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Release equity from your house: Increase your income

Posted on 3 July 202330 March 2025 by Sophie Soraf

As we’ll explain in this article, equity release is just one of several options that are now available to over 55s who wish to increase their income. Here at Tees our Equity Release Council member and SOLLA accredited experts are on hand to help and advise you every step of the way.

We’re all living longer and often, retiring later.

Changes to the state pension age, along with anticipated shortfalls in many private pensions, mean that we’re likely to need to look to alternative solutions as to how to fund our lifestyles in or approaching retirement – or risk relying on debt in later life.

In the past five years, the total value of debt held by the over-55s is estimated to have increased by 47 per cent and in another five years, this total value is forecast to increase by 35 per cent, rising to £397bn by 2024.

The good news is that the options to increase your income in later life are growing, becoming much more attractive – and can offer you peace of mind.

Since the government introduced pension reforms in 2015, the financial services industry as a whole – including the mortgage market – has begun to catch up with the challenges and opportunities of social change and consequently, lending criteria relating to age and retirement status have become a good deal more flexible.

Only a few years ago, there might have been a small handful of building societies prepared to lend to people of older age, however today, the options are many and varied and the previously niche equity release market has seen rapid growth and development into an industry that is now more commonly referred to as the later life lending market.

It is estimated that the UK’s over-55s currently own £1trillion in housing wealth.

What is later life lending?

Put simply, it is a mortgage offered to the over 55s that is designed to let you make use of the money that’s built up in your home and help you live better in your retirement.

What are the different types of later life lending?

Lifetime Mortgage

This is a form of equity release that lets you unlock the value in your home as a tax free lump sum of money.

How does equity release work?

Equity release is essentially like a long term loan. However, you don’t have to make monthly payments, unless you choose to, and the loan is usually repaid when the last borrower moves into long term care or dies, and you keep full ownership of the property. The maximum loan amount depends on your age and how much your property is worth.

Equity release may not be right for everyone. It may affect your entitlement to state benefits and will reduce the value of your estate.

Retirement Interest Only (RIO) Mortgage

A retirement interest only mortgage is very similar to a standard interest only mortgage, but with some differences.

The main part of the loan (capital) is usually only paid off when the last borrower moves into long term care or dies and you only have to prove you can afford the monthly interest payments.

Retirement Capital & Interest (RCI) Mortgage

Much like a standard repayment mortgage you pay back both interest and capital on a monthly basis.

The main difference is that you can borrow up to a higher age than on a standard mortgage but the product is still designed to repay your mortgage in full by the end of your term.

You’ll need to be able to afford the repayments on a monthly basis.

Home Reversion Plan

A Home Reversion Plan allows you to access all or part of the value of your property while retaining the right to remain in your property, rent free, for the rest of your life.

The plan provider will purchase all or part of your house taking into account your age and your health and will provide you with a tax free cash lump sum (or regular payments) and a lifetime lease, guaranteeing you the right to stay in your property rent-free for the rest of your life.

Is borrowing in later life right for me?

It’s often a good idea to speak with family members or trusted friends before taking on further borrowing in later life, they can often offer support and suggest other ways you could raise money. Borrowing in later life can have an impact on inheritance amounts you leave and any state benefits or local authority grants you get.

Is it wise with increasing interest rates for parents to release equity to assist in paying off or reducing their children’s mortgages?

This is a complex decision and will depend on various factors, here are some considerations:

Helping your children may be beneficial if you have excess funds and you are in a financially stable situation. It’s important to ensure that you have enough savings for your own needs and emergencies before considering assisting your children with their mortgages.
Releasing equity from your home may affect your retirement plans. It’s crucial to evaluate how using this equity will impact your future financial security, as you may be reducing the value of your estate or limiting your access to funds in the long term.
Before considering equity release, explore other possibilities for helping your children with their mortgages. For instance, you could recommend they seek financial advice or explore other forms of financial support that may not have long-term consequences for your own financial situation.
While helping your children reduce their mortgage loan can be beneficial, it’s essential to involve them in the decision-making process. Make sure they understand the implications and responsibilities associated with receiving financial assistance.
Releasing equity from your home may have tax implications, such as potential inheritance tax considerations.
Releasing equity may reduce your financial flexibility. Consider whether you may need access to the equity in the future for other purposes, such as long-term care costs or other unforeseen circumstances.

Ultimately, the decision to release equity to assist your children with their mortgages depends on your financial circumstances, risk tolerance, and long-term goals. It’s advisable to seek advice from a qualified financial adviser who specialises in this area of advice or a mortgage specialist who can provide personalised help and guidance on your specific situation.

Can I apply for a later life mortgage?

Many lenders will consider applications from people aged 55 up until their 85th birthday, with some lenders offering existing customers a mortgage up to their 95th birthday.

What can the money be used for?

The money released can be used for lots of different things. Some common uses include home improvements, family gifts, funding the purchase of a further property, buying a car, travelling abroad, or funding care.

Example

Mrs Hurst needed to carry out improvements on her home and gift her daughter money to aid her in buying a house. At the time, she held a lifetime mortgage previously arranged with another lender at an uncompetitive rate of 7.19%.

In order to achieve her goals, Mrs Hurst required an urgent loan of £226,160 and a more competitive rate of interest than her existing lifetime mortgage.

Tees’ Solution

Utilising a ‘whole of market’ approach, a new Lifetime Mortgage product was secured for Mrs Hurst, offering a significantly lower rate of interest of 3.92%.

As well as releasing an initial loan, Mrs Hurst released an additional £32,665 in order to fund the necessary £25,000 for home improvements and £10,000 to aid her daughter’s home purchase.

Even though the transaction involved releasing additional equity from her home, the lower rate of interest that was secured for Mrs Hurst on her new Lifetime Mortgage arrangement has resulted in a total saving of £256,049 of mortgage interest payments over a 15 year period, compared with if she had remained with her previous lender.

Outcome

The savings we secured for Mrs Hurst means she is now more able to enjoy a more comfortable retirement.

Our clients come to us for many different reasons. One of these is we offer lenders from the whole market and are able to access low rates. This ensures our clients can enjoy their retirement to the fullest and get the most out of the value of their home.

The Tees difference: a bespoke service that’s focused on delivering what you really need

Toni Chalmers-Smith is a later life lending specialist at Tees who has worked in the financial services industry for over 25 years. While fully qualified in all forms of life, health, mortgage and pension business, Toni is expert in advising clients who require later years advice, which includes investments, inheritance tax and estate planning, equity release and care fees planning. Toni works closely with Tees’ legal advisers in providing specialist advice on all areas of later life lending and also offers older clients a financial review and support service, especially if an individual or family member is unable to cope with day to day financial decisions.

Catherine Banks is an experienced solicitor in Tees’ residential conveyancing team, and specialises in later life lending conveyancing. Together Toni, Catherine and the rest of the Tees team work seamlessly together to ensure that the solutions they provide truly fulfil your needs, and are fully tailored to your individual circumstances.

Toni and Catherine pride themselves on offering a friendly, personal service which is designed to put you at ease and support you in these important financial decisions. Their approach is highly ethical; when dealing with older clients where there may be a vulnerability concern Toni can offer an advisory service and where necessary, work with a Power of Attorney and/or make an application to the Court of Protection on your behalf.

Expert financial and legal advice all under one roof

There are many advantages of having your financial advice and legal conveyancing services all under one roof:

a fast, efficient, joined-up service that is second to none
transparency in terms of our fees and any associated costs
a fully comprehensive service that is highly cost-effective

We at Tees strongly believe that financial and legal advice should take you to the stage where you can make clear and informed decisions, happy in the knowledge that you have received all the information and choices needed to reach those decisions.

Toni is a SOLLA Accredited Adviser and operates under its strict code of conduct. Both Toni and Catherine are members of the Equity Release Council: https://www.equityreleasecouncil.com/

Only specialist advisers can offer equity release advice.

Long-term Care Planning: Get the Best Advice

Posted on 21 September 202030 March 2025 by Sophie Soraf

Our SOLLA (Society of Later Life Advisers) accredited care fee planning team can help you create a robust plan for later life, in order to avoid difficult financial decisions for yourself and your loved ones down the line.

Long-term care refers to the range of services available to support those who need long-term or permanent assistance in caring for themselves. This can include residential and nursing home care, as well as domestic help.

Services are provided by a wide range of different bodies and organisations, including local Authorities, the NHS, private organisations and charities.

In the UK, better standards of living and improvements in healthcare have led to people enjoying a longer life expectancy. While in 1950, the average person could expect to live until they were nearly 69 years of age, today we have a life expectancy of over 81 years old.

While many older people can now expect to live to an advanced age in good health, it is inevitable that some will require care and assistance as they reach their later years.

How much does long-term care cost?

According to the Money Advice Service, the average annual cost of residential care is between £30,000 and £40,000 per year. These costs may not be all-inclusive, either – visits to the hairdressers, day trips and other forms of entertainment, for example, can all cost extra.

Home care costs will vary according to the person’s needs. On average, the cost of a home carer is around £17 per hour. So, even if you only need two hours of care per day, it could still add up to £12,500 per year.

Does the government help to pay long-term care fees?

Government funding is available to help you with the costs of long-term care. The amount to which you are entitled varies across the UK, with each devolved nation offering different levels of support.

In the autumn statement 17th November 22, chancellor Jeremy Hunt said the introduction of the new £86,000 cap on the amount anyone in England will need to spend on their personal care over a lifetime, will be delayed two years and now come into effect in 2025.

England and Northern Ireland

If you live in England or Northern Ireland, the government funding you receive will depend on how much capital you have. If you have capital assets:

Less than £14,250: You’re entitled to local government funding to cover the cost of your care. You won’t be expected to contribute from your capital, but if you are still drawing an income (e.g. a State or private pension), you’ll be expected to contribute this except for a personal expenses allowance (PEA) of £24.90 per week. If the cost of your care is more than your local authority’s standard rate, you may have to pay the difference – this is called a ‘third party top up’.

Between £14,250 and £23,250: You’ll be entitled to some funding, but you may have to contribute all income in excess of the PEA, as well as £1 per week for every £250 in capital you have between the upper and lower limits. For example, if you have savings of £21,000, you’ll be expected to contribute £27 of your capital per week in addition to your income.

Over £23,250: You will have to pay for your own care.

Scotland

The capital limits are higher in Scotland, but similar rules apply.

If you have capital assets:

Less than £18,000: You’re entitled to funding to help with your care fees. As above, you won’t be expected to contribute from your capital, but you will be expected to contribute all income over the PEA (£28.75 per week in Scotland).

Between £18,000 and £28,500: You’ll be entitled to some funding from your local authority, but will be expected to contribute £1 of your capital per week for every £250 you have between the upper and lower limits, as above.

Over £28,500: You will be expected to pay the full cost of your care.

Wales

In Wales, there are different rules depending on whether you need at-home or residential care.

At-home care

If you have capital worth:

Less than £24,000: You will not be expected to use your capital to pay for your care. Your local authority can only look at your income when deciding what to charge you.

Over £24,000: You will be obliged to pay for your home care, but the Welsh government has capped the cost at a maximum of £90 per week.

Residential care

If you have capital worth:

Under £50,000: You won’t be expected to use your capital to pay for residential care. You will, however, be expected to contribute all income in excess of the PEA, (£32 per week in Wales).

Over £50,000: You will be expected to pay the full cost of your care until your capital is reduced to £50,000 or below.

What counts as ‘capital’ for long-term care means tests?

For the purpose of local authority means tests, your ‘capital’ includes the value of the following assets:

Property (although this can be disregarded under certain circumstances)
Money held in bank accounts/building societies
Investments
Premium bonds
Cash
Any benefits you’re eligible for (even if you’re not claiming them)

What if I’m not entitled to government funding for my long-term care needs?

If you have a disability or complex health needs, you may be eligible for NHS continuing healthcare (CHC) free of charge. It is a package of care that can be provided at home, in a nursing care home or in a hospice. You’re more likely to qualify if you have healthcare, as opposed to social care needs.

If you are ineligible for government or NHS funding, there are ways to self-fund your care. Whether you’re paying in full or in part, the costs can mount up and it’s wise to prepare yourself financially. You could do this, for example, through savings and investments, or through a care fees plan (also known as an immediate needs annuity). This is a specialist insurance plan designed to convert capital into income to meet your care fees.

Consulting with an independent financial adviser well ahead of time will equip you with the tools you need to prepare yourself for the potential costs of long-term care.

Will I have to sell my house to pay for long-term care?

Your property will be included in government means test assessments, except in the following circumstances:

Your spouse/civil partner lives in the property
A disabled relative lives in the property
A relative over the age of 60 lives in the property
A child under the age of 16 lives in the property
Your care needs are only temporary
You are in your first 12 weeks of needing permanent care

If you do need to sell your home to pay your care home fees, the 12-week deferment period (which only applies if your capital falls under the upper limit in your country of residence) gives you time to find a buyer for your property and complete the transaction before you have to start paying fees.

Can I give away my property so it’s not included in the means assessment?

Even if you give your home away, for example to your child or another relative, it may still be counted as capital in the means test. This is because your local authority may see it as a ‘deprivation of assets’. This means that you have gifted your property for the sole purpose of discounting it from a means assessment. So, you might have to pay for the cost of your care as if you still owned your home anyway.

What happens when I can no longer make important decisions for myself?

Some people who require long-term care have lost mental capacity, and no longer have the ability to look after their money or advocate for their needs. That’s why planning ahead is so important, to enable your family to step in and manage your affairs when you need it most.

You can nominate somebody who is legally entitled to manage your personal and financial affairs with a document called a Lasting Power of Attorney (LPA). There are two types of LPA:

Health and Welfare LPAs allow your nominated attorney to make vital decisions relating to your health and personal welfare (including decisions surrounding long-term care);
Property and Finance LPAs will allow them to make key decisions about your money and property (e.g. whether or not to sell your house to pay for care home fees and accessing your capital to pay for your care).

Without an LPA in place, your family could face a drawn-out court process before they are able to give you the help you need.

Assistance is at hand

If you have capital and property that places you above the capital limits in your country of residence, then it is extremely important to seek professional independent financial advice from an adviser specialising in long-term care planning.

Our SOLLA (Society of Later Life Advisers) accredited care fees planning team can help you create a robust plan for later life, in order to avoid difficult financial decisions for yourself and your loved ones down the line.

At Tees we offer expert independent financial as well as legal advice which gives us the ability to combine your financial planning and legal needs, giving you a fully joined-up view.

We can take care of your later life financial plans in conjunction with advising you on estate planning and Powers of Attorney. We’re here to help, and only a phone call away.

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Past performance is not a reliable indicator of future returns and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.