Is It Possible to Be Refused Equity Release Loan? Find Out!

Equity release schemes are tied to the equity you have in your home, so as long as you’ve paid off most of your mortgage, it’s not usually too difficult to get accepted for an equity release loan.

But some applications can be declined for varying reasons.

Can You Be Refused an Equity Release Loan?

You can be refused equity release if a lender has concerns about the resale value of your home - for example if it is falling into disrepair or is located in an area of flood risk or commercial property growth.

It’s not common, but you can be refused for equity release for a number of reasons, usually related to your property and the risk of it not being sold easily.

Read on to find out more.

Looking for other information on Equity Release? This guide has info on 'Can you be refused equity release?' We have also writen extensively about:

• - Can equity release be paid back?
• - Can you use equity release to pay off mortgage?
• - Can equity release be transferred to another property?
• - Can equity release be repaid before death?

We update all our guides regularly. If you are researching Equity Release and we haven't got an exact guide that helps you, keep coming back as we update daily.

Equity Release: Age Limits

Equity release has an age limit, and if you’re outside of this limit then you won’t be able to apply. For lifetime mortgages, the lower age limit is usually 55 years old, although with some lenders it may be slightly older at 60. If you instead choose home reversion, where you sell part of your home to the lender, you’re looking at a lower age limit of 65 years.

There’s an upper age limit too, which can be anything from 85 years to 95 years depending on the lender. This is usually enforced to cover the lender in the case of accusations about vulnerability.

A lender cannot give you an equity release loan if you aren’t completely sound of mind or you are taken advantage of. If you’re above these age limits, it would be much easier for a relative to claim you were a vulnerable customer, which could result in the lender losing their money or even being fined.

The older you are when you apply for equity release, the more money you will usually be permitted to borrow, but don’t wait too long otherwise you may end up above the upper age limit for the most suitable lenders, and leave yourself unable to claim.

Equity Release: Credit History and Bankruptcy

A lot of people worry that a poor credit history could impact the decision on their equity release loan but in reality, that’s rarely the case. Your credit history shouldn’t have an impact on your ability to repay an equity release loan since it’s guaranteed against the equity you already have tied up in your home. And since you won’t be making immediate repayments and the debt is only settled once you’ve died, affordability isn’t an issue either.

The only problem will be if you have active CCJs against your name, or you’re currently going through bankruptcy. Either of these could risk you losing your home to clear the debt and so you won’t be able to take out an equity release loan against it.

Equity Release: Value and Worth of Your Home

The most prevalent reasons for an equity release loan being refused are all around the future resale potential of your home. Your lender needs to ensure that your property will hold its value, otherwise, they won’t get their money back.

Lenders won’t take any risks, and so if there’s even a chance that something could stop your home from being sold in future for the value they’d require, they will decline your application.

A study by the lender More 2 Life picked out some of the top reasons for customers to be refused equity release.

Properties with a flat roof will be declined by most lenders. Generally, a flat roof is anything with an incline less than 15 degrees. A larger incline is needed to ensure there’s never any build-up of rainwater. If water can be allowed to pool then it can cause damage, particularly in colder months when it then freezers. So, if your property has a flat roof with a lower incline, you may struggle to get accepted by a lender.

Equity Release: Proximity to a Commercial Venue

Another reason could be the proximity to a commercial venue. If your home is near a factory or, for example, a live music venue, that could have serious implications on how easy it would be for the property to sell. It may be something that’s only become an issue since you bought your property if the commercial venue is new, but if there’s a chance it could deter future buyers then your lender may not want the risk.

It will be down to the decision of the lender and the type of commercial property. For example, a takeaway next door is going to cause more problems than a charity shop.

Flood risk is another absolutely major red flag for a lender. With the changes to the environment and more frequent flooding in recent years, any property that’s in a flood risk zone may suffer future damage which may lower the value of the home or prevent its sale completely.

If you live in a flood risk zone and there are no plans for local authorities to put preventative measures in place, you might not be able to take an equity release loan.

Believe it or not, clutter can sometimes prevent a lender from being willing to sign you up to an equity release scheme, for one of two reasons. If your home is generally cluttered and doesn’t look well-maintained, your lender could have concerns about your ability to look after it properly.

They may believe it could end up damaged, or any issues wouldn’t be dealt with promptly, and so the value could decrease before it’s sold when you die.

Equity Release: How Cluttered Is Your Home?

The other related reason is that, if your home is extremely cluttered, the surveyor might not be able to properly assess your home. Without an accurate valuation, your lender won’t progress your application.

Any existing issues with your home might stop a lender from being willing to take your application further, and one of the most obvious would be signs of asbestos. There are still a number of properties in the UK with asbestos roof tiles, and if yours falls into this category then a lender may decide it’s not worth the risk since without it being replaced there could be serious ramifications before it’s time to sell.

Beyond these more common issues, there are a wealth of less obvious problems that could stop you, depending on your lender. Lenders have different criteria, and so don’t worry if you’re knocked back by one. For example, certain lenders won’t consider timber-framed properties from certain years, while others will.

Some lenders won’t consider properties with large estates over five acres, primarily due to the potential hidden problems that the land could have that would take extensive and expensive surveying to uncover.

Equity Release: Alternatives to Equity Release

If you are declined for an equity release loan, there are some options available to you. You could consider an over-55s mortgage, which works in the same way as a traditional mortgage with repayments to be made against the loan and interest. Rates for 5-year mortgages are typically around 3.5%.

Or, if you aren’t too worried by the prospect of relocating, you can downsize. By selling your home and buying a cheaper property to move into, you could raise a lot of money to help you with retirement without having to get into debt.

You must make sure that you consider sellers fees and other associated costs when you take this option so that you don’t budget for the money you won’t actually have available to spend.

In Summary

There are various reasons why you could be refused equity release, but they don’t apply to the majority of applicants. Most who apply will be successful and can enjoy the money as they see fit.

If equity release sounds like it could be an appealing option for you, then make sure to read our guides for a full breakdown of the costs involved, the pros and cons and more.

How Can Money Savings Advice Help You With Releasing Equity?

Here at Money Savings Advice, we have partnered with some of the UK’s leading Equity Release brokers. They have already helped thousands of people get the best Equity Release deal and they can do the same for you.

Choosing an independent adviser means they won’t recommend a scheme unless they are sure it is in your best interests. Their advice is also regulated by the FCA, which gives you an additional layer of protection.

If you would like to speak to one of these brokers who can provide you with a ‘whole market quote’ then click on the below and answer the very simple questions.