Property equity
You own a property with value above any mortgage or other secured borrowing.
Understanding equity release
Equity release can allow eligible homeowners, typically in later life, to access some of the value tied up in their home while continuing to live there. Learn how lifetime mortgages work, what can affect the amount available and which alternatives may be worth considering.
What is equity release?
Equity release is a way for eligible homeowners, typically in later life, to access some of the value tied up in their home while continuing to live there. It is a significant financial decision because the amount owed, future flexibility and value of the estate can all be affected.
The two main categories are lifetime mortgages and home reversion plans. Most practical UK equity-release advice focuses on lifetime mortgages, but the differences between both types matter.
How does equity release work?
Secured borrowing
An eligible homeowner takes money secured against the property under the chosen plan terms.
Receiving the money
Funds may be taken as a lump sum, through drawdown or using another available product structure.
Repayment
Depending on the plan, interest may roll up, be partly paid or be fully serviced. The loan is generally repaid after a specified later-life event such as death or a permanent move into long-term care, subject to the terms.
What is a lifetime mortgage?
A lifetime mortgage is a loan secured against a person’s home. The homeowner normally retains ownership of the property. Product terms vary, so the interest, repayment options, protections and early repayment conditions need to be understood before proceeding.
Lump-sum lifetime mortgage
A larger amount is released at the start. Taking more money than you need can increase the interest added over time, so the amount borrowed should be considered carefully.
Drawdown lifetime mortgage
A smaller amount may be released initially with a facility that can potentially be accessed later. Interest generally applies once funds are drawn, which can provide flexibility, but a drawdown facility and its terms are not universal.
Interest-paying options
Some plans permit voluntary payments towards interest and/or capital. Payment limits, affordability requirements and the effect of missed or stopped payments depend on the product.
What is a home reversion plan?
With home reversion, a provider buys part or all of the home in exchange for money while the homeowner retains the right to remain living there under the plan’s terms. The provider normally pays less than the market value for the share purchased, and the homeowner no longer owns that part of the property.
Home reversion is different from a lifetime mortgage: it is a sale of a property share rather than a loan secured against the whole home. Specialist advice is important when comparing the two.
Who might be eligible for equity release?
Eligibility varies by product and provider. Common factors include age, property ownership, property value, outstanding borrowing, property type and condition, location, joint applicants and provider criteria. Age thresholds differ, and meeting one does not guarantee eligibility or a particular amount.
Does age affect how much equity you can release?
Age can affect the maximum loan-to-value offered, and the younger applicant’s age is commonly relevant for a joint application. Property, borrowing and product criteria also matter. Our calculator provides an initial illustration only.
How much equity can I release from my home?
The amount you may be able to release can depend on age, property value, outstanding secured borrowing, property characteristics, the chosen product, provider criteria and potentially health or lifestyle factors for an enhanced product. The maximum available is not necessarily the amount that is suitable to borrow.
Initial estimate
Calculate your initial estimate
Use the calculator to get an initial illustration based on your age, home value, outstanding mortgage and the amount you would like to release. For a joint application, the younger applicant’s age is commonly relevant.
The amount available depends on your age, property and product criteria. Suitable advice is important before proceeding.
Can you use equity release if you still have a mortgage?
It may be possible, but any existing mortgage or other secured borrowing that must be repaid generally needs to be cleared as part of the transaction. The remaining amount, after repayment and applicable fees, may then be available under the plan terms.
Illustrative example
Potential gross release: £80,000
Existing mortgage to repay: £30,000
Potential amount remaining before fees: £50,000
What can you use equity release for?
People may consider releasing equity to repay an existing mortgage, improve or adapt their home, supplement retirement finances, help family, meet major one-off expenditure, manage other borrowing or pay for certain care-related needs. Whether borrowing is appropriate depends on the wider circumstances and alternatives.
Using secured later-life borrowing to consolidate unsecured debt can have serious long-term consequences. It may increase the total interest paid and put the home at risk if the plan terms are not met.
Using equity release to help family
Money may be gifted to help with a house deposit or another family need, but this can reduce the estate and future financial flexibility. It may also affect means-tested support and raise tax or estate-planning questions. Take appropriate specialist advice before gifting or investing released funds.
How does equity release interest work?
If interest is not paid, it is added to the amount owed. Future interest can then be charged on the original borrowing plus previously added interest. Over a long period, compound interest can significantly increase the balance.
| Time | Illustrative balance |
|---|---|
| 5 years | £66,911 |
| 10 years | £89,542 |
| 15 years | £119,828 |
| 20 years | £160,356 |
What affects equity release interest rates?
Rates can be affected by market conditions, loan-to-value, product structure, age and product eligibility, features, provider and whether the rate is fixed or capped. Available rates depend on the product and can change, so check current product information when comparing options.
How much does equity release cost?
Potential costs can include advisor fees where applicable, lender or product fees, valuation fees, legal fees, completion or arrangement fees and early repayment charges. The largest long-term cost may be accumulated interest rather than an upfront fee. Ask the advisor to explain any applicable fees before proceeding; costs depend on the service and product route.
Can you repay equity release early?
Some plans permit partial or full repayment, but conditions vary. Repayment limits may apply and early repayment charges can potentially be significant. Certain circumstances may receive different treatment under particular plan terms, so check the specific offer rather than relying on a universal rule.
Can you move house after taking equity release?
Some lifetime mortgages can potentially be transferred to a suitable new property, subject to product terms, lender criteria, property suitability and loan-to-value requirements. Moving to a lower-value home can sometimes mean that some borrowing needs to be repaid.
How can equity release affect inheritance?
Equity release reduces the equity that might otherwise remain in the property. Rolled-up interest can further increase the amount owed over time, reducing the value ultimately available to beneficiaries. Some products or features can potentially protect a proportion of property value for inheritance, where available, but this is not universal and may affect the amount that can be borrowed.
Could equity release affect benefits or care funding?
Receiving a lump sum or holding additional capital can affect entitlement to some means-tested benefits or support. Equity release can also be relevant to future care-funding decisions. Check your circumstances with an appropriate benefits, care or financial specialist before proceeding.
What are the advantages and disadvantages of equity release?
Potential advantages
- Access some property wealth without immediately selling or moving.
- Remain in the home subject to the plan terms.
- Some lifetime mortgages may not require monthly interest payments.
- Drawdown can provide flexibility where the product offers it.
- Funds may be used for a range of purposes.
Potential disadvantages
- Compound interest can significantly increase the balance.
- Remaining property equity and inheritance may reduce.
- Means-tested benefits or support may be affected.
- Early repayment charges and fees may apply.
- Moving house and future financial flexibility may be affected.
- Alternatives may be cheaper or more suitable.
What are the alternatives to equity release?
Alternatives can include downsizing, standard residential or remortgage borrowing where affordable, a retirement interest only mortgage, another later-life mortgage, using savings or investments, family assistance, grants for property adaptations, or delaying expenditure. The right option depends on affordability, objectives and future plans; sometimes not borrowing is the appropriate choice.
Retirement Interest Only mortgage vs equity release
| Feature | Lifetime mortgage | RIO mortgage |
|---|---|---|
| Monthly interest payments | May not be required, depending on the product. | Normally required. |
| Affordability assessment | Depends on the product and circumstances. | Generally important because payments must be affordable. |
| Rolled-up interest | Can occur. | Usually avoided if interest payments are maintained. |
| Repayment | Usually follows sale, death or long-term care, subject to terms. | Capital is generally repaid on a specified later-life event. |
| Suitable for | Depends entirely on circumstances. | Depends entirely on income and circumstances. |
Lifetime mortgage vs home reversion
| Feature | Lifetime mortgage | Home reversion |
|---|---|---|
| Ownership | Homeowner normally retains ownership. | Provider owns the share purchased. |
| Structure | Loan secured against the home. | Sale of part or all of the home. |
| Interest | May roll up or be paid, depending on the product. | There is no loan interest on the sold share. |
| Property growth | Homeowner generally retains exposure to property value changes, subject to the debt. | Provider generally participates in changes affecting the share purchased. |
| Inheritance | Debt and interest can reduce the estate. | The sold share is no longer owned by the homeowner. |
Is equity release safe?
Equity release is a regulated financial product and advice area, but it is not risk-free. Product safeguards can exist, yet compound interest, reduced inheritance, possible benefit effects, fees, repayment charges and changing personal circumstances remain important considerations.
Regulated specialist advice and independent legal advice are important before proceeding. A mortgage advisor should not be treated as a solicitor and cannot provide independent legal advice.
Do you need advice for equity release?
Specialist advice can help you understand product types, costs, risks, alternatives and long-term consequences before deciding. You can speak directly to a mortgage advisor or request a call after viewing your estimate.
How does the equity release process work?
- Understand your objectivesWork out why you need the money and how much is actually required.
- Explore alternativesConsider downsizing, other borrowing, savings and whether delaying expenditure is possible.
- Use the calculatorGet an initial estimate based on the information you provide.
- Speak to a specialist advisorReview your circumstances, needs and potential options.
- RecommendationIf suitable, the advisor explains a recommended product and its consequences.
- Application and valuationThe provider assesses the application and property.
- Independent legal adviceA solicitor explains the legal implications before completion.
- CompletionAny secured borrowing that must be repaid is cleared and remaining funds are released according to plan terms.
What information might be needed?
Exact requirements vary, but you may be asked for:
- Proof of identity.
- Property details and an estimated property value.
- Existing mortgage balance and other secured borrowing.
- Household and personal financial circumstances.
- The purpose of the release.
- Estate and inheritance objectives.
- Existing benefits or support.
- Health or lifestyle information where relevant to a product assessment.
Frequently asked questions
What is equity release?
Equity release is a way for eligible homeowners, typically in later life, to access some of the value tied up in their home while continuing to live there. The two main categories are lifetime mortgages and home reversion plans.
How does equity release work?
An eligible homeowner takes money secured against the property. Funds may be taken as a lump sum or through drawdown, and the loan is generally repaid after a specified later-life event, subject to the plan terms.
What is a lifetime mortgage?
A lifetime mortgage is a loan secured against a person’s home. The homeowner normally retains ownership of the property. Product terms vary, so the interest, repayment options, protections and early repayment conditions need to be understood before proceeding.
What is a drawdown lifetime mortgage?
A drawdown lifetime mortgage may release a smaller amount initially with a facility that can potentially be accessed later. Interest generally applies once funds are drawn, subject to the product terms.
How much equity can I release from my home?
The potential amount depends on factors including age, property value, outstanding secured borrowing, property characteristics, product choice, provider criteria and potentially health or lifestyle factors. The calculator provides an initial estimate only.
How accurate is an equity release calculator?
An equity release calculator can provide a useful initial illustration, but it is not a personalised recommendation, mortgage offer or confirmation of eligibility. Actual availability depends on product, provider and individual circumstances.
What age can you take equity release?
Minimum ages vary by product and provider. Traditional lifetime mortgages have commonly been associated with customers aged 55 and over, but being over 55 does not automatically confirm eligibility.
Can I get equity release if I still have a mortgage?
It may be possible, but existing secured borrowing that must be repaid generally needs to be cleared as part of the transaction. The remaining amount may then be available under the plan terms.
How is equity release interest calculated?
If interest is not paid, it can be added to the amount owed. Future interest can then be charged on the original borrowing plus previously added interest, so the balance can grow over time.
Does equity release interest compound?
It can. When interest is added to the balance rather than paid, future interest may be charged on both the original borrowing and earlier added interest.
Can I repay equity release early?
Some plans permit partial or full repayment, but conditions, repayment limits and early repayment charges vary. Check the specific plan terms.
Can I make payments towards a lifetime mortgage?
Some plans permit voluntary payments towards interest or capital. Payment limits and product conditions vary, so do not assume that every plan offers the same flexibility.
Can I move house with equity release?
Some lifetime mortgages can potentially transfer to a suitable new property, subject to product terms, lender criteria and loan-to-value requirements. A lower-value property may require some borrowing to be repaid.
Does equity release affect inheritance?
It can reduce the equity remaining in the property, and rolled-up interest can increase the amount owed. Some products may offer inheritance protection, but it is not universal and can affect the amount available.
Can equity release affect my benefits?
Receiving a lump sum or holding additional capital can affect some means-tested benefits or support. Check your circumstances with an appropriate specialist before proceeding.
What happens to equity release when I die?
Under plan terms, the loan is generally repaid from the sale of the property after death, although the exact process depends on the product and circumstances.
What happens if I move into long-term care?
A permanent move into long-term care can be one of the events that leads to repayment, subject to the plan terms. Ask the advisor and solicitor to explain the relevant conditions.
Can equity release be used to help my children?
It may be used to gift money to family, but doing so can reduce the estate and future financial flexibility and may affect means-tested support or tax and estate-planning considerations.
Is equity release tax-free?
Borrowed capital released through a lifetime mortgage is not normally treated as taxable income simply because it is released. What happens afterwards, including investment returns, gifting or estate planning, can have tax implications, so take appropriate tax advice.
What are the disadvantages of equity release?
Potential disadvantages include compound interest, reduced property equity and inheritance, possible effects on benefits, fees, early repayment charges, reduced future flexibility and the possibility that another option may be more suitable.
What are the alternatives to equity release?
Alternatives can include downsizing, standard borrowing, remortgaging where affordable, a RIO mortgage, another later-life mortgage, savings or investments, family assistance, adaptation grants or delaying expenditure. Compare these routes with the help of a qualified advisor. You can also read our remortgage guidance.
What is the difference between a RIO mortgage and equity release?
A RIO mortgage normally requires ongoing interest payments and an affordability assessment. A lifetime mortgage may not require monthly payments, and interest can roll up depending on the product. Neither is automatically better.
Is equity release safe?
It is not risk-free. Speak to a qualified advisor about compound interest, inheritance, benefits, fees, repayment charges and changing circumstances.
Do I need financial advice for equity release?
Specialist advice is important before proceeding. See our mortgage advice page to discuss product types, costs, risks and alternatives.
Thinking about releasing equity from your home?
The amount you may be able to release is only part of the decision. Long-term cost, impact on your estate, future plans and alternatives all matter. Use the calculator first, then request advisor contact if you want to discuss your estimate.