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You can usually get equity release with poor credit. However, you will be required to pay off certain types of debt. In many cases, you can achieve this with the equity release funds.

In this guide, you will learn:

About half of the clients I have seen have some form of debt. The most common being a mortgage.

Equity release can be a useful way to help clear debts, but it isn't for everyone.

If you are worried about your debts, it may be beneficial to speak with a debt charity such as Step Change who provide free debt advice.

To find out about how debts impact an equity release, read on below.

How does bad credit affect equity release?

As part of any equity release application, the lender will check your credit report.

If you have a poor credit rating, you may be concerned about how it could negatively impact your equity release application.

But as we will explore throughout this guide, it is unlikely that your credit rating will impact your ability to get equity release.

The most important advice I can give you is, to be honest.

Any lender will prefer honesty and integrity over a bad credit report!

Can you get equity release if you have credit card debt?

Credit card debts can be crushing to be under, and it can often feel that there is no way out.

I know that for any finance which requires monthly repayments, the lender will consider your credit card debt, and your ability to repay them.

With an equity release plan, it is different!

As there are no monthly payments that you are required to make, your credit card debt will not be called into consideration.

With credit cards, the debt is unsecured; meaning that your credit card isn't linked to your property.

If you choose to repay your credit cards with the equity release funds, it will be your responsibility to repay them.

By repaying your credit cards with an equity release plan, you will be moving the debt from unsecured to secured. It is therefore essential that you receive advice on the implications of doing so.

If you have credit card debt and have failed to make your monthly minimum payments, you may also be in arrears. In turn, this could lead to other credit issues, including CCJ's and charging orders. We explore these later in this article.

Lets now explore the full effects of arrears.

Can you get equity release if you have arrears?

Yes, you can still get equity release if you have arrears.

Debts secured on your property (for example a mortgage with arrears), will need to be repaid in full.

You can repay the sums owed with the equity release funds.

If the debt is unsecured, for example, personal loan arrears, the lender will take into consideration the details of your arrears, including the number of missed payments and the total amount owed.

Even though the unsecured debts are not linked to your property, the lender does not wish for the creditors to apply to the courts to have them secured.

Therefore, the equity release lender may ask you to repay the arrears as a condition of the equity release.

Can you get equity release with a CCJ?

County Court Judgements (CCJ's) relate to debts which you have left unpaid.

For the CCJ to be registered, your county court will have adjudicated that the debt is valid and needs to be repaid.

And, unless the CCJ is settled within one month, it will remain on your credit file for six years.

With any equity release application, your credit record will be checked. If there are any CCJ's noted, they will be required to be settled.

Depending on the amounts owed, I have seen lenders request that the CCJ is either repaid:

  • before they release the equity release funds,
  • upon completion by your solicitor before they transfer you the remaining funds, or,
  • by you after receiving the equity release funds (typically within six months).

When speaking with your advisor, it is essential that you make them aware of any CCJ's you have before making any equity release application.

If I know that someone has a CCJ, I will be able to best advise them on the steps they need to take and match it to a plan that best suits their needs.

If it is not declared and the lender later finds out that there are undeclared CCJ's, they may decide not to lend, even if they would have been able to proceed had they known upfront.

For this reason, I often suggest that clients obtain a copy of their credit report.

I have used ClearScore for years and am happy to recommend them to you. Visit www.clearscore.com to receive your free credit report.

Can you get equity release if you are in an IVA?

If you are in an IVA, you can get an equity release. However, the lender will require that the IVA is settled in full.

Some lenders will allow the IVA to be settled upon completion. However, some lenders will require that your IVA is cleared before an application is received.

I work with clients to find the best way for them to move forward, including providing details of the best plans for each instance and discussing alternative ways to clear the IVA.

In the final year of your IVA, you are required to look at releasing equity from your property to repay your creditors.

A typical IVA allows you to retain 15% of the value of your home. So working out 85% of the value of your home determines how much equity you may have to release. If your existing secured borrowings (including any mortgage) is more significant than 85% of the property value, then you are not required to release equity.

As you may be forced into releasing equity with an IVA, it is common that a lifetime mortgage could be used to repay the amount owed.

One of the great features of a lifetime mortgage is that your eligibility is not based on affordability as you are not required to make monthly payments.

If you would like to explore using equity release to repay your IVA, please contact me, and I will be able to help.

Can you get equity release if you have a charging order?

You can still get equity release with a charging order. However, the charging order will need to be satisfied, and the lender repaid.

What is a charging order?

A charging order is a charge placed upon your property which must be repaid upon sale or remortgaging of your home.

Charging orders can only be placed on your property following an order by the court. It is therefore likely that you will only have a charging order if you also have outstanding County Court Judgements which remain unpaid.

Any charging orders will be visible on your title deeds.

If your property is registered with the land registry, we are happy to provide you with a copy of your title deeds free of charge.

How bankruptcy affects an equity release plan

For every equity release plan available, you will need to be discharged from bankruptcy (this releases you from any debts, and restrictions covered by your bankruptcy).

If you are not yet discharged, no lender will provide you with an equity release plan.

After a year of being bankrupt, you will usually be automatically discharged from bankruptcy. However, your bankruptcy will stay on your credit file for six years.

Regardless of when your bankruptcy took place, you will need to declare it to your advisor and the equity release lender.

Providing you are discharged from bankruptcy, your eligibility will not be impacted.

In summary

As you can see, even with different types of bad credit, you are likely still able to get an equity release.

I have even helped people who were facing property eviction and could see no way out.

To discuss your circumstances, and how to get an equity release book your FREE consultation.

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.