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You may wonder whether you have access to equity release at age 55. And if you do, how much can you release, and what must you consider?

55 is the minimum qualifying age for equity release. Interest rates start from 5.64%, and the maximum amount you can release on a standard plan is 23.5% of your property value (LTV). This is the lowest amount available compared to all ages, as typically, the older you are, the more money you can release.

Now that we know equity release has just become available to you, there are some essential things you should consider at age 55.

In this guide, you will learn:

In this guide, I will focus on the most common type of equity release, lifetime mortgages.

What is the maximum equity release you can get at age 55?

The maximum equity releases you can get at age 55 are:

Maximum LTV when in good health Maximum LTV with highest Medical Enhancement
Standard Built Freehold House 23.5% 27.3%
Purpose Built Flat With a Long Lease 22.0% 27.3%

Two main factors determine the maximum equity release amount you can release:

  • Your Age
  • Your Property Value

The lender calculates the amount you can release as a percentage of your property value. We refer to this as Loan to Value (LTV).

Typically, you can release more money each year you are older until you reach age 85. After this, you are limited to the number of plans available, and you will likely not get any more money as you will be approaching average life expectancy.

Medically enhanced lifetime mortgages

Currently, two lenders offer medical enhancements. They can provide extra funds at lower interest rates, as the lender expects the plan to run for a shorter period.

The younger that you are, the more significant the enhancement can be.

However, the enhancement is not a simple yes or no. Instead, the benefit of an enhanced plan increases in increments depending on the severity of your medical conditions.

Importantly, if your property is not built of standard construction or is subject to a short lease, your maximum release amount may be impacted.

To determine the maximum you can release from your property, contact us on 0207 158 0881 or book online for your free, no-obligation consultation.

What is the best equity release interest rate you can get at age 55?

The best equity release interest rate at age 55 is 5.64%. However, the interest rate you achieve will depend on several factors. Most notably, the amount of funds you release, as typically, the more money you access, the higher the interest rate.

Unlike many other financial products, equity release interest rates are fixed for life. This means it will always remain the same in the future, which can be both great for planning and avoiding unexpected rate increases.

See below for a breakdown of the current headline interest rates for a single applicant aged 55 with a £400,000 house in England.

Loan Amount Cashback Interest Rate (MER)
£16,000 £0 5.64%
£18,000 £0 5.65%
£20,000 £0 5.69%
£21,200 £0 5.70%
£25,960 £0 5.70%
£35,200 £0 5.93%
£43,600 £0 5.98%
£46,400 £0 6.02%
£48,400 £0 6.04%
£51,200 £0 6.09%
£53,600 £0 6.09%
£56,000 £0 6.13%
£56,000 £560 6.22%
£58,800 £0 6.22%
£58,800 £588 6.31%
£61,960 £0 6.34%
£61,960 £0 6.34%
£61,960 £620 6.35%
£70,000 £0 6.46%
£70,000 £0 6.50%
£74,000 £0 6.51%
£76,040 £0 6.55%
£76,040 £0 6.60%
£84,000 £0 6.86%
£88,000 £0 7.24%
£88,000 £0 7.24%
£91,000 £0 7.58%
£91,000 £0 7.63%
£94,000 £0 8.25%
£92,000 £2,760 8.40%
£92,000 £3,680 8.50%
£92,000 £4,600 8.60%

To receive your own personal market report, please use our equity release calculator.

If you looked into equity release in the past, you may have heard of variable-rate lifetime mortgages. These are no longer available as of late 2022.

What to consider when taking equity release at age 55

At age 55, you have just gained access to equity release.

Lifetime mortgages, the most common type of equity release, are designed to run for the rest of your life - as the name suggests.

Therefore, at age 55, you can expect the plan to run for decades. The lenders use an estimated term within any illustration, which is typically based on average life expectancy data from the Office of National Statistics (ONS). At age 55, you can expect an illustrative term of 29 years.

Important: Although there is an estimated term, the plan runs for as long as you require. Typically, this is until the last borrower passes away or moves into long-term care.

You do not need to make monthly payments towards the plan during this time - and most people don't. However, you should consider how the interest might roll up over those years and its impact on your estate.

Let's take a look.

If you borrow £50,000 now at the headline interest rate of 5.98% MER, after 29 years, the balance will be £299,617.

The increase is significant, but don't forget about your property value.

We have seen an average of 3% property price growth annually in recent years. So if this continued, and you have a £500,000 property after 29 years, it would be worth nearly £1.2 million.

Making monthly payments

Although you don't need to make monthly payments, it might be best if you have the funds.

Any payments that you can afford in the earlier years will have a massive impact over time.

If you work, your income will likely drop when you retire. Until then, you could use your excess income to pay the monthly interest, reducing the roll-up over the estimated term.

Most plans allow you to make 10% overpayments yearly without incurring an Early Repayment Charge. This is plenty to cover the interest, and you can even reduce the capital amount if you want to, similar to a repayment mortgage.

However, some plans also offer reduced interest rates if you service the interest by Direct Debit. If you need to stop making the payments, you can, and the interest rate may increase to their standard offering.

Let's revisit our previous example.

If you borrow £50,000 now at the headline interest rate of 5.98% MER and make interest payments until age 67, after 29 years, the balance will be £146,395.

This would save you a massive £153,222 over the estimated term!

As you can see, unless you can make payments early on in the plan, equity release can be an expensive way to borrow money, as compounding interest in later years can really add up!

Suppose you don't have the money to service the interest and expect your income to drop during retirement. In that case, it is essential to consider whether you are taking equity release too soon.

While you might be able to access more money in the future, it is not guaranteed. You will need to seek further financial advice, and the lender will need to approve it as they did the first time.

Therefore, we always suggest only taking the amount you need now and planning for the future. This is where drawdown plans can be helpful.

Drawdown equity release

Drawdown plans allow you to get prior approval to access funds in the future without the need for further financial advice.

They work by taking an initial lump sum and placing a pre-agreed amount into a reserve facility.

You are not charged any interest on the amount held within the reserve facility until you withdraw it, often in minimum amounts of £2,000.

Drawdown plans can be a great way to top up your income. But at 55, obtaining a plan to support you throughout your whole retirement with regular income can be difficult.

This is because the maximum amounts you can place in a reserve facility are at their smallest at age 55, compared to each year you are older (until 85).

Changes to your circumstances

When you are 55, you should have decades ahead of you, and equity release can be a great way to provide you with extra money to realise your financial dreams.

However, when taking equity release, it is essential that you consider your ongoing needs in the future and not just focus on your goals now.

If you decide to move in the future or pay for private care, your options could be limited if you take an equity release.

Similarly, you should plan for changes to your income and expenditure. When considering equity release, it should be a great time to also consider what income you are likely to receive later in life from any pensions and what job you will likely do later in life (if any).

Moving Home

Many people also like to move home later in life, whether for financial, personal or health reasons. And at age 55, you may have yet to consider whether your current property will be your forever home.

Although all equity release plans can be transferred to a new property (ported), it might be worth considering a plan feature to help avoid Early Repayment Charges (ERCs) should you wish to downsize and repay the equity release.

Downsizing protection

Downsizing protection allows you to repay the balance in full without incurring an Early Repayment Charge when you move home after having your plan for several years, typically five.

If you have any plans to move in the future, let your equity release advisor know.

How equity release changes as you get older

With equity release, the older you are, the more money you can access. Typically, each year you are older, the amount increases by 1% of your property value (LTV).

This general rule applies until age 85, with one exception. This is at age 60 when the LTV usually increases by a larger amount of up to 3%. This is because while plans start from 55, some equity release lenders do not lend until age 60.

So, when speaking with your equity release advisor, you should consider whether you need the funds now or if it is best to wait.

How your birthday affects equity release

If you are within six weeks of your next birthday, you can apply for equity release based on the age you will be. This can be helpful to achieve a larger release or a lower interest rate.

But remember, interest rates, release amounts, and products available now cannot be guaranteed in the future.

What is the best equity release lender for a 55-year-old?

There is no best equity release lender for a 55-year old, as it will depend on your financial circumstances and goals.

However, some lenders that offer competitive interest rates and release amounts now are:

  • Standard Life
  • More2Life
  • Canada Life
  • Aviva
  • Just Retirement
  • Legal & General

However, other lenders also offer great plans that cannot be discounted, so this list is not exhaustive.

Your equity release adviser will be able to recommend you the most suitable lender based on your financial goals and needs.

What is the best equity release plan for a 55-year-old?

There is no best equity release plan for a 55-year-old. Instead, the best plan is unique to you.

Your equity release advisor will complete an information-gathering exercise known as a "Fact Find".

They will examine your total assets, liabilities, income, future plans, and financial goals.

Only once they have completed the Fact Find can they recommend the most suitable and cost-effective plan for you.

Can you get an equity release if one applicant is under 55?

To take equity release, all applicants must be aged 55 and over. If one co-owner is under 55, the only way that you can obtain equity release would be to apply in the sole name of the person over 55.

However, this also poses extra risks.

You must fully own the property to apply for equity release. Therefore, if you are currently joint owners, the person under 55 will need to transfer their ownership as part of the equity release process.

It is important to remember that if someone transfers property ownership, they will no longer have any claim on the property.

This means if the applicant passes away or moves into long-term care, the plan will have concluded, and the lender will need repaying. Therefore, the other person may need to pay the equity release lender or vacate the property and find new living arrangements.

Applying as a sole applicant is acceptable to all lenders unless you are married or in a Civil Partnership. In this case, you can only access two lenders and are limited to the plans available.

Your equity release advisor will be able to best advise you on how to proceed and discuss how taking equity release as a sole applicant will impact both of you.

I have written a full guide on equity release if you are under 55.

Why could equity release be a bad idea at age 55?

Equity release could be a bad idea at age 55 if you are concerned about its impact on the amount you leave to your beneficiaries. This is because the plan is intended to run for many years, and the interest roll-up can be significant if you are not servicing the interest.

However, if you plan to service the interest, a standard residential mortgage could be a more suitable alternative.

Residential mortgage interest rates typically start lower than an equity release plan. However, they are not fixed for life as an equity release plan is, meaning you could be susceptible to rate increases in the future.

Furthermore, residential mortgages will require mandatory monthly payments, and you must prove to the lender that you can afford them.

Whereas equity release plans are not affordability assessed. Instead, they are largely based on the youngest homeowner's age and the property value.

Pros of equity release

  • No mandatory monthly payments - Any payments that you make are optional, so there is no risk of repossession if you cannot afford or choose not to pay.
  • Poor credit scores accepted - There are no affordability assessments with equity release plans, so even if you have no job or bad credit, you should still qualify for equity release.
  • No fixed-term - The plans run as long as you are living in the property. Only when you pass away or move into a care home would the equity release finish. The lender can never ask for their money back early or force you to move out.
  • Drawdown plans - Access to pre-agreed reserve facilities, which you draw upon as you need more money in the future.
  • Fixed-for-life interest rate - You will never have a rate shock with a lifetime mortgage. The interest rate you have at the start of the plan remains the same until the balance is repaid.
  • Medically enhanced plans - If you have certain medical conditions, you can access more money and lower interest rates.

Pros of residential mortgages

  • Shorter Early Repayment Charges - Typically, ERCs will be for the same time period as the fixed term of the mortgage. Whereas with Lifetime Mortgages (Equity Release) you can expect them to run from 4 to 15 years.
  • Larger maximum LTVs - You can find residential mortgages offering 75%, 80%, 90% and even 95% LTVs. Instead of your property value, the maximum loan amounts are based on your income and expenditure. Therefore, you can often release more on a residential mortgage while you are younger and still working.
  • Lower interest rates - As interest rates are fixed short-term, interest rates will be lower than lifetime mortgages, which are fixed for life.

Cons of equity release

  • Compounding interest - If you elect not to make monthly payments, interest charges will be added to the total loan. Therefore, as time passes, you will see larger interest charges as they will be levied on the total balance outstanding.
  • Longer Early Repayment Charges - As the interest rate is fixed-for-life, you can expect longer early repayment charge periods than residential mortgages. Lifetime mortgages typically have ERCs lasting 4 to 15 years.
  • Stricter property underwriting - The resale value of your home is more important to equity release lenders than with residential mortgages. Therefore, you can expect stricter property underwriting, but don't forget you also have much more flexible personal underwriting.
  • Primary residence only - As of writing this guide, there are no equity release lenders who can lend on second homes or buy-to-let properties.

Cons of residential mortgages

  • Interest rate shocks - At the end of your fixed-rate term, you will be moved to the Standard Variable Rate, and if you wish to re-fix, you will be charged at the prevailing rate. People moving off their low fixed rates can see huge increases in their monthly payments.
  • Mandatory monthly payments - You do not have the flexibility to pay less than the interest charged and capital that you have agreed to pay each month.
  • Risk of repossession - If you fail to keep up with your mandatory monthly payments, your home may be repossessed.

A Money Release advisor will only recommend an equity release plan if they believe it is your best solution.

Are you taking equity release too soon?

Taking equity release at age 55 might stop you from being able to take it again in the future.

With the national retirement age coming up, it is important to consider whether you need money now or whether you can manage and use equity release when you need it more.

Let's look at a scenario.

You own a house worth £300,000. You take the maximum equity release available at 23.50% of the property value (£70,500) to clear your existing mortgage. Due to it being the maximum release, it attracts an interest rate of 8.25%.

You plan to retire in ten years. After ten years, the balance is £163,544, and based on a 3% annual growth, the house is now worth £415,270.

Based on current plans, at age 65, you can release 35.20% of the property value, which is £146,175.

As you can see, this is not enough to cover the existing plan, and the current lender will not provide a further advance as you previously released the maximum available.

Whereas if you continue to pay your mortgage, you have the option to take an equity release plan when you retire and need the monies because of a drop in income.

Alternatively, you could make interest payments towards the equity release as we have looked at. Still, a residential mortgage could be more cost-effective due to the often lower interest rates.

Therefore, it is essential to discuss your future plans with your equity release advisor to ensure you will be financially stable for the rest of your life, not just for the next few years.

Equity release can impact your means-tested benefits

Equity release can be a bad idea if you are in receipt of means-tested benefits, but you adviser will be able to guide you to ensure it is the best solution before taking it.

So why might it be a bad idea?

Firstly, a means-tested benefit is any benefit you are entitled to based on a low income.

These are:

  • Council Tax Reduction
  • Universal Credit
  • Child Tax Credit
  • Housing Benefit
  • Income Support
  • Income-based Jobseeker's Allowance (JSA)
  • Income-related Employment and Support Allowance (ESA)
  • Working Tax Credit

Now, the lump sum of cash paid to you when you take equity release is classed as a loan rather than income. Therefore, you should not declare it to your local benefits office / DWP as income.

However, if the money is held within your account for an extended period, it will be considered savings.

You could lose your entitlement if you have savings above certain thresholds (depending on the benefit you receive).

This is where drawdown plans can be helpful.

Remember, drawdown plans allow you to take an initial lump sum and place a pre-agreed amount into a reserve facility.

In almost all scenarios, the amount held within the reserve is not classed as savings.

However, we know a few instances where, following individual reviews, the DWP has classed equity release as income and savings when funds have been regularly drawn to provide an income top-up.

Therefore, I always suggest speaking with your local benefits office if you receive means-tested benefits and plan to take equity release to know the exact impact it could have.

For a full guide on how equity release can impact your benefits, click here.

If you have further questions, why not speak with one of our qualified advisors?

Call us on 0207 158 0881 or use our online form to book your FREE consultation.

While a qualified equity release advisor has written this guide, it is not intended to be used as financial nor legal advice and should not be relied upon.

To understand the full features and risks of an Equity Release plan, ask for a personalised illustration.

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