Do You Need Good Credit to Be Eligible for Equity Release?

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Written by Daniel Tannenbaum on July 7, 2021

Updated July 26, 2021

No, it is unlikely that your credit score will impact your eligibility for equity release. That being said, the lender will still conduct a credit check on applicants as part of the equity release application process.

While your credit score may not be an important factor in determining an equity release application, the credit check is still necessary as part of the application process, and helps the lender to determine other potentially important factors that could impact your eligibility for the loan.

 

Why Don’t I Need Good Credit for Equity Release?

For equity release lenders, the property in question is the primary security, and is the way in which the loan will be repaid.

In addition to this, equity release borrowers will not be required to make repayments on the loan until the house is sold, the repayment made via the money from the sale. This means that the lender will hold less importance on the borrower’s credit score so long as the value of the house and the money from the sale is secured as a repayment for the loan.

However, as the lender needs the value of the house to help repay the loan they have given, it’s important to check that this property is, and will continue to, be free from other debts that could be secured on it.

This means that the lender will still conduct a credit check to look for additional financial commitments.

If you have outstanding CCJ’s (County Court Judgements) or IVA’s (Individual Voluntary Arrangements), you’ll be considered a higher risk to lend an equity release loan to. Therefore, if you have any CCJ’s or IVA’s, you’ll likely need to have the debts settled as part of accessing the equity release.

 

Can I Take Out Equity Release With Bad Credit?

If you have bad credit, most likely you’ll still be eligible for equity release. While lenders do conduct a credit check, your score is not the most important feature of your application.

However, while a bad credit score might not affect your application too much, as previously explored, it’s important to show you are free of any outstanding debts, as this could have an impact on the future sale of the property being secured on the loan.

 

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Equity Release Key Features

Equity release can come with some fantastic key features, including the following:

  • With a lifetime mortgage, you could unlock 20%-60% of the property’s value.
  • Receive tax-free payments, either in one lump sum or smaller, scheduled payments.
  • For those aged 55 and over.
  • You’ll still be able to pass on an inheritance.

A common concern amongst those considering equity release is that they won’t be able to leave an inheritance to loved ones. However, this is simply not the case – if you take out equity release, you’ll still be able to pass on an inheritance to your family. In fact, some give the money from the equity release to their family and can enjoy watching them use it.

 

Am I Eligible for Equity Release?

There’s set criteria applicants must meet to be eligible for an equity release loan, this includes:

  • You must be 55 or over (for a lifetime mortgage).
  • You must own the property.
  • Your main residence must be the property.
  • The property must be more than a certain specified value.

If you do not meet the set eligibility criteria for an equity release lender, including that listed above, you might want to consider other forms of borrowing better suited to you and your situation. For example, if you don’t meet the age requirements but still would like to use your property to secure the loan, you might want to explore secured loan options.

 

To discuss your equity release requirements today, you can get a free and impartial quote from Lending Expert here >>

 

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