If you have equity in your home but a history of bad credit, you may wonder if these past issues could hinder your ability to access the money tied up in your house. Here, we’ll explain how equity release works if you have poor credit, the options available, alternatives to consider, and which lenders may consider your application.
Can you get equity release with bad credit?
Yes, having bad credit doesn’t mean you won’t be approved for equity release. Unlike standard mortgages, equity release lenders typically do not assess affordability based on your income or regular repayments, so your credit history is less of a priority.
Instead, they base the lending on your specific property, age (usually over 55), and the amount of equity available to you. However, your credit history can still influence which lenders will consider you and what interest rate or conditions they might attach.
Does the type of bad credit impact this?
Different kinds of adverse credit (and their recency) are treated differently by equity release providers. Below are some breakdowns of common bad credit issues and how lenders typically view them in the context of equity release:
County Court Judgments (CCJs)
Many lenders may require that any outstanding CCJs are satisfied (settled or at least arranged) before approving the equity release. Although CCJs remain on your credit file for 6 years, most lenders are comfortable with CCJs registered 2 or 3 years ago.
In some cases, a recent or outstanding CCJ might disqualify you from some (but not all) equity release products, or push you to higher interest rates.
Bankruptcy, IVAs and debt relief orders
These have a more serious and long-lasting impact on your credit file, and lenders will look carefully at how recent these issues were or when they were discharged.
Some lenders may refuse certain equity release options if your bankruptcy, Individual Voluntary Arrangement (IVA), or debt relief order is recent or ongoing; others may accept you if enough time has passed and all legal obligations have been satisfied.
Missed or late payments, defaults, and arrears
Late or missed payments are less severe than CCJs or various forms of insolvency, but still matter. Lenders may ask for explanations or proof of consistent payments for any debts since the missed payments.
If your credit record files show frequent defaults or a pattern of poor money management, that could reduce the number of lenders willing to work with you or push you toward more expensive equity release options. However, this category of bad credit shouldn’t impact your overall ability to release equity.
Low credit score or weak credit history
If you have a low credit score (but without active defaults or judgments), lenders should still accept you for most forms of equity release. Although if you don’t approach the right lender, it can result in less competitive terms, such as higher rates or stricter criteria.
How to access equity with bad credit
Even with poor credit, there are ways to successfully release equity from your home. The key is choosing the right structure for your circumstances, being realistic about how much you can afford to release, and strengthening your application to preemptively address any concerns a lender may have.
Choosing the right type of equity release
It’s essential to choose the right type of equity release for your specific circumstances, particularly if you have bad credit.
-
Lifetime mortgage: The most common route to releasing equity with bad credit, a lifetime mortgage allows you to borrow against your property without making repayments until the property is sold. Because repayment is deferred until you pass away or move into long-term care, affordability checks are more lenient.
-
Drawdown lifetime mortgage: This allows you to release smaller amounts of cash in stages (drawdowns). For borrowers with bad credit, drawdown lifetime mortgages for equity release can be more acceptable to lenders, as it reduces the initial loan size and their perceived risk.
-
Home reversion plans: These involve selling part of your property to a provider. It’s less common and more restrictive, and credit issues may be scrutinised more closely, with fewer providers willing to take on borrowers with poor credit (depending on the age and severity).
Deciding how much equity to release
How much equity release you request also affects how a lender might view your application. Borrowers with bad credit often face a reduced maximum overall loan-to-value (LTV) ratio compared to those with stellar credit.
This means you might not be able to release as much equity as you hoped. Opting to release a smaller, more modest amount can increase your chances of approval and make your case more attractive to lenders. However, most providers have minimum borrowing levels.
It’s also important to remember that if you have an existing mortgage, many providers will require this to be cleared first, using the proceeds of the equity release. This can be a challenge if the outstanding balance is large. So, careful planning with expert support is vital.
Strengthening your application
How you present your case for equity release makes a significant difference when you have bad credit. Lenders want reassurance that your situation is stable. Settling any outstanding CCJs or defaults before applying can improve your chances considerably.
Being upfront about the circumstances that caused your credit issues with your broker and providing evidence of improved financial management can also work in your favour. A heavier weight is placed on the property itself when it comes to their decision, so ensuring your home is in good condition and marketable is a wise move.
Working with a specialist equity release adviser is crucial here; not only can they identify lenders more willing to accept bad credit, but they can also help package your application in the most positive way. They can also review all your credit reports, deal with any inaccuracies, and ensure you’re applying to the best option for your needs.
Who are the best lenders for bad credit equity release?
If you want to access funds tied up in your home, it’s typically best to deal with a specialist equity release provider rather than a generic high street lender. This is particularly true if you’re looking to release equity with bad credit.
Here are a few examples of popular lenders open to letting certain applicants equity release with CCJs and other types of bad credit:
-
Aviva: May be open to equity release for applicants with bad credit. However, Aviva tends to have strict lending criteria and usually offers little flexibility in the way of underwriting.
-
SunLife: With the SunLife Equity Release Service, you may be eligible for a lifetime mortgage if you’ve had past bad credit issues like CCJs. However, credit checks will be carried out, and your application will depend on your property and the specific issues.
-
Legal & General: Minor past bad credit issues may be acceptable with Legal and General if you’re looking to release equity with a lifetime mortgage. However, their rules and criteria tend to be rigid without any room for tailored lending.
If you want to get an idea about current lifetime mortgage rates for equity release with bad credit, get in touch below and one of our equity release advisers will compare your options across the market and help you choose the best solution.
Connect with an equity release expert today
Do equity release lenders perform credit checks?
Yes, equity release lenders will always carry out a credit check or credit search as part of their due diligence when reviewing your application. Because the property and your level of equity are more crucial, with the right support, releasing equity should still be a viable option with bad credit.
However, it’s essential to be introduced to the right lender from the outset, as you may face an automatic rejection or refusal if you approach a lender directly and your past credit issues fall outside what a particular lender is comfortable with.
What alternatives are there if you’re refused equity release?
Equity release may not be your only option. Depending on your circumstances, there are alternative solutions your advisor can explore, such as:
-
Remortgaging: If you’re earning income and below the typical equity release age thresholds of around 55, an experienced broker can help you remortgage with bad credit.
-
Retirement interest-only (RIO) mortgages: Work similarly to equity release, but require you to make monthly interest payments. As a result, affordability assessments may be stricter, and your bad credit can have a greater impact on your options, but it’s still more flexible than a standard mortgage.
-
Downsizing: Another option is downsizing, which involves selling your current home and purchasing a smaller property outright. This frees up equity without requiring additional borrowing, thereby eliminating the need for lenders to review your credit history.
-
Secured loans: You may be able to use other assets or property as security for a bad credit secured loan, perhaps with a second charge mortgage or homeowner loan, potentially allowing you to access funds for various purposes.
It’s always best to speak with an experienced adviser before applying for equity release, as they can direct you to the lender that will be most accommodating for your specific type of bad credit, avoiding any unnecessary rejections or refusals.
Why choose Money Helpdesk for your equity release?
Our brokers specialise in arranging equity release for people with bad credit, including those with CCJs, defaults, or IVAs. We understand that your circumstances are unique, and our brokers know which lenders are more flexible when it comes to adverse credit.
Because our advisors have access to specialist equity release providers not available directly to consumers, they can match you with the option most likely to offer favourable terms for releasing equity with bad credit.
Here are some more of the reasons people trust us to help them secure equity release with bad credit:
-
Whole-of-market with access to exclusive deals
-
Our brokers are 5-star rated on leading review platforms
-
Your first chat is free with no obligation to proceed further
-
Access to equity release providers who specialise in bad credit
If you’d like to compare rates online for free or speak with one of our expert advisers for a free, no obligation chat, you can get started here.
FAQs
It can. Because equity release provides a lump sum or allows for cash drawdowns, it may impact your entitlement to means-tested benefits, such as Pension Credit, Universal Credit, or Council Tax reductions. You should always speak with an expert adviser to understand how releasing equity might impact your benefits position.