Equity Release on Non-Standard Construction Properties

You may have heard the term equity release, had it suggested to you as an option and want to see if it’s something that would benefit you? In short, it allows people over 55 years old to withdraw some of the money tied up in the value of their home without having to move. But lenders are particular when it comes to what properties they’ll consider for equity release.

This guide will explain why, layout which properties qualify, and explain how to find out if your property fits the criteria.

Can you get equity release on any property?

No, lenders only offer equity release on specific properties. They’ll consider a property’s location, value, condition, use, and what it’s made of. Of course, different lenders have different criteria and accept different property types.

Working with a mortgage broker will speed up the process of finding a lender that is more likely to offer you a good equity release deal based on your property type.

Eligible properties

Many properties are considered acceptable, but as with most lending, your application will be assessed on a case-by-case basis.

In general, though, you’ll have a higher chance of accessing the money you’re looking for if the property you own is:

• A house, flat or bungalow made with bricks and mortar;
• In good condition;
• Is your permanent home and
• On land you also own

Why lenders won’t allow for equity release on certain properties

For lenders, it’s all about resale further down the line and making their money back. Any factors that put the ability to resell into question will raise a red flag for them unless they’re an easy fix. Issues can include safety problems, such as a property in a flood zone, one near high-voltage power lines, or a home that contains asbestos.

Other undesirable features include a property with commercial neighbours, one with single-skin walls or a house in an unattractive area. Some of these issues could be remedied, and a broker would be able to suggest how best to address them ahead of the application process.

Properties that don’t qualify

These are the property types on which lenders take a harder stance.

• Park homes: As a mobile home situated on a protected site, the property is considered non-standard. It is also land that the property owner doesn’t own or have a leasehold for. This means the lender has nothing to secure the loan against, making equity release on a park home impossible.
• Shared Ownership Properties: Lenders require a borrower to have 100% property ownership to consider equity release. In this situation, owning only a portion of your property with either a developer or local council as a co-owner means you wouldn’t be able to take equity release on a Shared Ownership property.
• Commercial properties: You can’t do equity release if you use property, even part-time, for commercial purposes. This includes instances where a property is rented out on Airbnb, leased to long-term tenants, or run as a hotel.
• Holiday homes: One of the stipulations for equity release is that the home you’re taking the money from is your main residence. A holiday home or even a second home wouldn’t qualify under this criteria, though you can use the funds to help you purchase a second property.
• Studio and basement apartments: Lenders tend to be averse to studio and basement flats, and unfortunately, that attitude translates into their equity release products.

Properties with caveats

Some properties fall between these two categories, meaning that for some lenders, equity release involving one is a hard no, but for others, potentially more specialist lenders, it remains an option. If you have one of these properties, it’s best to consult an equity release advisor for advice on where to make your equity release application.

• Properties of non-standard construction: If it is made out of anything other than bricks and mortar—perhaps it has a timber or steel frame, a thatched or tin roof, or concrete—then a property is considered non-standard. This equates to a higher risk level for lenders, making equity release on non-standard properties harder to come by.
• Listed buildings: Protected by Historic England, listed buildings must comply with specific rules and stipulations to preserve them. This could affect a future sale and make a lender for this type of property harder to find. However, specialist lenders are available to offer specific equity release products for properties considered Grade I, Grade II, or Grade II*.
• Ex-council property: Lenders are generally willing to offer equity release in this scenario as long as the discount period set by the local council has passed. The lender will also consider how many other properties in the area are still owned by the local authority.
• Leasehold property: Typically, getting equity release on a leasehold flat or house isn’t an issue as long as there’s significant time left on the lease. A minimum of 75 years is the usual stipulation, but some lenders may require it to be as long as 80 or even 90 years. If the freeholder is the council, be aware that a lender could also ask you to buy the freehold to get equity release.
• Retirement property: This isn’t usually much more difficult than equity release on a standard house, though fewer lenders will consider it.

Historically, equity release has also been harder to obtain on properties with annexes, flat roofs, and specific forms of spray foam insulation.

How an equity release advisor can help you get approved

In this situation, a broker could quickly consult and advise on whether the property in question would qualify for an equity release arrangement. If it falls into a grey area, they can advise on how to mitigate against any risk lenders may see and recommend a lender with a track record of offering equity release on such properties.

They’d also be able to:

• Guide you through the application process for equity release.
• Offer a calculation on what they believe you could feasibly ask to borrow.
• We can connect you with specialist lenders who cannot be accessed by the general public and may be more willing to offer lower interest rates.

Other factors lenders consider

Lenders won’t only look at the property type when assessing your eligibility for equity release.

They’ll also want to know:

• That you own the property in question: If you co-own it with a friend, family member, local council or developer, equity release wouldn’t usually be an option you could pursue.
• That you live in the UK for over 6 months of the year: Many retirees may choose to travel and spend time abroad. Even if you’re a UK citizen, lenders will want proof that you spent significant time in the country to qualify for equity release.
• The current value of the property: A surveyor sent by the lender will conduct a full valuation to determine its worth. If a property comes in lower than £70,000, you may struggle to find a lender willing to offer an equity release mortgage, and if it is over £1 million, a lender may ask for additional underwriting checks.
• The state of the property: A lender will also want to see that the property is in what they deem “sellable condition.” They’ll need to sell it at the end of the term, and if it isn’t of a certain standard, that will make it harder to do so.

As with any mortgage application, lenders will also factor in a borrower’s age, income if still working, the amount to be released, and any future plans.

Connect with a specialist equity release mortgage advisor

Differing from the traditional mortgage application process, obtaining an equity release mortgage can be complex, which is why it’s worth having an expert in your corner. As a specialist in the equity release market, they’ll be able to assess whether your property is eligible for such a loan, recommend which lender is likely to give you the best deal, and help you navigate the application process.

Reach out today, and you’ll be matched with a broker on our team who is experienced in the equity release market. This broker can give you bespoke advice to help you get the money you need. Call 0330 818 7026 or complete this enquiry form for a free, no-obligation consultation.