Equity Release Explained: Unlock Your Home's Value Now
Equity release lets homeowners, usually aged 55 and over, access the money tied up in their property without moving. Learn how lifetime mortgages, home reversion and drawdown plans work, the pros and cons, eligibility rules and how releasing equity can affect retirement income, benefits and inheritance. Get clear, practical guidance before you decide.
Equity release converts part of your property value into cash while allowing you to stay in your home. For many older homeowners this can provide a useful supplement to retirement income, cover large costs or let you help family members — but it also carries long-term implications that need careful thought and professional advice.
How equity release can help you
Accessing equity means turning some of your home value into usable funds without selling or moving. This is particularly useful if you have significant property wealth but limited disposable cash. Common uses include improving the home, paying off an existing mortgage, boosting retirement income, or gifting money to relatives. Many plans include a no negative equity guarantee, which protects you and your estate by ensuring the amount owed will never exceed the property sale proceeds when the home is eventually sold.
Risks and drawbacks to consider
Releasing equity reduces the value of what you can leave as an inheritance. Interest on lifetime mortgages compounds over time, which can substantially increase the debt and reduce estate value. Some agreements include early repayment charges if you want to end the deal sooner than planned. Equity release may also change eligibility for means-tested benefits and make moving or downsizing more complicated in the future. It is important to weigh these outcomes against the immediate financial benefits.
Who usually qualifies
Eligibility criteria vary by provider, but common requirements include being a minimum age (often 55, though some lenders set the threshold at 60) and owning a UK property. Lenders typically expect a minimum house value, which can be around £70,000 to £100,000 depending on the product and provider. The amount you can access depends on your age, the property value and sometimes health; older borrowers and those with certain medical conditions may be able to release a larger proportion of equity. Any outstanding mortgage on the property normally needs to be repaid when you take out an equity release product.
Financial impact and what happens to existing mortgages
When you take out equity release, any existing mortgage is usually cleared from the proceeds, so you may free up monthly cash flow by removing mortgage repayments. However, many equity release products (especially lifetime mortgages) roll up interest, meaning you may not make monthly payments but the interest grows and compounds. That can significantly reduce the remaining value of the property over time. Also consider potential tax implications and the effect on means-tested benefits — you should check how a lump sum or increased income might alter your benefit entitlement.
Main types of equity release products
| Product Type | Provider Examples | Key Features |
|---|---|---|
| Lifetime mortgage | Aviva, Scottish Widows, Legal & General | No mandatory monthly repayments; choose fixed or variable interest; some plans allow voluntary overpayments |
| Home reversion plan | Bridgewater Equity Release, Lifetime Equity Release | Sell part or all of the property in exchange for a tax-free lump sum while keeping the right to live there rent-free; no interest charged |
| Drawdown lifetime mortgage | Pure Retirement, More2Life, OneFamily | Release money in stages rather than all at once; interest typically charged only on sums withdrawn |
Prices, rates, or cost estimates mentioned in this article are based on the latest available information but may change over time. Independent research is advised before making financial decisions.
Lifetime mortgages are the most commonly chosen option and suit people who want flexibility and clarity about how much they borrow. Home reversion plans suit those who prefer to know exactly what share of the property theyve sold, though they generally mean selling at less than market value. Drawdown plans reduce interest accumulation by letting you take funds only when needed rather than receiving a large lump sum immediately.
Questions to ask and next steps
Before deciding on equity release, get clear answers to practical questions: How much can I borrow? What interest rate applies and will it compound? Are there any early repayment penalties? How will this affect my tax position and entitlements? What protection does the provider offer, such as a no negative equity guarantee? Also consider alternatives like downsizing, taking out a conventional mortgage, or using savings or pensions.
Professional advice and making an informed decision
Because equity release affects your long-term finances and estate, it is essential to seek independent, regulated financial advice from a qualified equity release adviser. They can assess your personal situation, explain product differences, run illustrative figures showing how interest and roll-up would affect the estate, and identify any better-suited alternatives.
Equity release can be a practical option to unlock value tied up in a home, but it is not right for everyone. With careful planning, a full understanding of the costs and consequences, and guidance from an independent adviser, you can decide whether releasing equity fits your retirement plans and family priorities.
