finding that their homes are their largest asset.
Unfortunately, homes aren’t considered a cash asset, and to realise their value, the cash needs to be freed up, either by borrowing against the property or equity release.

Releasing Equity to Buy Another Property

One of the primary reasons that you might want to use the cash locked up in your homes is to buy a second property.

A second property can serve all kinds of purposes.

  • As a Buy to Let
  • Holiday Homes
  • For Housing Dependents
  • Overseas Property
  • Second Homes

Currently there are two ways you can free up cash in order to put a deposit down on a second property – remortgaging the existing property or by using equity release.

Remortgaging to Buy a Second Home

Remortgaging can be a good option for certain people, but there are a number of criteria that can prove tricky. The key issue many buyers face when remortgaging for a second home is eligibility.

There are all sorts of hurdles to jump when it comes to remortgaging for a second home including age, affordability, and credit profile.

  • Age – lenders have maximum ages they will allow you to borrow to, this means that if you’re approaching retirement age, you might not get the mortgage term required to make the loan affordable.
  • Affordability – you will need to demonstrate to the lender that you can pay back the amount you’re remortgaging for – alongside any new mortgage on the second property.
  • Credit Profile – Your credit profile and history could impact whether you’re able to remortgage. It could also impact the interest rate offered by a lender in some cases.

While remortgaging is initially attractive, many find themselves in a position where they’re either unable to borrow the money or the financing is too expensive to make it feasible.

Understanding Second Home Mortgages

Once you have remortgaged your property, unless there is a substantial amount of equity, you will need a second mortgage to afford a second property.

The two most common types of mortgage that lenders offer on second properties are a Buy to Let mortgage (interest-only) and a repayment mortgage.


To qualify for a Buy to Let mortgage you will need a larger deposit compared to a repayment mortgage and you will need to demonstrate that the rental income is greater than the monthly interest payment.

If you’re not thinking of renting out the second property, a repayment mortgage is applicable, and you will need to factor in the monthly costs of the existing remortgage alongside the costs of the new mortgage.

Equity Release

Equity release is a different product to a traditional remortgage. 

It is particularly attractive if you’re older and unable to meet remortgage criteria due to your age or income (pensions etc.).

Equity release is available to homeowners over the age of 55 and is sometimes called a ‘Lifetime Mortgage’. 

It allows you to take out some of the money tied up in your property. The equity released is tax-free and paid as a lump sum. 

An equity release differs significantly to a standard mortgage (despite the Lifetime Mortgage moniker) and there are no mandatory monthly payments to make.

This is a great advantage if you’re currently drawing on your pension as your income won’t be affected by an equity release.

There is still an interest payment, but this is rolled up and is paid for by the sale of the property when you pass away (or if you have to move into a long-term care setting). If you’re looking to reduce interest owed on the equity release, you can make interest payments as well in most cases.

Most Equity Release lenders will also allow you to make overpayments of typically up to 10% of the outstanding balance per annum without incurring early repayment charges. 

The Process of Buying a Second Home with Equity Release

Releasing equity to buy another property can be confusing, especially when you factor in some of the costs associated with owning a second property.

You will need to discuss your circumstances with an equity release advisor who will be able to give bespoke advice about equity release.

Calculating the Amount of Equity in a Property

It is straightforward to work out how much equity you have. If you own the property outright the amount of equity you have will be 100%.

If there is a mortgage on the property – the equity will be the property value minus the total amount outstanding on the mortgage.

For example, a £330,000 property with a £140,000 mortgage would have £190,000 in equity.

Releasing Equity to Buy Second Home – Eligibility

Equity release companies prefer to release equity from homes that are owned outright, although there are circumstances where equity release will be possible on a mortgaged property.

Typically, this is when the outstanding mortgage on the property is small in relation to the amount of equity you have.

An equity release advisor will be able to outline whether you’re eligible for releasing equity to buy a second home.

Purchasing the Second Home

Ideally, you will be looking to purchase a second property that is valued less than the amount of equity they will release.

If the second property is valued higher than the amount of equity being released, you should consult a mortgage adviser about the best way to proceed.

As mentioned above, mortgages can be difficult to obtain if a borrower is 55 years of age or older. A mortgage term could take an older borrower beyond retirement age and a lender must factor in whether your pension payments will cover the monthly repayment of the loan.

Lenders also operate maximum ages on mortgages with many capping the term at 70 years old (and a few going beyond that). The shorter the term on a mortgage, the higher the monthly repayment.

Associated Costs to Consider

Alongside the complexities of getting a mortgage at an older age, there are also a number of additional costs to consider when you’re buying a second property.

Stamp Duty

A big financial barrier when buying a second home in the UK is stamp duty. This is even more so when buying a property that doesn’t serve as a main residence. You will need to pay an additional 3% on top of any stamp duty that is already owed for second homes.

Fortunately, the government provides an easy calculator that you can use to determine your stamp duty liability.

Purchasing a second property with a value of £250,000 will attract £10,000 in stamp duty. This is a £7,500 increase on the £2,500 typically charged for a primary residence property with the value of £250,000.

Property Survey

Buying property in the UK is conducted under the principle of caveat emptor, commonly known as ‘buyer beware.’ This means that when buying a property in the UK it is your responsibility to verify the property you’re buying is suitable for your needs.

Because caveat emptor is all encompassing, it is prudent for you to contract with a surveyor to check the property for defects or issues that could cause problems down the line.

Property surveys range in cost from a basic survey at around £300 to a comprehensive survey at around £1400. 

The general rule with surveys is that ‘you get what you pay for’ and paying for a comprehensive survey will be more thorough and highlight more problem areas if there are any.

Legal Fees

Land Registry now makes it straightforward for buyers and sellers to transfer deeds electronically.

But you will need to make sure that everything contained in the deeds is correct and that any covenants are highlighted to you before you exchange contracts. 

Conveyancers facilitate the property sale, and you will need to hire one to exchange contracts and complete a property purchase. 

A conveyancer will also deal with your stamp duty liability as well, ensuring it is all paid before the purchase is completed. Conveyancing fees vary greatly depending on the property value, the type of property, and where it is in the UK.

If you’re using a mortgage product to purchase the second property, a lender will normally nominate an approved conveyancer. If you’re not using a mortgage product, you will have to seek out your own conveyancer.

Second Home Costs Overview

Buying property in the UK isn’t a cheap endeavour and there are costs associated with even the most bog-standard purchase. 

When buying a second home in the UK, the cost of purchasing is inflated by stamp duty. This difference in cost can be extremely off-putting as the additional 3% is significant in most cases.

Is Equity Release a Good Option for Me?

There are a number of things you should consider when deciding if equity release is a good option. This is especially true if the purpose is releasing equity to buy another property. You should seek advice from an independent, whole-of-market mortgage broker, such as Boon Brokers, to establish whether Equity Release is suitable for your situation. 

Benefits of Releasing Equity to Buy Second Home

Many older buyers find themselves struggling to obtain a suitable mortgage, or worse still are shut out of the mortgage market completely due to age, income, and affordability.

Releasing equity to buy another property is particularly good if the second property is of less value than the amount of equity that is being released.

help to buy

It also gives older buyers a financial alternative to the often-problematic traditional mortgage market.

Drawbacks of Equity Release

At time of writing (2022) the property market is buoyant and house prices have been rising rapidly since 2004 according to Halifax. But past track record isn’t an indicator of future success, and the market could turn.

Releasing equity in a booming market means that you get more ‘bang for your buck’ but if the market turns, you could find that negative equity impacts the amount that is repaid eventually.

Many equity release providers offer you a ‘no negative equity’ guarantee which offers those releasing equity more protection in such a scenario – but this doesn’t mean that costs won’t completely erode the value of your home.

If you’re looking to leave money to family or friends in the event of your death, releasing equity should be treated with caution as there may be no money left in the property when the estate is settled, and the loan is repaid.

Drawbacks Aside from Equity Release

Buying a second property is almost always a costly endeavour for one reason or another. This is true whether you purchase outright from savings, use a mortgage product or equity release.


When buying a second home, you should carefully consider the totality of the circumstances and if you’re considering using equity release, you will need to consult an equity release adviser.

Equity release advisers are qualified to give expert advice if you’re looking to free up cash in your property. They will ensure you get the best equity release deal.

You will also need legal advice when completing an equity release, something an equity release adviser will provide more information about.

Contact Boon Brokers to discuss your equity release options now.

Boon Brokers are a fee-free, whole-of-market mortgage, insurance and equity release brokerage. Feel free to contact us for a free consultation. 

15 Red Flags That Could Ruin Your Mortgage Application [2022 Study]

When people are thinking about applying for a mortgage in the near future, they are usually aware that factors such as income and credit history will impact their application but not many are aware of how their bank activity could affect a mortgage application. 

In this article

How many people are aware of the fact that their bank activity may be a red flag?
How does bank activity affect mortgage applications?
The risk of gambling on your bank statements
What happens if I hide things on my bank statement?
Full data breakdown
Full demographic breakdown
What to do if I have red flags on my bank statement?

How many people are aware of the fact some of their bank activity may be a red flag?

A recent independent survey conducted by Boon Brokers revealed that 83% of people are unaware of certain bank activity that will be a “red flag” during a mortgage application. 

Over 2,800 respondents were given a list of potential red flags and were asked which of them they thought could impact their mortgage application.

The findings showed that there is a general lack of awareness of how certain bank activities can affect mortgage applications.

How does bank activity affect mortgage applications?

When lenders are reviewing applications, some lenders will analyse bank account transactions to check for any signs that there are potential issues that could affect the applicant’s ability to repay their mortgage.

For example, transactions for betting companies can be a red flag for lenders, although infrequent, small deposits are less likely to affect the application.

Large and regular deposits into gambling accounts or at casinos can be deemed to be a risk though. This is because if there are signs of a gambling addiction, this could prevent someone from repaying their mortgage.

Gerard Boon, partner at Boon Brokers gives some further insight into this: 

“Not all lenders will scrutinise your bank statements, but if you’re seen as a higher risk, perhaps with a smaller deposit or you’re self-employed, lenders are more likely to take a closer look.

Anything which shows the account holder may struggle with debt or to control their spending is likely to create questions.”

The risk of gambling on your bank statements

Many mortgage applicants are oblivious to the fact that what they see as a harmless and affordable hobby could prevent them from getting their mortgage approved.

In the survey, 58% of respondents were unaware that their gambling transactions could cause an issue for a mortgage application.

One of the other concerning discoveries was that 72% said they were not aware that having numerous payments with no clear reference would also be a red flag.

For lenders, having transactions without any information to indicate what the money is spent on is a concern and could suggest that they are trying to hide what the money is used for.

What happens if I hide things on my bank statement?

It is never a good idea to hide financial transactions from a mortgage lender, as this could hold up your mortgage application.

However, the survey showed that a small percentage of people would consider hiding things on their bank statement. 

Gerard Boon explains why this is not recommended:

“Our research did reveal that the equivalent of 1.38 million current homeowners (four percent) would consider trying to hide things on their bank statement to make sure their mortgage got approved – which we definitely would not recommend! If you’re planning on applying for a mortgage or remortgage in the next six months, it’s worth being aware of what may lead to further investigations – even though in many cases it’s totally harmless and easily explained. 

You don’t want any unnecessary delays to your application which could stop you getting the property you want. As our research revealed, not all the things that could cause an issue are automatically that obvious – gambling, pay day loans and being in an overdraft are the ones people are more aware of, but there are others too.”

Full data breakdown 

These were the red flags listed and the headline results from the survey:

🎰 Gambling

Only 58% of people were aware that regular gambling transactions could be an issue. Interestingly, the people aged 65+ were less aware than respondents in the lower age categories.

💳 Taking out a recent credit card

78% did not realise that taking out a credit card prior to applying for a mortgage would have an impact.

Lenders are wary of people taking out credit or loans and having more debt to repay.

Again, the data showed that younger people had more awareness, with 34.8% of 18-24s thinking a credit card would affect the application, compared to just 15.8% of respondents aged 65+.

🧾  Having lots of PayPal transactions

Just a tenth of the people we surveyed thought that PayPal transactions could be a problem.

The concern with PayPal transactions is that they are not always clearly referenced, so they are deemed as a red flag for many lenders.

🔢   Playing bingo

Just under 13% of people surveyed thought that playing bingo could affect a mortgage application.

Although playing bingo occasionally for small amounts of money would not typically be a red flag, regular and large amounts spent on playing bingo could set alarm bells ringing for lenders.

More women (13.6%) were aware that bingo could be a red flag compared to men (11.9%).

Having multiple payments into an account with no clear reference

72% of surveyed people did not know that payments without clear references were an issue.

The youngest age category had most awareness again. Lenders want to know what money is being spent on, so having no reference on payments is a red flag.

💳  Store cards

18% of respondents were not aware that store cards would affect their mortgage application.

Having multiple store cards and especially ones with high interest rates on them, will often be a concern for lenders.

📙   Catalogue payments

Only 13% of the people surveyed thought that ‘buy now, pay later’ options could be a red flag.

Lenders will be worried that the applicant cannot afford to pay for their purchases upfront due to lack of available money.

Frequent payments to unknown third parties such as family and friends

18% did not realise that unknown payments could make the lender wary.

It is always better to write a description such as ‘birthday present’ to indicate what the payment is for.

🤭 Payments with joke/rude references

Just 1 in 10 of the people surveyed expected references with joke or rude words in would be an issue.

What people think of as just a bit of fun between friends could make the lender suspicious about the transaction.

💍 Payments for luxury items

Only 9% thought that paying for luxury items could cause a problem.

Most lenders would not be concerned about purchases that are within affordability but regular luxury items while being in debt would be a concern.

💷 Large cash deposits/Cash-in-hand work

Just 1 in 5 people expected a large cash deposit could affect a mortgage application.

Lenders prefer to see steady, predictable income rather than random cash deposits.

👨👩👦👦 Working for a family business

There was very little awareness that working for a family business could be a red flag, with only 3% thinking it could be an issue with lenders.

The concern would be that a family business could employ someone for the sole purpose of getting a mortgage approved.

📉 Being in your overdraft at the end of every month

Almost 60% of people do not realise that going into an overdraft, even an agreed one, would affect an application.

Lenders see this as a sign that applicants cannot afford to live off their monthly income.

💷 Pay day loans

Despite being the red flag that most people were aware of, 55% of people were still not aware that taking out a pay day loan would be a problem.

Pay day loans have very high interest rates and are seen as a last financial resort, so lenders are very wary of these.

Demographic summary

The survey respondents provided their age, gender and location, so that we could review any key variances. The high-level observations were as follows:


The survey results split the data by city, which revealed a large variance of awareness levels, depending on what part of the UK people were in. Overall, people from Leeds had the greatest awareness about the red flags, while in Norwich, Manchester and Cardiff there was less awareness.


The youngest age group (18-24) displayed the highest amount of awareness for most of the red flags, with the age 65+ category revealed to have the lowest awareness about the red flags that impact mortgage applications. 


There were not any large differences between awareness for male and female respondents, with similar scores for awareness across the majority of the red flags listed.

What to do if you have any of these red flags on your bank records?

Typically, brokers will look at up to 3 months of your bank statements when they review your application, although some may request more than this.

Therefore, it is a good idea to try to practice “good” financial behaviour in the months leading up to your mortgage application.

In the same way that it is beneficial to improve your credit score in the months leading up to submitting a mortgage application, it will also work in your favour to make sure that there are no red flags on your bank statements.

Changing your spending habits and avoiding taking out any types of loans, store cards or credit cards prior to your application will boost your chances of having the application approved.

If you are transferring money to people, you should always give the transaction a clear reference so that the lender knows what you are spending the money on.

If you are self-employed, or have another type of job that involves cash-in-hand, in the lead up to your application, you should ask for payments to be made into your bank account instead of as cash.

Splurging out on any unnecessary items that could be considered as luxury items should be avoided until after your application goes through, to give you a better chance of getting your mortgage approved.

You should try to avoid using your overdraft, as even if you have an agreed overdraft with your bank, regularly going into your overdraft will count against you.

For most lenders, the biggest red flag will be regular gambling with large sums of money, as lenders could consider this as an indication of an addiction to gambling that could prevent the applicant from being able to pay their monthly mortgage repayments.

Therefore, you should keep gambling to a minimum, or avoid it completely to make sure you have the best chance of getting the mortgage approved.

As well as trying to avoid any of the red flags listed above from appearing on your bank statements, you should look at all the other ways you can boost the likelihood of having your mortgage approved. 

This includes:

  • Checking your credit score and making improvements where possible. Making sure that you make all of your loan and bill payments on time should boost your credit rating.
  • Reduce debt as much as you can. If you have outstanding loans or credit cards, getting as much of the balance paid off as possible will be beneficial to your application decision.
  • Save up as much deposit as possible, as the more deposit you have, the less risk you will pose to the lender. You can also get mortgage deals with lower interest rates if you have a better LTV (loan-to-value) ratio.

If you are considering applying for a mortgage in the future, even if it is likely to be in a few years’ time, you should try to improve your spending habits so that there are no red flags appearing on your bank statement. 

Mortgage in principle

While there are some lenders who will not scrutinise your spending habits as much as others, when you have your heart set on a property, you do not want to miss out on it through unnecessary delays or a declined mortgage application.

Boon Brokers can help you to find the right lender to suit your financial situation, so even if you think some of these red flags might be identified, we can find lenders who will still approve your mortgage.

Contact Boon Brokers today if you would like us to help you find the best mortgage deal for your specific circumstances.

Equity Release For Buy To Let Mortgage

Equity Release is quite a popular finance option for people over the age of 55 who want to access the value in their property through a Lifetime Mortgage product.

Equity Release for buy to let properties is less common but there are several scenarios where it can be beneficial. 

To start up in property investment or to expand a property portfolio, it is not always necessary to have money readily available to buy properties outright.

In this article

What is buy to let Equity Release?
Remortgaging a buy to let property to release equity
Alternative ways to release equity
Lifetime mortgage on a buy to let property
Lifetime mortgage on a buy to let eligibility

There are a few finance options for property investors to consider.

Some landlords take out bridging loans against their own property, but this can be risky, while taking out Equity Release with buy to let properties has a lot less risk and is therefore a more popular strategy for raising capital.

What is Buy to Let Equity Release?

While the terms Equity Release and releasing equity are often used interchangeably, they are actually different financial solutions.

Releasing equity is usually done through remortgaging a property with a conventional mortgage.

Whereas, an Equity Release mortgage, known as a Lifetime Mortgage, is a loan taken out against the property.

Standard Lifetime mortgages are for homeowners aged over 55, usually to provide more money in retirement for lifestyle, home improvements, to gift to family members, or for many other reasons. 

The homeowner takes out a loan that is secured against the property and when they die or move into permanent residential care, the loan is either repaid through the sale of the property or from beneficiaries remortgaging it themselves.

People who have a buy to let property may be able to take out a Lifetime mortgage to access the capital tied up in the property.

Landlords can access equity in their buy to let property once a certain amount of the mortgage has been paid off, or if the value of the property increases to create enough equity.

Releasing equity from a buy to let property is usually quite straightforward, as long as there is equity in the property and there are no issues such as adverse credit.

In some cases, a better deal may be available, so remortgaging has additional benefits as well as releasing equity.

Remortgaging a buy to let property to release equity

Landlords who have equity in their buy to let property often have a strategy where they use equity in one property to purchase another and continue to build up their portfolio by purchasing more properties using the equity.

They might also use Equity Release in a buy to let property to fund refurbishments and maintenance.

For example, they could access Equity Release to refurbish an HMO to create more bedrooms, which would increase the rent yield potential.

With Equity Release products, such as Lifetime Mortgages, borrowers can raise money for many purposes.

For example, reasons such as ‘Lifestyle’ are acceptable to Lifetime Mortgage lenders. Whereas standard buy-to-let lenders who offer conventional mortgages are far more restrictive.

They may insist on the money being raised for ‘Debt Consolidation’, ‘Home Improvements’ or other reasons that directly or indirectly benefit the lender.

Therefore, if you would like to release equity for reasons that are usually unacceptable to traditional buy-to-let mortgage lenders, such as perhaps gifting money to family, Lifetime Mortgage lenders may provide a suitable solution for you.

For landlords who have a portfolio of properties, it may also be possible to apply for a portfolio mortgage, where you can have one single mortgage for all of your properties, so it is easier to manage with one single mortgage payment each month.

Alternative ways to release equity

There are other ways to release equity rather than remortgaging, such as obtaining a further advance from the existing lender as you already have a relationship with them.

Even if you have been with the lender for some time, they will still probably perform affordability checks and a credit check to identify any potential risks.

Another alternative is taking out a second secured loan, otherwise known as a second charge.

This is a loan taken out against the property with a different lender to your mortgage. The first charge is your mortgage lender, while the second charge is your secured loan lender.

This type of arrangement is appealing to people who want to keep their existing mortgage deal but do not want to take out a further advance from the same lender, possibly because there is a better deal available from another lender.

Just like with a mortgage, if you miss payments on a secured loan against your property, you risk it getting repossessed.

Also, the interest rates for second charges can be higher than first charge mortgage rates, depending on how much equity is in the property.

With a second charge, you will also be paying for two mortgages rather than one, so it is more difficult to manage.

Lifetime mortgage on a buy to let property

Many people are now choosing to buy a second property and let it out as part of their retirement fund instead of investing all their money into pensions.

This can be a good way to build up a pot of money, although there are obviously tax obligations and legal requirements involved with becoming a landlord.

If you have a buy to let property as well as your own home, you can take out Equity Release in the buy to let property so that you are not using your own home for collateral.

The downside of using the buy to let property for Equity Release is that it may be valued less than your home, in which case you would not be able to release as much equity.

With a lifetime mortgage on your own home, you are typically able to release up to 50% of the property value, depending on factors such as your age, how much equity there is in your home and health details.

If you want to take out Equity Release on a buy to let property, you will only be able to release a lower percentage.

Lifetime mortgage on a buy to let eligibility

This is the eligibility criteria:

Aged 55+

As with a lifetime mortgage on your own property, to be eligible for a lifetime mortgage, you must be aged over 55 and some lenders require you to be over 60.

Have adequate equity

Another dependency to qualify for a lifetime mortgage on a buy to let is that you have enough equity in the property.

This amount will vary from lender to lender, so even if one lender is not prepared to give you the amount you require, another lender may.

Tenants in the property

You must also have tenants in the property, as the lender will see a vacant property as a risk.

Assured tenancy agreement

As well as having tenants in the property, the lender will require you to have an assured shorthold tenancy agreement, which is a fixed term tenancy of at least six months but sometimes for a year or longer.

How much can I borrow?

The amount that you can borrow will depend on a number of factors:

Property value

The more your property is worth, the more you will be able to borrow.

The lender will base their valuation assessment on how much your property could sell for on the open market.

If the property is in poor condition or there are some significant repairs that would be required before the property is sold, this will also be taken into account.

Some lenders will request that you have this work completed before they agree to lend to you.

Personal information 

When a lender is considering how much to lend, they will make an estimation of how long the borrower is likely to live for, as this will affect how much money they make from the deal.

This is why the applicant’s age is a consideration, as well as their health.

People who have previous or existing health conditions that could reduce their life expectancy may be able to borrow more money than people who are in good health.


Whether you have a second property because you inherited it or if you have multiple properties as a property investor, taking out Equity Release against your buy to let can be a very beneficial option.

For retired homeowners with a buy to let, they can take out Equity Release on the second property without worrying about not being able to leave their residential home to their beneficiaries. 

For property investors aged over 55, releasing equity through a lifetime mortgage might be a preferable option to remortgaging the property, as it means you will not have the mandatory monthly mortgage payments to make.

However, be aware that lifetime mortgage interest rates may be higher than those available on the open market with conventional buy-to-let mortgage lenders. 

The Equity Release Lifetime Mortgage loan on the buy-to-let is only repaid once you die.

Releasing equity through a standard remortgage is usually a more suitable option than a lifetime remortgage if you are a property investor looking to expand your property portfolio due to the likely difference in cost.

If you are considering a conventional buy-to-let mortgage or a lifetime mortgage,  you should speak to a broker that is qualified in both areas, such as Boon Brokers, so that you can get advice on the most suitable type of finance solution.

If you would like to speak to an expert on buy to let Equity Release, our team at Boon Brokers can provide you with all of the information and guidance you need to find the right solution and the most cost-efficient deal.

How Does Being Self Employed Affect A Joint Mortgage?

Mortgage applications can be complex and challenging at the best of times, especially those that feature joint applicants and at least one self-employed individual.

But what is a joint mortgage, and how is this application impacted by having a self-employed partner?

In this article

What is a joint mortgage?
Who can apply for a joint mortgage?
What factors are considered upon application?
How does having a self-employed partner affect a joint mortgage?
What documents will a self-employed partner have to provide?
How much will you be able to borrow?

What is a Joint Mortgage?

As the name suggests, a joint mortgage features at least two people on the same application, as you apply to borrow a potentially larger sum of money with someone such as a partner, spouse, friend or relative.

With this type of application, both individuals are in charge of making payments, with each partner having equal liability in this respect. So, if a scenario arises where one of you is unable to repay your share of the mortgage, the other will be liable to meet the monthly repayment in full.

Despite this, a joint mortgage doesn’t necessarily equate to 50/50 ownership of a property, as the precise equity can be amended if one partner has more financial assets and assumes responsibility for a larger share of the mortgage repayment.

This can be agreed informally between the two parties or written into the mortgage agreement, with this ownership share relevant to both the structure of the monthly repayments and the distribution of the proceeds following a future sale.

When applying for a joint mortgage, you can borrow a larger sum of money based on the combined earnings of both parties. 

However, this also means that lenders will carry out eligibility and credit checks on both applicants, increasing the risk that the application will be rejected and the length of time taken for lenders to complete their due diligence.

Who Can Apply for a Joint Mortgage?

While joint mortgages are synonymous with married couples or partners, there are no marital restrictions in place when making this type of application.

There are no wider relationship or familial restrictions either, so any combination of two people can apply for a joint mortgage and to undergo the associated credit and eligibility checks.

Some lenders may even allow more than two people to apply for a joint mortgage, particularly as each has their own range of bespoke products and unique criteria. 

In general terms, however, most lenders allow a maximum of four buyers to take up a mortgage together, primarily because they require each applicant to be named on a property’s deeds. Typically, this type of deed and document has space for only four names, so this is often the maximum number allowed by reputable lenders.

What factors are considered upon application? 

A joint mortgage will consider the same factors as a single application, taking into account two sets of data from both applicants in the process. These include:

Credit Checks

Currently, lenders use cumulative FICO Scores for mortgage lending, leveraging different models for the main credit agencies (including Experian and Equifax).

Such checks are carried out across both (or more) names on a joint mortgage application to check eligibility and help lenders to fully appraise risk.


Lenders may also check bank statements dating back three months, while asking applicants to provide information pertaining to their monthly spending.

This information will also appraise each applicant’s earnings and determine whether or not they can afford their mortgage repayments.

Deposit Value

The deposit that you can put towards your application will also be considered, as this can reduce the amount you need to borrow and monthly mortgage repayments (while minimising the lender’s risk in the process).

It is typically recommended to save a deposit worth at least 10% of a property’s purchase price for residential purchases, although committing a 20% deposit will improve your chances of a successful application.

Of course, joint applicants will be able to pool their resources and build a larger deposit amount, increasing their chances of being accepted by a lender while simultaneously reducing the amount that they need to pay back across the duration of the mortgage.

As they have a higher deposit sum, joint applicants may also be able to access lower interest rates.

How Does A Self-Employed Partner Affect A Joint Mortgage?

As we’ve already touched on, lenders will also carry out checks on your employment status and the amounts that you earn per annum.

This also informs wider affordability checks, but the process can become complicated when dealing with one or more applicants who may be self-employed.

For example, when working in a permanent role, you’ll simply be asked to provide bank statements and evidence of past payslips dating back, typically, three months. Occasionally, lenders may make contact with employers to ask basic verification questions, but this usually isn’t required if the necessary documentation is provided.

However, the checks for self-employed individuals are more stringent, as such workers are deemed to pose a higher risk to lenders as a result of fluctuating workloads and a perceived lack of long-term security.

To this end, lenders will often ask self-employed applicants to provide certified accounts data for the previous two years, in order to prove consistent earnings that meet the necessary affordability checks.

Similarly, they may ask for proof of retainer contracts or details of future work agreements, although this will depend largely on the information included in your accounts.

For those who have worked on a self-employed basis for less than a couple of years may not be eligible to apply, creating the need for a single person application on behalf of your partner.

At this time, there are only a few lenders in the market that can accept a self-employed applicant with just one year of business accounts.

What Documents Will A Self-Employed Partner Have To Provide?

Self-employed workers will have to provide detailed documentation to support their part of a joint application, although the requirements vary depending on the structure of your venture and tax status.

We’ve broken this information down  below, so you can understand your requirements depending on precisely how you work as a self-employed individual:

Limited Company

If you own more than 25% of shares in a limited company, the personal salary and dividends that you draw from the venture will be used to calculate your average income.

Limited company owners often assume that the income declared on their PAYE payslips can be accounted for by mortgage lenders.  This is a false assumption.

If you own more than 25% of a limited company, you will need to provide self-employed income proof.  You will normally have to provide the most recent two years of Tax Calculation and Tax Year Overview documents, which are generated via HMRC after you submit your Tax Return for the year.

While some lenders may allow you to factor in your net business profit alongside your earnings, this is quite rare in the current marketplace. 


As a partner, lenders will also typically insist on seeing your last 2 years of personal Tax Calculations and Tax Year Overview documents.

Currently lenders will not accept the income declared on the Tax Return for the Partnership as a whole.

Sole Trader, Freelancer or Contractor

Typically, a sole trader or freelancer will have to provide Tax Calculation and Tax Year Overview forms as documentation to support their application. This is also the case for contractors, although some lenders may also use an annualised version of the applicants day-rate to calculate average earnings where applicable.

You will probably have to provide evidence of written contracts confirming your ongoing work commitments and retainers in this instance.

How Much Will You Be Able to Borrow?

Once your initial application has been processed and the joint applicants have passed the initial affordability checks as detailed above, you can begin to think about precisely how much will be available to borrow.

This will usually be presented in a range with lower and upper thresholds, with lenders providing an estimated quotation before completing their final credit and affordability checks.

The average amount that you can borrow will vary from one lender to another, but in the case of a joint application, you may be able to borrow between 4x and 5x your combined annual incomes for the purpose of securing a mortgage.

The lure of a joint application may become less obvious if one of the applicants is self-employed, especially if they’ve only worked in this way for less than a year. In this case, their income would not be considered by the lender, leaving the remaining applicant to decide whether to proceed on their own.

To help find the right joint-mortgage deal for your short-term and long-term requirements, contact us for an informal chat and we can get started.

Boon Brokers is a fee-free whole-of-market brokerage and has a vast knowledge of the mortgage industry.

How Much Deposit Do I Need For A Mortgage?

Before the 2008 financial crisis 100% mortgages were commonly approved and, in some cases, as much as 125% mortgages were available from lenders. This means that lenders were prepared to lend the full value of a property and more.

However, the crash in 2008 forced an overhaul of the mortgage market, with lenders removing the higher risk 100% mortgages from their offering. 

Since the crisis, stricter lending criteria has made it more difficult for people to buy their own home, although there are some alternative options to the original types of 100% mortgages. 

In this article, we look at different mortgage deals and how much deposit is required for each one, as well as the financial impact that your deposit amount will have over the short and long term.

In this article

0% Deposit Mortgages
What is a guarantor mortgage?
Types of mortgages with deposits
How is a mortgage deposit calculated?
What is the recommended mortgage deposit amount?
How to calculate your mortgage deposit amount
What does LTV stand for?
What are the benefits of a higher deposit mortgage?
Options for people who can’t save up a large mortgage deposit

Short for time? Here’s a quick video overview of mortgage deposits.

0% Deposit Mortgages

Despite the pre-2008 0% deposit mortgages no longer being available, there are still some options to get on the property ladder with a small deposit or no deposit at all.

The only way to get a 100% mortgage in the current market is to take out what is called a guarantor mortgage.

What is a guarantor mortgage?

A guarantor mortgage involves taking out a mortgage but with the requirement to have a guarantor.

This essentially means that someone you know, such as a relative or friend will agree to be a guarantor on your mortgage.

The guarantor (usually parents or grandparents) will be required to use their savings or even their own home, as security against the mortgage.

In return for this security, certain lenders will be prepared to offer a 100% mortgage with no deposit.

While this type of mortgage is very useful for people who cannot save up a deposit, it is risky for the guarantor.

If mortgage repayments are not made on time, it is their savings or property that is on the line. They could potentially lose their savings or home if the mortgage repayments are not paid.

However, for many families, guarantor mortgages offer a good solution as an alternative to parents gifting a lump sum for a deposit.

Another option for people to get onto the property ladder from a young age would be getting a mortgage with their parents.

Mortgages with deposits

In April 2021, the UK government introduced a 95% mortgage guarantee to help first-time buyers to purchase their own home.

Prior to this, when COVID-19 first struck the U.K. economy, most lenders required a 10% deposit as part of the lending criteria.

The scheme works by the government guaranteeing the 95% mortgages, so there is less risk for the lender.

Other than the government guarantee mortgages, most mortgage products require a minimum of 10% deposit, with some asking for 15% or even 20%.

Higher risk borrowers may be required to pay a larger deposit to offset some of the risk.

How is the mortgage deposit amount calculated?

The deposit is calculated as a percentage of the property that you are buying. For example, if you are buying a house for a £200,000 purchase price, a 5% deposit would be £10,000 and a 10% deposit would be £20,000. 

As you can see, the difference between 5% and 10% is quite considerable, so the government guarantee has helped to make buying a home more realistic for many people.

Even people on the average UK salary with minimal outgoings would usually have to save up for a long time to reach the 10% required without this scheme.

What is the recommended mortgage deposit amount?

Although a lot of first-time buyers will opt for a mortgage deal with the lowest deposit possible, the more deposit that you put down, the better the interest rates available.

Therefore, if there is the possibility to save up for a while longer, you could save a significant amount of money in interest.

For example, if you have a 20% deposit, you should be able to get a deal with a lower interest rate than if you only have a 5% or 10% deposit.

To access low-cost deals, it is recommended that you aim for a minimum deposit of 20%. Interest rates will continue to fall in 5% LTV brackets until you have at least a 40% deposit.

After that stage, you could have a 40% deposit or an 80% deposit, as an example, and you would have access to the same interest rates.

How to calculate your mortgage deposit amount

To calculate 20% deposit for the house price you are looking to pay, multiply the price by the deposit percentage.

For example: £250,000 x 20% = £50,000.

For 10% you multiply by 10%, so the deposit on a £250,000 property would be £25,000.

For 5% you multiple by 5%, which on the same value property is £12,500.

What does LTV stand for?

The loan to value (LTV) is the term that is used to describe how much you are borrowing compared to the value of the house.

Working out the LTV is similar to working out the deposit:

If the house value is £250,000 with a deposit of £50,000, your mortgage amount is £200,000.

Then you divide the mortgage by the house price:

£200,000 / £250,000 = 0.8

Multiply this by 100 to get the percentage of LTV = 80%.

When you start looking at different mortgage rates you will see them listed with the LTV displayed for each product.

The same lender will usually have several deals available, each one applying to a different LTV amount. 

The LTV is not just important for when you are looking at first-time buyer mortgages, it is also a significant factor when homeowners look to re-mortgage when they want to get a better deal. 

After several years of paying off a mortgage and the good possibility of the house value increasing, many homeowners will have a better LTV compared to when they took out their existing mortgage deal.

This often gives people the opportunity to switch to a new mortgage deal with a lower interest rate once their fixed rate period ends.

There are some exceptions to this, for example, if they have missed payments on their mortgage or have other adverse finances affecting their credit score.

In these situations where there is now adverse credit on the client’s credit file, regardless of whether or not the LTV has reduced since the last mortgage application, it is likely that the interest rate will be higher for the remortgage.

This is because there is now a greater risk to the lender of the applicant not meeting their mortgage payment obligations.

There is also the possibility that the property could decrease in value, in which case the LTV might not improve even if two, three or five years of mortgage payments have been made.

What are the benefits of a higher mortgage deposit?

When you are deciding whether now is the best time to buy a property or you should wait and save up more deposit, these factors can help you to decide:

Better mortgage deals

The higher deposit you have, the more chance you have of getting a mortgage deal with a lower interest rate.

Less risk

One of the biggest risks when you buy a property is that you could end up with negative equity.

This happens when the value of the property is less than the amount that is outstanding on the mortgage.

While this is fairly uncommon due to the fact that property values generally increase over time, a crash in the property market or an issue with your specific property or area could lead to negative equity.

When you have negative equity in a property, it can make it difficult, if not impossible, to move home or switch to a better mortgage deal.

The more deposit you pay, the less chance of negative equity as you are taking out a smaller mortgage and there is less likelihood of the value dropping below the mortgage amount.

Improved acceptance rate

One of the major benefits of saving up a bigger deposit is that there is an improved chance of having a mortgage application accepted.

When you have a better LTV, you pose less of a risk to a mortgage lender, as there is a lower chance of negative equity.

Options for people who can’t save up a large mortgage deposit

Saving up a large deposit is the ideal scenario, but it is not a realistic option for most people.

Even saving up a 5% deposit can be very challenging when there are bills such as rent to pay and your income minus your outgoings does not allow you to make savings each month.

Fortunately, there are some alternative options available to help people to get onto the property ladder when they are not able to save up a deposit.

We discussed the option of guarantor mortgages earlier in this article, where a guarantor is required on a mortgage in exchange for a 100% mortgage. 

Help to Buy

The Help to Buy scheme is available to first-time buyers in England who buy a newly built property.

Under the scheme, the buyer must provide a deposit of 5% but can also borrow 20% (40% in London) of the purchase price, which is interest-free for the first five years.

The mortgage will therefore be for 75% of the LTV, with 20% made up from the equity loan and 5% from the deposit.

This enables buyers to get accepted for mortgages on properties that would otherwise be above their affordability calculation.

The Help to Buy scheme has helped many first-time buyers to buy a new property without waiting many years to save up a larger deposit.

Shared ownership

Another option available to people who want to buy their own property is a shared ownership scheme.

In this scenario, you are buying part of the property and you pay rent on the rest of it.

The stake that you own will vary depending on the specific property you are looking at, but it will be between 25% and 75%. 

The rest of the property will be owned by a housing association, and you will pay rent on the stake that they own.

As an example, if you bought a 40% share in a property worth £200,000, the value of your share would be £80,000.

Lenders will require you to contribute a certain deposit sum and they will calculate LTV from the value of your share.

As the value is £80,000 instead of £200,000 for the full property, a 5% deposit would be £4,000 instead of £10,000 so it can help people to buy a property faster.

Typically, you would then pay rent of around 2.75% on top of the mortgage repayments.

There are pros and cons of using the shared ownership scheme and if you want to eventually own the property, you would need to ensure you are able to staircase.

This allows you to buy bigger stakes in the property up until you own it outright.

If you sell a property that you have shared ownership with, any equity would be split by the percentage of stake each owner has.

One of the negative aspects of the shared ownership scheme is that it only applies to certain properties and you might not be able to find a shared ownership property in the area you want to live in.

Lifetime ISA

A Lifetime ISA (LISA) is available to people aged 18-39 and allows them to save up to £4,000 per tax year towards a home, with the government adding a 25% tax-free bonus on the savings.

Therefore, if you are able to save the full £4,000 allowance in a year, it will be topped up by £1,000.

The maximum bonus available per annum is £1,000. 

After two years you would have £10,000 deposit to use for a property, which reduces the length of time it takes to save up the deposit.

Parents and grandparents can put money into their child’s LISA to help the savings to increase quicker and the bonus is still applicable to that money.


To conclude, there are multiple options in terms of how much deposit is needed for a mortgage.

If you are able to arrange a guarantor mortgage, you would not need any deposit at all. 

However, if this is not a possibility or you do not want to choose this option, the lowest amount of deposit required is 5% of the property value.

Due to the government’s 95% mortgage guarantee scheme, there are currently many products available on the market that require a 5% deposit.

This is in addition to the Help to Buy scheme that can help applicants to afford a property with a 5% deposit for a new build property.

Before you apply for a mortgage you should review all of the available options and consider the impact of waiting and saving up a larger deposit.

The overall interest on a 90% mortgage compared to a 95% one will be considerable over the term length, so waiting until you have a 10% deposit will help you to keep your total mortgage costs down.

Boon Brokers is a fee-free whole-of-market brokerage and has a vast knowledge of the mortgage industry.

We have helped many first-time buyers purchase their home through finding the best available mortgage deals.

To help find the right mortgage deal for your short-term and long-term requirements, contact us for an informal chat and we can get started.

How Much Does Equity Release Cost?

For homeowners who are retired or are due to retire in the near future, equity release can be the ideal financial solution to allow them to have a more comfortable retirement.

One factor that often puts people off though is that equity release can end up costing a lot of money in interest.

If you are considering taking out an equity release product, you should make sure that you are fully aware of the financial implications before you take the decision to accept a loan secured against your property.

In this article

What is a lifetime mortgage?
What is home reversion?
What can you spend the equity release loan on?
Average interest rates
How much does equity release cost?
Other factors to consider
Pros and Cons of equity release
Is equity release right for me?

Unlike most loans where there is a set term, equity release loans run until the homeowner passes away or moves into permanent residential care.

This makes it more difficult to calculate the total cost of taking out an equity release loan.

There are alternative options to equity release, such as downsizing to a smaller property.

However, for people who want to remain living in their home, equity release is a more attractive choice.

In this article, we break down the typical costs involved in equity release products, to help you to make the right decision for your personal circumstances.

What is a lifetime mortgage?

With a lifetime mortgage, you can borrow some of the property’s value at a fixed interest rate.

You borrow money that is secured against the property, with the loan being repaid when you die or move into permanent residential care.

You are able to continue living in your home until that point, while the interest builds up.

You have different options in terms of how you receive the money; so, you could take one large sum or you can choose drawdown, where you take smaller amounts at different times.

Most lifetime mortgages will allow you to make repayments, which will help to keep the interest amounts down.

What is home reversion?

Home reversion is less common, mainly due to it involving selling part or all of your property at below market value.

Although you are able to live in the property until you die, if the property value increases, the lender benefits from the increase on their portion, not you.

When you die or move into long-term care, the property will be sold and the sale proceeds will be split as determined by the percentage owned by the lender.

What can you spend the equity release loan on?

One of the main benefits of taking out equity release rather than other types of loans is that there are largely no restrictions on what you can spend the money on.

Money can be spent on a more comfortable lifestyle during retirement, holidays, holiday lodges or to provide family with financial support while you are still alive. 

Some other types of loan will only be approved for certain expenditures, for example, home improvements. So, the flexibility around what you can spend equity release money on is a key benefit to this type of financial solution.

Average interest rates:

Current interest rates for equity release are cheaper than they have been for a long time, but the interest can add up to a very significant amount over the years.

The average interest rate on lifetime mortgages right now is around 4%, with the lowest rate being approximately 3%.

To give an idea of the variance between the different lenders and products, the lifetime mortgage interest rates available on (as of 15/11/2021) span from 2.93% to 6.90%.

The Premier Flexible Black with Legal & General offered the lowest rate of 2.93%, while at the other end of the scale, the Heritage Supreme Max from Pure Retirement had a rate of 6.90%.

Aviva were offering a Lifestyle Flexible Enhanced lifetime mortgage with 3.01% interest rate and Scottish Widows had one product with a rate of 3.44% and another at 3.49%.

The following table* gives some examples of the equity release products that are currently available on the market.

Product NameInterest RateLender
Premier Flexible Black2.93%Legal & General
Lifestyle Flexible Enhanced3.01%Aviva
Lifestyle Mortgage FR13.44%Scottish Widows
Lifestyle Mortgage FR23.49%Scottish Widows
Tailored Lifetime 13.49%more2life
Heritage Supreme Max6.90%Pure Retirement

*All figures taken from on 15/11/2021

All equity release products differ in regards to the terms, with some having set early repayment charges and voluntary repayment options, amongst other details that vary between one product and the next.

Over the last few years, equity release interest rates have been falling steadily.

Five years ago, the average interest rate was 6.06% and in April 2021 the average had plummeted to 4.07%.

These lower interest rates, plus the fact that there is significantly better protection from the Equity Release Council (ERC), has led to a large upturn in applications for equity release.

Historically, there were concerns that negative equity could result in owing a higher amount than the property value.

The no negative equity guarantee that the ERC requires ensures that this is no longer a risk.

How much does equity release cost?

The cost of Equity Release will depend on whether you choose a lifetime mortgage or home reversion plan.

As mentioned, the cost of a home reversion plan is simple to calculate because the provider is paid their share of the property’s value when it is sold. 

For lifetime mortgages, the amount of interest that compounds will depend on how long you remain in the property, the interest rate and whether you decide to make interest-payments to prevent compounded interest

As an example, if you acquire a lifetime mortgage for £300,000 at an interest rate of 2.75%, fixed for life, and allow the interest to compound annually, the total balance payable after 15 years would be £450,659. 

However, if you decide to make monthly interest payments towards the mortgage, the amount will not increase as quickly if at all. 

As there are a few variants that will determine the cost of a lifetime mortgage product, it is always best to discuss your specific case with a qualified equity release broker – such as Boon Brokers.

Other fees

Similar to standard mortgages, there are lots of additional fees to be aware of if you are considering taking out equity release. These fees include:

Arrangement fees

Many lenders charge an arrangement fee, sometimes known as a booking fee.

This fee will vary from one lender to the next but typically will be between £300 and £1,000.

This fee can often be added to the mortgage sum on completion.

Boon Brokers does not charge any equity release fees, so you will not pay arrangement fees when you choose us.

Solicitors’ fees

Due to the legal work involved in arranging a loan against your property, a solicitor is required to act on your behalf. Again, the fees for this will vary but the average solicitors’ fee for an equity release product is £650.

The legal fees charged will depend on a number of factors such as whether the property has a leasehold or freehold tenure.

Properties with a leasehold tenure tend to be more time-consuming than freehold properties for solicitors to process.

This means that if you are applying for Equity Release on a leasehold property such as a flat, expect higher legal fees.

The fees charged by solicitors is correlated with the time that they need to allocate to your case.

Therefore, if there are causes for additional legal work, such as complications around the legal title of the property, expect higher solicitor fees. 

Early repayment charges

If you want to have the option to repay some or all of your equity release loan, some products have early repayment charges applicable in certain circumstances. 

Even if you are not considering paying the equity release back early, your circumstances could change, so you should ask your broker to find a product with minimal or no early repayment charges just to provide another option for you. 

Fortunately, most lifetime mortgage providers will waive early repayment charges in certain circumstances. These circumstances normally include:

  1. You repay after the Early Repayment Charge Expiry Date (i.e after a set number of years outlined by the lender)
  2. You die or move into long-term care
  3. You move to a new property and transfer the lifetime mortgage to the new property
  4. You move to a property that does not meet the lender’s lending criteria and you are eligible for downsizing protection

Therefore, in most scenarios where a lifetime mortgage will need to be redeemed, the early repayment charge will currently be waived by most lifetime mortgage lenders. 

Each applicant’s circumstances are different, so you should ask your broker for financial calculations based on your property value, your age and the interest rates of the available products.

You should never just opt for the cheapest interest rate, as there can be other charges that will end up costing you more than taking out a product with a slightly higher interest rate.

For example, arrangement charges and early repayment charges can end up costing more than a product with a slightly higher percentage of interest rate.

Other factors to consider

When you are deciding whether equity release is the right option, you might also need to consider the impact that it will have on your family.

If you are hoping to leave some inheritance, equity release can significantly reduce the amount of money you leave. It is possible to take out an equity release product where you can ‘ringfence’ a specified amount for inheritance.

It may help to have your family involved in the discussions that you have with your broker, so that they understand how the equity release works and what will happen upon your death.

The executor of the will is responsible for arranging the sale of the property and the repayment of the loan with the proceedings.

Therefore, keeping them involved in the process will be helpful for when they need to make the repayment. It also ensures that your family understand your reasons for taking out equity release.

Pros and cons of equity release

There are a number of pros and cons to taking out equity release, such as:


  • You get to live in your home for as long as you need to.
  • Release value in your property to spend on anything you choose.
  • No monthly repayments to make.


  • Interest can end up being a large amount if it compounds.
  • Less money to leave as inheritance.

Is equity release the right for me?

Hopefully, this article will have helped you to understand the costs involved with taking out equity release to enable you to make the best decision for you and your family.

The ERC requires that professional advice is provided before anyone is allowed to take out equity release, so choosing a high-quality broker will be very beneficial.

Boon Brokers has been providing equity release advice for many years and we always help our client to find the best financial solution to suit their needs.

As well as receiving expert guidance, our services are free, as we do not charge any equity release advice or arrangement fees to our clients.

Contact our equity release team today and we can help to find the most suitable equity release product or recommend an alternative.

Is it Better to Overpay or Reduce your Mortgage Term?

A mortgage is usually the biggest financial outlay that you will commit to, so it is important to understand how you can keep the total loan repayment to a minimum.

As your financial circumstances change, you may be in a position to overpay on your mortgage or reduce the term.

Both overpaying and reducing the mortgage term can help you to save a considerable amount of money.

In this article, we review the pros and cons of the two options to help you to decide which is the right choice for you.

In this article

What is overpaying?
What is reducing term?
What’s the difference between overpaying and reducing your mortgage term?
Pros and cons of overpaying your mortgage
Pros and cons of reducing mortgage term
Should I overpay my mortgage or reduce the term?
Other considerations

What is overpaying?

Overpaying your mortgage loan involves paying an extra amount each month on top of your agreed loan repayment amount.

If your lender allows you to make overpayments, you can choose how much extra you can afford to pay within their imposed limits. You are not committed to make overpayments every month, just when you want to.

british house

The additional payment could be just £50, or it could be £1,000, depending on your affordability and how much your lender allows you to overpay.

Many lenders will apply a maximum limit on how much you are able to overpay per year.

Overpaying allows you to repay your mortgage loan faster and save on interest.

What is reducing term?

Reducing your mortgage term is similar but slightly different to overpaying your mortgage.

When you reduce the length of your mortgage term, you are arranging a new deal which is spread over less time.

For example, your mortgage could have 22 years remaining, but you decide to reduce the term to 17 years.

This would mean that your minimum monthly repayments increase and you pay the mortgage off sooner, saving a significant amount of interest.

What’s the difference between overpaying and reducing your mortgage term?

Overpaying and reducing the term are very similar but the key difference is the flexibility of each option.

Shortening your term is a formal agreement that you will pay a higher amount each month, to repay the full mortgage over a shorter period.

With overpaying, there is more flexibility, as you could decide to stop making overpayments if you need to and start them up again in the future.

If your financial circumstances change, you might not be able to afford the higher contractual amount and you may want to go back to repaying the minimum amount.

You still have the flexibility to repay your mortgage over the original length of term, so it is an option that allows for future changes to suit your circumstances.

Pros and cons of overpaying your mortgage:



The main pro of overpaying is that you have the choice to stop overpaying whenever you want to.

You can change the amount you overpay to suit your monthly affordability as long as its within the lender’s overpaying facility.

So, if you get a pay rise, for example, you could increase the overpayment amount.


Not always an option

Not all lenders will allow you to make overpayments, so you might not have the option to overpay.

Overpayment fees

Some lenders apply a fee if you overpay, or if you overpay higher than the allowed amount, you will be charged a fee.

british house

In this situation, you would therefore not be saving as much money as you could if you reduced the term (when calculated based on the same interest rates).

Maximum overpayment amount

With most fixed rate products, which are currently most demanded in the market, you may only be able to pay up to 10% of the outstanding amount each year, but if you could afford to pay more, a reduced term could be the better option save interest.

Due to the maximum overpayment amount, if you inherit a sum of money, you might not be able to use it to pay off your mortgage straight away.

However, there are some mortgage products, such as Tracker, Discount and Standard Variable, that tend to have no overpayment restrictions.

If you are planning to make large overpayments in a short period of time, these products may be most suitable for you.

Pros and cons of reducing the mortgage term:


Potentially save more

You could potentially save more money due to the lower interest being paid over the term.

As there is a formal agreement in place, you are more likely to continue making the higher payments.

Whereas, with overpaying you might be tempted to not overpay for a few months, in order to pay for something else.

Consistent payments

When you reduce the term, the payments remain consistent, and it is easier to budget and make financial plans as you know exactly how much you have to pay each month.

With overpaying, you might not stick to your planned schedule, which could mean you end up taking a similar amount of time to pay off your mortgage.


Less flexibility

Circumstances over your lifetime can easily change and these changes may be unpredictable.

People can be made redundant, go through a relationship breakup or become ill, which could affect the ability to make mortgage repayments.

If you have committed to making a higher mortgage payment amount, it will be harder to continue making the repayments if your income is reduced.

Less “wiggle-room”

When you formally agree to make higher payments each month, you have less “wiggle-room” in your daily life.

So, luxuries like spontaneous trips away and other non-essential purchases will be less possible.

british house

You are working to a tighter budget each month, with less flexibility on what you are spending due to your mortgage commitment.

Should I overpay my mortgage or reduce the term?

There is not a right or wrong answer, as both options have some positive and negative results.

The amount you can save will depend on a wide variation of factors including interest rates, any overpayment limitations and other possible fees involved in the mortgage deal.

Another important factor to consider is the type of mortgage you take out.

A fixed rate mortgage will stay consistent but if you have a variable rate mortgage, you could end up on a much higher interest rate.

If you have agreed to a shorter term, a hike in interest rate could make repayments unaffordable for you.

Choosing to reduce the term of your mortgage loan has bigger risks due to the lack of flexibility, so you should think about what would happen if your income reduced for some reason.

If you have a lot of job security and work in an industry that is thriving, you may be more confident in being able to repay your mortgage for the new, shorter term.

Generally, you can save more money by choosing to reduce the term of your mortgage, as you will be contractually obliged to reduce the interest quicker than if you have a longer term.

You have to decide whether the potential savings are worth giving up the option of more flexibility around when and how much you pay.

You can still save yourself a large amount of interest by overpaying your mortgage, as long as you do it regularly enough to make a difference.

Other considerations

Before you decide whether to reduce the term on a mortgage, you should consider whether it is the right time to do it.

Just like any other time you arrange a new mortgage deal, you should consider details such as whether you can arrange a lower mortgage deal due to reaching a better LTV (loan to value) ratio.

If you have a 60% LTV rather than 65%, then you could be eligible for a deal with a lower interest rate. Therefore, paying the mortgage over a shorter period would be more affordable than doing it at 65% LTV.

Speaking to an independent adviser will help you to understand the options that you have available, and they will be able to provide calculations to show you the difference between overpaying or reducing term.

They will look at your specific circumstances, such as income, other financial commitments, age, job security and other individual factors that will influence the suitability of each option.

Boon Brokers provides expert mortgage advice based on your specific financial circumstances, to ensure that you choose the best option for your short and long-term finances.

Contact our mortgage team today and we can help you to get started with your mortgage application and enable you to get onto the property ladder. Boon Brokers offers a fee-free, whole-of-market, mortgage advice and arrangement service.

Is Equity Release Safe?

The simple answer to this question is yes, the majority of equity release products are completely safe due to the strict regulations that are in place.

Prior to stricter regulations being introduced in 2004, there were more risks involved in taking out equity release, due to the lack of protection.

Despite the industry being more regulated now, some people are still hesitant about taking out equity release due to the historical risky reputation of the product. 

In this article

Who safeguards Equity Release?
What is the catch with Equity Release?
What to consider before choosing Equity Release?
Types of Equity Release
What to ask an Equity Release adviser?
The downsides of Equity Release

This article explains how equity release products are regulated and how consumers are protected when they take out equity release.

We also highlight the key considerations you should think about before you choose to apply for equity release.

Who safeguards Equity Release?

There are two key organisations responsible for safeguarding equity release:

The Financial Conduct Authority

The Financial Conduct Authority (FCA) regulates all equity release products, and all brokers and advisers must be authorised by the FCA to arrange equity release products and provide advice.

This means that lenders, brokers and advisers must follow the FCA’s strict codes of conduct and they can face penalties if they breach the rules.

The Equity Release Council

In addition to having the FCA as regulators, equity release is also safeguarded by the Equity Release Council (ERC).

The ERC is a trade body that equity release providers should be members of and members must comply with the ERC’s product standards.

These standards include:

  • Providing a no negative equity guarantee. Going into negative equity used to be one of the biggest risks of equity release. Negative equity could occur when the house price drops to a lower value than the loan amount, so money is still owed to the lender once the house is sold. In this situation, beneficiaries could end up paying an additional amount on the loan to cover the difference.
  • Freedom to transfer the product to another property. Most lenders now include the option to move home and transfer the equity release loan to the new property. Historically, transferring the loan was either not allowed or would have incurred a financial penalty to move the loan to a new property.
  • Before taking out an equity release product, you must receive professional financial and legal advice.
  • Interest rates must be fixed or variable on a lifetime mortgage, with a maximum limit applicable on variable rates.
  • You are able to stay in your home for the rest of your life, or until you go into permanent residential care.

It is not a legal requirement for lenders to be members of the ERC, so before taking out a product, you should check the lender is a member of the ERC by looking for them on the ERC website.

What is the catch with Equity Release?

People often worry about whether there is a catch involved with equity release but the regulations ensure that risks are kept to a minimum.

As long as you understand how the financial aspects of equity release works, regarding the accumulation of interest, the product can be the ideal financial solution for your needs.

The main negative element of equity release is the impact that it will have on leaving inheritance to family, as the loan will be paid off with the sale of the property upon your death.

If there is money remaining once the loan has been paid off, then it can be left to beneficiaries of the will.

What to consider before choosing Equity Release

There are a few factors to consider before choosing equity release over other types of financial products. These include:


You will need to check that you meet the eligibility criteria stipulated by the lender. The criteria will vary from one lender to another but generally the main criteria will include:

  • Age – Equity release is available for people aged over 55, with some lenders having a minimum age of 60.
  • Property value – Some lenders will only agree equity release on properties that are valued above a minimum amount.
  • Property condition – Properties that will require a lot of repairs or that could be difficult to sell may not be deemed as acceptable properties.

Types of Equity Release plans

There are two different types of equity release products to choose from:

Lifetime mortgage

With a lifetime mortgage, you still own the property and the lender provides you with a loan which can be arranged as a lump sum or a drawdown, or a combination of the two.

Under the terms of the mortgage, you are able to continue living in the property until you die and then the property is sold or refinanced by beneficiaries to repay the loan.

Home reversion

If you take out a home reversion scheme, you sell the property, or a percentage of it to a provider, and you are still able to live there until you die.

Home reversion is the less common option as the amount you receive will be considerably less than the market value of the property.

Inheritance / Family opinion

As well as making sure that equity release is the right option for your financial circumstances, you should also consider the impact it will have on your family.

If you want to be able to leave some inheritance to your family, equity release might not be the right financial solution.

It is a good idea to discuss your plans with your family so that they are aware of the equity release process and understand what will happen when you die.

Getting impartial advice

It is important to get impartial advice when you take out financial products and equity release is more complicated than most other products, so you should speak to a reputable broker or adviser before taking it out.

As the loan is taken out against your home, you should make sure you fully understand the impact that the loan will have on you and your family.

What to ask an Equity Release adviser?

Before your meeting with an adviser, it will be useful to have some pre-prepared questions to ask them, such as:

How much will equity release cost me?

Find out how much interest and overall costs there are for the product. The adviser should be able to give you a breakdown of the total costs. 

Are there any early repayment charges?

Some lenders apply a large early repayment charges (ERC), so you should ask about any ERC, in case you want to repay the loan in the future.

Can you advise on both types of equity release?

Ask the adviser to talk through both types of equity release so that you understand which is the right one for you. They should explain the key differences between a lifetime mortgage and a home reversion scheme.

Are you a member of the ERC?

Confirm whether the adviser is a member of the Equity Release Council, to ensure that you have the protection that comes with that. You should also check on the ERC website that they are listed as members.

Can you provide me with alternatives to equity release if you believe it isn’t the best option for me?

In some cases, equity release may not be the best option for your situation, so you should ask the adviser whether they would be able to recommend alternative, more suitable products.

Can I make ad-hoc voluntary payments?

Some equity release plans allow you to make payments on the loan, so that the total amount of interest is lower, and you can leave more money as inheritance.

The downsides of Equity Release

Before you decide whether to take out equity release, you should evaluate all of the pros and cons to determine whether it is the right choice for you. The main drawbacks of equity release are:

Loss of inheritance for your family

When you take out equity release, you will not be able to leave as much inheritance to your family.

However, it is possible to arrange to ringfence a specific amount of inheritance that is guaranteed after the property is sold.

Compound interest can end up being a considerable amount

Equity release providers charge interest on the total amount of the loan and the longer the loan remains outstanding, the more interest will build up.

This means that owning the property for an extra ten years, for example, could end up costing a huge amount in compound interest. 

Early repayment charges may apply

Many lenders have early repayment charges that are applicable if the loan is repaid within a certain period. If you think you might want to repay the loan at some point in the near future, you should discuss your options with your adviser to find a lender with no / minimal early repayment charges.

It may affect your benefits

If you receive means-tested benefits, borrowing a lump sum of money may affect your eligibility for some benefits. Therefore, you should ask your adviser how your benefits will be impacted before you take out an equity release product.


Due to the protection provided by both the FCA and the ERC, taking out equity release is much safer than it was in the past.

By seeking professional, impartial advice and asking all of the questions listed above, you should be able to find the right product for your needs. 

If you would like to discuss whether equity release is the best option for your financial circumstances, book a free consultation with our equity release team at Boon Brokers.

Our brokers do not charge any client fees and they have Whole-of-Market access to lenders in the U.K.

Boon Brokers is also a member of the Equity Release Council.

Mortgage Broker Costs 2022: How Much Do Mortgage Brokers Charge?

By choosing to work with a mortgage broker to find your mortgage deal, you can benefit from their in-depth expertise in the market, which can help to find you the best mortgage deal available to suit your specific circumstances.

Whether you need to use a specialist broker due to having adverse credit or any other circumstances that standard mortgages are not suitable for, or you just want to find the best financial mortgage deal, a broker will help with this.

There are many different brokers available to choose from, but they do not all offer the same level of service and the pricing structures can vary significantly.

In this guide, we provide a comprehensive review of the mortgage broker fees across the market, answering some of the most frequent questions about the subject of mortgage brokers.

After reading this guide, you should be able to decide which type of mortgage broker is more suitable for your budget and to match you with the right deal for your requirements.

In this article

What fees do mortgage brokers charge?
How much do mortgage brokers charge in fees?
Mortgage broker fees or commission- which is better?
Is fee-free mortgage advice too good to be true?
How much commission do mortgage brokers receive?
Is a mortgage broker fee worth the money?
How many homebuyers use a mortgage broker?


What fees do mortgage brokers charge?

A broker fee is a fee charged by a broker to execute transactions or provide their services. Brokers charge broker fees for a multitude of service, such as consultations, delivery, purchases and negotiations.

The pricing models from one broker to the next can be very different, so you should ask about, or research, the costs before you agree to use your mortgage broker and you should ask for their prices in writing.

Below are the different pricing models that brokers operate with.

Short for time? Here’s a quick video overview of mortgage broker fees and how they work between different brokerages.


Some mortgage brokers do not charge any fees at all to the mortgage applicants, as they make their money from charging commission to the mortgage lenders instead. This means that you get their service without any cost to yourself, which will be very welcome when you are paying fees for solicitors and other costs associated with buying a property and moving house.

Hourly rate

There are also some brokers that will charge by the hour, where costs can quickly escalate if there are any complications that they need to spend more time on. You should try to get an estimate of how many hours they are going to charge you for, as this should be fairly standard.

Fixed charge

Brokers with a fixed charge provide a more transparent approach to their fees but you will still need to make sure that there are not going to be any further costs that are not included in the initial quote.

Typically, a fixed fee mortgage broker cost will range between £300-£600, with the average cost in the UK currently sitting at £500, according to the Money Advice Service.

This is backed up by recent research we undertook with mortgage brokers across the UK, which revealed that the average amount charged was £559, but with some brokers charging more than £1,000.

This fee may be charged upfront or on completion of the mortgage transaction.


With this model, the broker charges a percentage of the mortgage that the applicant is taking out.

Therefore, with higher value properties you could end up paying a lot more than the average mortgage broker fee.

For example, if you are taking out a mortgage for £250,000 and they are charging 1%, you will be paying them £2,500, which is significantly higher than the average mortgage broker cost.


There are also a number of brokers who will use a combination of these models, for example, they might charge you an hourly rate and then also get commission from the lender.

However, it is worth noting that all mortgage brokers receive the commission from the lender. This means that any client fee charged will be in additional income for the broker.

How much do mortgage brokers charge in fees?

All mortgage lenders pay a mortgage broker a commission or procuration fee, typically being 0.35 percent of the full loan size.

Any additional fees charged to the client are optional and are individual per broker.

Some brokerages, such as Boon Brokers, operate on a fee-free basis for their clients.

Mortgage broker fees or commission – which is better?

There is not a simple yes or no answer to this question, as it all depends on the quality of your mortgage broker.

According to our recent research, 59% of mortgage brokers across the UK charge fees, therefore most mortgage brokers do charge fees for advice.

However, the price that each mortgage broker charges does not always correlate to the level of service that you will receive.

There are some excellent mortgage brokers that will charge fixed client fees, just like there are some exceptional brokers that operate by not charging the client a penny.

To keep your costs down, the ideal option is to find a reputable broker that will not charge you any costs for their services.

At Boon Brokers, we’re proud to offer an exceptional service without any cost to the mortgage applicant.

A good way of finding out whether your mortgage broker is of high quality is to research any feedback and reviews provided by previous clients through a third-party review site such as Trust Pilot.

Sometimes the best approach to deciding on your mortgage broker is to talk to the advisor that you will be working with to see whether you get on with them and trust them to provide you with the best advice.

You don’t want to appoint someone and then feel that they are difficult to work with or are not putting your best interests first.

Your gut feeling might just steer you away from a broker that isn’t going to deliver a good level of service.

You should also make sure that any broker that you select is authorised and regulated by the FCA (Financial Conduct Authority), either through a network or directly, as this will provide you with protection if you are given poor mortgage advice.

Is fee-free mortgage advice too good to be true?

When you are provided with something for free, the natural instinct is to wonder whether it is too good to be true.

Of course you would prefer to pay no costs but if the reality is that you are using a poor broker, you could end up worse off financially than if you paid a fee and used a better broker.

However, due to the fact that brokers can operate on a commission basis through the lender, mortgage brokers such as Boon Brokers can give you the highest level of service without incurring you any costs.

Typically, brokers that apply costs will do this because they have large overheads such as employee salaries and office costs to pay for.

At Boon Brokers, business operation costs are kept to a minimum by utilising cutting edge technology that reduces the cost of running the business.

There really isn’t a catch when it comes to fee-free brokers, but as we mentioned previously, you really do need to be confident in the quality of the service that the broker will deliver.

When you are looking at the different broker options available to you, you should be looking for brokers that offer whole-of-market access.

This means that they have access to every lender on the market, so they can find the best possible deal available to suit your needs.

The survey we at Boon Brokers conducted* found there was a general lack of understanding around what mortgage brokers can or should offer. Worryingly, one in seven of those who have used a mortgage broker didn’t know if they had whole of market access.

You should remember that the financial implication of obtaining a mortgage deal with a better interest rate can be very significant.

Over a 25 or 30-year term, even a small percentage of difference could end up costing you thousands of pounds more or less over the full term.

However, you can move to a new mortgage deal once your fixed rate ends, so this is another factor to consider when you are thinking about whether to go with a fee-free broker or one with a charge.

If you are paying an additional £500 or more every two or three years when you switch mortgages, you are going to end up paying a huge amount in mortgage broker costs.

This is why it is a good idea to try and find a high-quality fee-free broker that you trust, so you can go back to each time you want to find a new mortgage deal.

How do mortgage brokers get paid?

Mortgage advisors are paid on a commission basis paid by the mortgage lender.

The mortgage lender will give a commission of around 0.35 percent of the full loan size after the mortgage is completed by the advisor on behalf of their client.

So, for a £100,000 loan, this would calculate at £350, or for a £200,000 loan, they would be receiving £700.

The lender will benefit from providing a larger loan, so it makes sense for them to give the broker a higher fee for the work that they do in arranging the mortgage.

However, for the mortgage applicant, the mortgage broker will not be doing more work (If any) to find a good deal on a £200,000 loan compared to a £100,000 one for the same applicant.

Therefore, they cannot justify charging you a percentage of the loan.

Mortgage commission is a topic that has been heavily scrutinised in the past by regulators, with concerns that high commission fees can lead to brokers recommending specific products that might not offer the best deal to their clients.

Research Boon Brokers undertook with 2,000 mortgage holders showed that 13% of people worry a broker will push you into a deal they want you to take because they get better commission*.

However, if the commission was completely removed then it could lead to brokers charging high fees for their services, so this is another reason to make sure the broker you choose is regulated by the FCA.

Is a mortgage broker fee worth the money?

In many cases, using a broker will enable the mortgage applicant to get a mortgage deal that they couldn’t find on the market themselves.

With a lower interest rate deal, mortgage applicants can quickly recoup the £500 that they pay on their broker costs.

Usually, the deals a broker can find are much better than the ones you will find with a high street lender, so financially, working with a reasonably priced broker can definitely be worth the money.

However, that isn’t taking into consideration that there are numerous brokers who will find you the best mortgage deals on the market, saving you a large amount of money, while providing that service for free.

If you are planning on going with a broker that charges a fee, you need to look at how their fee stacks up against the savings that you will make by using them, to determine whether they are worth the fee or not.

You should also ask your broker why they apply a charge in addition to the commission, as this will also indicate whether it is worthwhile paying that fee or not.

One broker can go above and beyond what is expected, doing all of the work for you, while other brokers might do the bare minimum of work for their fee.

You should ask the broker what their fee covers before you agree to work with them, so you will know what you are getting for your money.

There is a lot of paperwork and other admin tasks involved in arranging a mortgage deal, which can be really time consuming, so choosing a broker that is going to do a lot of the work for you will definitely be a big advantage.

A good mortgage broker will be able to identify the best mortgage deal to suit your circumstances but they should also be able to make the process much smoother.

They will know which lenders will provide a loan to you and for how much, by assessing the information that you provide them with.

The better knowledge they have of the mortgage market, the quicker and easier the application process should be for the applicant.

A mortgage broker should also be able to advise the applicant on the requirements of the lender, for example, which documentation they will request.

If they already know what each lender will require from you, before the lender asks for it, this will significantly speed up the process.

If you want the mortgage application to go through quickly, so that you don’t miss out on a property, then this type of insight will come in very useful.

Your broker should have exclusive access to the best deals on the market, deals that you would not be able to get hold of if you were looking directly for lenders.

They might have worked with specific lenders for years and agreed a special type of deal that will save you a large amount of money.

What you want from your broker is vast knowledge about the market, as well as their guidance and support to get your mortgage processed as smoothly as possible.

Again, taking a look at reviews of each broker you are considering using, will help you to get a better idea of how much work and effort your broker will provide in order to save you a lot of the hard work.

The reviews on sites such as Trust Pilot should also show you how easy it is to get hold of your broker, as this can be a very frustrating part of the mortgage application process; not being able to ask questions when you need to can hold up the application.

If a client has been unable to contact their broker when they’ve needed to, there is a good chance that they will mention that in their review.

You should ask your broker what their working hours are and the best way to contact them.

We also have a full dedicated article based on choosing the perfect mortgage broker for you, if you’d like to learn more before beginning the mortgage process.

How many homebuyers use a mortgage broker?

Despite the fact a good mortgage broker is likely to be able to find homeowners a much better product than they could secure themselves, well over a third of mortgage holders (39 per cent) have never used one.

We conducted an independent survey of almost 2,000 mortgage holders* to ask how many had used a mortgage broker when securing a mortgage in the past.

We discovered that on average 39 per cent of homeowners had never used one, but the number rose to half (49 per cent) of over 55s.

This means many homeowners could have reached full ownership of their property – having now paid off their mortgage – without ever having had professional advice to help them secure the best deal. Over a lifetime of mortgage payments that potentially means they’ve been paying out thousands of pounds on unnecessary interest and fees.


Younger homeowners are more likely to consult an expert, with three out of four (74 per cent) of 25 to 34s saying they have used a broker for a home loan.

Regionally, those in the South East and Wales are most likely to have used a mortgage broker, whereas those in Northern Ireland, Central England and Scotland are least likely.

Edinburgh was the city where people were least likely to have consulted a broker, followed by Belfast and Norwich. Southampton was the city where homeowners were more likely to have taken advice from an expert, followed by Manchester and London.


Buying a property is usually the biggest outlay that you will ever have and as well as the price of the property, there are many additional costs such as mortgage arrangement fees, interest fees, solicitors’ fees, valuation fees etc.

Therefore, you should be as financially savvy as possible and the more expertise and help you have with your mortgage application process, the better chance you will have of getting the right deal for your specific requirements.

If there are any factors such as poor credit history, or you are self-employed or any other reason that makes it harder to get a standard mortgage, a broker will be the best option for finding deals for your situation.

You shouldn’t get put off with the idea that a free service means is a lower quality service, because brokers like Boon Brokers can give you the best level of service but make their money by charging the lender rather than the mortgage applicant.

However, you should do enough research about the broker to find out whether they are going to be the best option for you.

A broker that has many years of experience working in the industry will be able to save you a considerable amount of money because they will know exactly which deal works out best financially, so you should take your time in selecting one.

If you want to save yourself some money then you should select a broker that has a fee-free model but make sure you don’t just pick any fee-free broker, find out as much information about them as you can.

Recommendations from friends, online reviews and other online research will help you to form an idea of whether a broker has a good reputation, or if you should stay well clear.

Top 5 Reasons People Choose Equity Release [2022 Study]

Equity Release has had mixed press over the years, but for many over 55s it provides the freedom to do things in later life that they wouldn’t otherwise be able to.

But what are homeowners planning on spending that money on? How does it vary by region or gender? And what are the main reasons those who still feel nervous about Equity Release wouldn’t consider it?

In this article

The top 5 reasons people would use Equity Release
What would people in different cities spend their Equity Release money on?
Differences in Men v Women using Equity Release
Considering family
Equity Release’s bad reputation
Is Equity Release right for you?

It’s no secret that Equity Release has had its fair share of negative coverage over the years. And rightly so when the products were newly launched and unregulated in the 1990s, and people were advised to take out products which were not suitable for their needs. 

However, that’s a long way away from where Equity Release is now. In the last 15 years the products and the regulations surrounding lenders have tightened dramatically. 

Equity Release products can help homeowners release some of the money held in their property.

Given house prices have risen by a staggering 1145 per cent since 1980, many people have a significant proportion of their wealth tied up in their home.

British Cottage

Although for many people there is a comfort in having something to pass on to their loved ones, for others it can seem crazy to put off doing things they want or need to do in life, because they don’t have the equivalent cash sat in a bank account.

Equity Release allows a homeowner aged over 55 to borrow between 30 and 58 per cent of the value of their home – whilst allowing them to continue living in it. They can either take out a Lifetime Mortgage or a Home Reversion product and the money can be taken as a lump sum or a draw down.

Homeowners opting for a lump sum take on average a pot of £81,700 and those opting for draw down typically release around £104,500. In 2020 £3.89bn was released to homeowners in the UK from their homes via Equity Release.

We wanted to understand what the driving forces are for homeowners who might consider Equity Release. Do they need the money for general living expenses, or would they want to do something exciting with the cash?

We ran an independent survey with almost 1,000 homeowners aged over 55 to ask them just that.

The top 5 reasons people would use Equity Release

  1. To fund day-to-day retirement costs
  2. To help my children financially
  3. To travel
  4. To pay for home or garden improvements
  5. To pay off debt

It seems covering day-to-day living costs is the most common reason – or helping children or family members with their finances. 

Taking the money to fund travelling and holidays came next on the list – and ranked as a higher priority for those aged 55 to 64 rather than those over 65. 

Holiday in Paris

Home and garden improvements was something many homeowners felt they would want to do with the money, which could potentially add value to the home if it needed updating. Others might need to make adjustments to their property for health reasons.

Consolidating other debts was also a reason given by some homeowners, perhaps wanting to clear off any high interest rates or wanting to cut down on monthly repayments. 

What would people in different cities spend their Equity Release money on?

Interestingly there were regional differences in priorities when it came to the reasons behind Equity Release. 

Taking a look at 15 of the UK’s major cities, we analysed what the most popular reason for Equity Release was in each.

It seems homeowners in Belfast and Manchester are yearning to see the world, whilst those in Sheffield and Norwich dream about alterations at home to make staying local more appealing. 

  1. 🏡 To pay for home or garden improvements – Norwich and Sheffield
  2. 💷 To help fund day to day retirement costs – Birmingham, Leeds, Liverpool, London, Newcastle and Nottingham
  3. To enable travel – Belfast and Manchester
  4. 💳 To pay off debts – Bristol and Glasgow
  5. 👪 To help children financially – Cardiff, Edinburgh and Southampton

Overall, those in Northern England and Northern Ireland were twice as likely to want to use the money to travel, compared to those living in Scotland or the South West of England.

Home improvements were more popular in the South East of England than any other region. Clearing debts was most pressing for those in Northern Ireland and South West England. 

Infographic on top reasons people take out equity release

Differences in Men v Women using Equity Release

Geographic locations weren’t the only reasons for differences in opinion. Men and women also had different priorities in terms of how they would plan on spending the money.

Both ranked day-to-day living costs as the most common reason.

However, men were twice as likely as women to want to use the money to travel and three times more likely to want to do Equity Release to pay off other debts.

The top five reasons men would plan on using Equity Release are:

  1. 💷 to help fund day-to-day retirement costs
  2. to enable travel
  3. 💳 to pay off debts
  4. 👪 to help my children financially
  5. 🏡 to pay for home or garden improvements

The top five reasons women would plan on using Equity Release are:

  1. 💷 to help fund day-to-day retirement costs
  2. 👪 to help my children financially
  3. to enable travel
  4. 🏡 pay for home or garden improvements
  5. 💳 to pay off debts

Overall our research showed that women were slightly more nervous about Equity Release in general and marginally more likely to have decided they would never take out an Equity Release product.

Men were twice as likely as women to feel that it is pointless keeping all your wealth tied up in a property and not putting it to good use when it’s needed.

Equity Release’s bad reputation

When researching the 1,000 homeowners we asked them additional questions around their feelings on Equity Release. Six out of 10 of the respondents (57 per cent) said they would never consider Equity Release.

When quizzed about why they felt that way one in five (18 per cent) said they had been put off due to horror stories they had heard or read about. One in 10 (10 per cent) also admitted they were worried about negative equity.

A further 22 per cent were concerned that they would no longer own their own home. However, these don’t have to be an issue with modern Equity Release products.

All plans approved by the Equity Release Council have a no negative equity guarantee, meaning you will never owe more than the value of your home and excess debt will not be passed on to your beneficiaries. For Lifetime Mortgages, which accounts for the majority of Equity Release is (over 95 per cent of our clients opt for it), you will always own your home.

With the less common Home Reversion Plan, part or all of your home is sold but you can stay there rent-free for as long as you choose.

You should always choose a company which is registered with the FCA and is a member of the Equity Release Council.

Misunderstandings around the products were high. Only 33 per cent felt confident they knew what Equity Release really entailed. Just 8 per cent said they understood the difference between a Lifetime Mortgage and a Home Reversion Plan.

It’s possible that not having a clear understanding of the products, combined with the historic bad reputation, is putting the target audience off seriously thinking about whether Equity Release could be of benefit to them and the lives they want to lead in retirement. 

Considering family

During questioning, our research revealed that one in eight homeowners over the age of 55 (12 per cent) have been put off releasing equity held in their home because they’re worried that their families wouldn’t want them to. 

Homeowners in Scotland were most worried that their families would disapprove (15 per cent) and those in the South West were least worried (9 per cent).

We also found that only 13 per cent of men and 7 per cent of women agreed that it doesn’t make sense to keep money tied up in property when it could be put to better use.

Given you can’t take your money with you, it seems that many feel they should leave the largest possible inheritance for their families, by way of a property. 

Because many families feel awkward discussing money and death these can often be conversations which don’t take place, leading to assumptions on both sides.

Homes may also have to be sold to fund care in retirement, which is one reason we always recommend families talk about these things as early as possible, to avoid miscommunication and to make sure everyone is aware of the situation.

Anyone wishing to take out an Equity Release product has to receive independent legal advice to make sure they are fully aware of the implications and details of the product they are taking on, which is a very important and sensible precaution. 

Is Equity Release right for you?

For those who need to free up some money in later life to enjoy their retirement, or to ease their or their family’s financial worries, it can be an ideal solution if the homeowner doesn’t want to sell their property. There is the benefit that the money is tax free too. 

But key to it all is really doing your homework and making sure you understand the details.

Ensuring your broker and lender are part of the relevant regulatory bodies (ERC and FCA) is a good first step to finding a reputable equity release lender. Be clear on any related fees and details around repayment charges and having the right to remain and the right to move.

Taking independent advice is vital and a mandatory part of the process. But for many people Equity Release can provide some financial freedom and a way to make the most of the property market boom without having to move.