What is Equity Release?
Thinking about equity release? This complete UK guide explains how equity release works, who can apply, the advantages and disadvantages, costs, inheritance implications and the alternatives you should consider before making a decision.
Equity release is a way for homeowners aged 55 or over to unlock some of the money tied up in their property without having to sell it immediately. The two main types of equity release are lifetime mortgages and home reversion plans. While equity release can provide tax-free cash to support your retirement, it also reduces the value of your estate and may affect your entitlement to certain means-tested benefits. Before making a decision, it’s important to understand how equity release works, the costs involved and the alternatives available.
For many people, their home is their biggest financial asset.
After years of paying off a mortgage and benefiting from rising property values, homeowners often find that a significant amount of their wealth is tied up in their property. However, unless the property is sold, that money cannot usually be accessed.
Equity release is designed to solve this problem by allowing eligible homeowners to unlock some of their property’s value while continuing to live there.
For some people, this extra money can make retirement more comfortable, help pay for home improvements, fund care needs or support family members financially. For others, equity release may not be the most suitable option, particularly if preserving an inheritance or avoiding long-term borrowing is a priority.
Understanding exactly how equity release works before committing to any agreement is essential.
This guide explains everything you need to know, including the different types of equity release, eligibility requirements, costs, advantages, disadvantages, alternatives and the questions you should ask before making a decision.
Reviewed by the We Buy Any House Property Team
Since 2008, We Buy Any House has helped thousands of homeowners across England and Wales make informed decisions about selling their properties during retirement, downsizing, inheritance, relocation and other major life events. Our property guides are reviewed regularly to help ensure they reflect current UK property practices and publicly available guidance.
Published: July 2026
Last Reviewed: July 2026
Key Takeaways
- Equity release allows eligible homeowners aged 55 or over to unlock money tied up in their property.
- The two main types of equity release are lifetime mortgages and home reversion plans.
- You can usually continue living in your home after taking out an equity release product.
- Equity release may reduce the value of your estate and the inheritance you leave behind.
- Independent financial and legal advice should always be obtained before proceeding.
- It’s important to compare equity release with alternatives such as downsizing, remortgaging or selling your home.
Who This Guide Is For
This guide is suitable if you:
- Are aged 55 or over.
- Own your own home.
- Want to access money tied up in your property.
- Are planning for retirement.
- Want to compare equity release with other options.
- Are unsure whether equity release is right for your circumstances.
What Is Equity Release?
Equity release is a financial product that allows eligible homeowners to unlock some of the value built up in their home without having to sell it immediately.
The money released is usually tax free under current UK tax rules and can normally be taken as:
- A single lump sum.
- Smaller drawdown payments over time.
- Regular income payments, depending on the product.
- A combination of these options.
Unlike a traditional mortgage, many equity release products don’t require regular monthly repayments. Instead, the loan is usually repaid when the property is eventually sold after the last borrower dies or moves into permanent long-term care.
The amount you can release depends on several factors, including:
- Your age.
- Your property’s value.
- The type of equity release product.
- Your health and lifestyle in some cases.
- The provider’s lending criteria.
Although equity release can provide valuable financial flexibility, it is a long-term financial commitment and should always be considered alongside other available options.
How Does Equity Release Work?
Although different providers have slightly different processes, equity release generally follows the same steps.
Step 1: Check Your Eligibility
The first step is confirming whether you meet the provider’s eligibility requirements.
Most providers require you to:
- Be aged 55 or over.
- Own a qualifying property in the UK.
- Meet the provider’s lending criteria.
- Have sufficient equity in your home.
Step 2: Receive Independent Financial Advice
Equity release is a regulated financial product.
Before proceeding, you’ll normally receive advice from a qualified, FCA-authorised equity release adviser, who will explain:
- Whether equity release is suitable.
- The different products available.
- The long-term costs.
- Alternative options that may better meet your needs.
This advice helps ensure you fully understand the financial implications before making a commitment.
Step 3: Property Valuation
The lender will arrange for your property to be professionally valued.
The valuation helps determine:
- Your property’s market value.
- How much equity may be available.
- Which products you may qualify for.
Step 4: Receive Your Offer
If your application is approved, you’ll receive a formal offer explaining:
- The amount available.
- Interest rates.
- Product features.
- Any fees.
- Your legal obligations.
At this stage, you should carefully review the documentation and ask questions if anything is unclear.
Step 5: Independent Legal Advice
You’ll usually need your own solicitor to provide independent legal advice before completion.
This ensures you fully understand:
- Your legal responsibilities.
- The terms of the agreement.
- The long-term impact on your property and estate.
Step 6: Receive Your Funds
Once everything has been completed, you’ll receive your money in the format you’ve chosen.
Depending on your plan, this could be:
- A lump sum.
- A drawdown facility that allows you to release money when needed.
- Regular payments over time.
Many modern lifetime mortgages offer flexible drawdown facilities, allowing homeowners to release smaller amounts when required rather than borrowing everything at once. This may help reduce the amount of interest that builds up over time.
The Two Main Types of Equity Release
There are two main forms of equity release available in the UK.
Although both allow homeowners to access money tied up in their property, they work in very different ways.
Understanding these differences is one of the most important parts of choosing the right option.
Lifetime Mortgages
A lifetime mortgage is the most common type of equity release.
You borrow money secured against your home while continuing to own the property.
Many lifetime mortgages don’t require monthly repayments, although some products allow voluntary payments to help reduce the amount of interest that accumulates.
The loan, together with any accrued interest, is usually repaid when the property is sold after the last borrower dies or moves into permanent long-term care.
Many products that meet the Equity Release Council’s standards include a No Negative Equity Guarantee, meaning you or your estate will never owe more than the value of your property, provided the product terms have been met.
Home Reversion Plans
A home reversion plan works differently.
Instead of borrowing money, you sell part or all of your property to a home reversion provider in exchange for a lump sum or regular payments.
You continue living in the property, usually rent free, for the rest of your life or until you move into permanent long-term care.
When the property is eventually sold, the provider receives the agreed share of the sale proceeds.
Although home reversion plans are less common than lifetime mortgages, they remain an option for some homeowners depending on their financial circumstances and long-term goals.
Who Can Get Equity Release?
Not everyone will qualify for equity release, but many homeowners aged 55 or over may be eligible.
Each provider has its own lending criteria, so eligibility can vary depending on your circumstances.
In general, lenders will consider the following.
Your Age
Most lifetime mortgages are available to homeowners aged 55 or over.
The amount you may be able to release often increases with age because lenders expect the loan to be repaid over a shorter period.
Home reversion plans may have higher minimum age requirements depending on the provider.
Your Property
Your home will usually need to meet the provider’s lending criteria.
Factors they may consider include:
- The property’s market value.
- Its construction type.
- Its condition.
- Its location.
- Whether it is your main residence.
Some properties may not be accepted, such as certain leasehold properties, homes built using non-standard construction methods or properties in poor condition.
Your Existing Mortgage
You can still apply for equity release if you have an outstanding mortgage.
However, the existing mortgage will usually need to be repaid using some of the money released before you receive any remaining funds.
For some homeowners, equity release can therefore provide a way to clear an existing mortgage during retirement.
Your Health
Some providers offer enhanced lifetime mortgages, sometimes referred to as medically underwritten plans.
If you have certain medical conditions or lifestyle factors that may reduce life expectancy, you could be offered a larger amount of equity release than someone of the same age in good health.
This is why it’s important to provide accurate health information during the application process.
How Much Equity Can You Release?
There isn’t a fixed percentage that applies to everyone.
The amount available depends on several factors, including:
- Your age.
- The value of your property.
- Your health in some cases.
- The type of equity release product.
- The provider’s lending criteria.
Generally speaking, older homeowners can often release a larger proportion of their property’s value than younger applicants.
For example:
- A homeowner aged 58 may be offered a smaller percentage of their property’s value than someone aged 75.
- A higher-value property may provide access to a larger cash amount, although lender limits still apply.
- Enhanced lifetime mortgages may increase the amount available for applicants with qualifying medical conditions.
An independent adviser can provide personalised illustrations showing how much you may be able to release from your property.
What Can Equity Release Be Used For?
One of the attractions of equity release is that, once received, the money can usually be used however you choose.
Common reasons homeowners release equity include:
Supplementing Retirement Income
Many retirees use equity release to top up their pension income and improve their day-to-day financial flexibility.
Home Improvements
Some homeowners invest in:
- Accessibility adaptations.
- New kitchens or bathrooms.
- Extensions.
- Energy efficiency improvements.
- General maintenance.
Improving your home may help make it more suitable for later life.
Paying Off an Existing Mortgage
Equity release is often used to repay an interest-only mortgage that’s approaching the end of its term.
This can remove the pressure of finding a large lump sum to repay the outstanding balance.
Helping Family Members
Many parents and grandparents use released equity to help children or grandchildren with:
- Property deposits.
- University costs.
- Weddings.
- Financial emergencies.
Giving money during your lifetime can sometimes allow you to see the positive impact your support has on your family.
Funding Care Costs
Some homeowners use equity release to help pay for care at home or adaptations that allow them to continue living independently.
Travel and Retirement Lifestyle
Others simply use the money to enjoy retirement, whether that’s travelling, pursuing hobbies or achieving long-held personal goals.
Advantages of Equity Release
Equity release can provide valuable financial flexibility for the right homeowner.
Some of the main advantages include:
You Can Continue Living in Your Home
One of the biggest attractions of equity release is that you usually remain living in your property for the rest of your life or until you move into permanent long-term care.
This allows many homeowners to access money without leaving a home they love.
Access Tax-Free Cash
Money released through equity release is generally tax free under current UK tax rules.
This can provide a useful source of funds during retirement without immediately creating an income tax liability.
Tax rules can change, so it’s always sensible to seek professional advice.
Many Lifetime Mortgages Don’t Require Monthly Repayments
Unlike a traditional mortgage, many lifetime mortgages don’t require regular monthly repayments.
This can be particularly attractive for homeowners living on a fixed retirement income.
Some products also allow voluntary repayments if you wish to reduce the interest that builds up over time.
Flexibility
Modern equity release products often provide greater flexibility than many people realise.
Depending on the provider, you may be able to:
- Release money gradually through a drawdown facility.
- Make voluntary repayments.
- Protect part of your property’s value for inheritance purposes.
- Move home without automatically repaying the loan, subject to the provider’s criteria.
These features have helped make equity release products more flexible than earlier generations of plans.
FCA Regulation and Consumer Protections
Equity release is a regulated financial product in the UK.
Many providers are members of the Equity Release Council, whose standards include important consumer protections such as:
- The right to remain living in your home for life, provided you continue to meet the terms of the agreement.
- Clear product information.
- Independent legal advice.
- A No Negative Equity Guarantee on qualifying products.
These safeguards provide greater reassurance for homeowners considering equity release.
Disadvantages and Risks of Equity Release
Although equity release can offer significant benefits, it isn’t suitable for everyone.
Understanding the potential disadvantages is just as important as understanding the advantages.
Your Estate May Be Worth Less
Perhaps the biggest consideration is that equity release usually reduces the value of your estate.
The loan and any accrued interest are typically repaid from the sale proceeds of your property.
As a result, there may be less inheritance available for your beneficiaries.
Compound Interest Can Increase the Amount Owed
If you don’t make voluntary repayments on a lifetime mortgage, interest usually compounds over time.
This means interest is charged on both the original loan and previously accumulated interest.
Over many years, this can substantially increase the amount that must eventually be repaid.
Using a drawdown facility rather than borrowing everything upfront may help reduce the amount of interest that accumulates, depending on your circumstances.
It May Affect Means-Tested Benefits
Receiving a lump sum could affect eligibility for certain means-tested benefits, depending on how the money is held and used.
These may include:
- Pension Credit.
- Council Tax Reduction.
- Universal Credit.
- Other means-tested support.
Before proceeding, it’s important to understand how your benefits could be affected.
Early Repayment Charges
Some equity release products include early repayment charges if you choose to repay the loan sooner than expected.
These charges vary between providers and products.
Understanding the repayment conditions before signing an agreement is essential.
Equity Release May Not Be the Best Option
For some homeowners, alternatives such as downsizing, remortgaging, Retirement Interest-Only mortgages or selling their property may provide greater long-term financial benefits.
This is one reason why regulated financial advice forms an important part of the equity release process.
What Does Equity Release Cost?
The total cost of equity release extends beyond the interest charged on the loan.
Before proceeding, you should understand all of the costs involved.
These may include:
- Interest charges.
- Financial advice fees.
- Property valuation fees.
- Legal fees.
- Arrangement fees.
- Completion fees, depending on the provider.
- Potential early repayment charges.
Different providers structure their fees differently, making it worthwhile to compare the overall cost of each plan rather than focusing solely on the interest rate.
How Interest Works
Lifetime mortgage interest rates vary depending on:
- Market conditions.
- The provider.
- The product you choose.
- Whether the rate is fixed or variable.
Rather than looking only at today’s interest rate, it’s also important to understand how interest may accumulate over the lifetime of the plan.
Your adviser should provide personalised illustrations showing how different borrowing amounts could affect the eventual repayment.
Key Points to Remember
Equity release can provide valuable financial flexibility for eligible homeowners, but it’s important to understand both the benefits and the long-term costs before proceeding.
The amount you can release, the costs involved and the overall suitability of equity release will depend on your individual circumstances.
Understanding these factors before comparing equity release with the alternatives can help you make a more informed decision.
How Does Equity Release Affect Inheritance?
One of the biggest questions homeowners ask is how equity release will affect the inheritance they leave to their loved ones.
Because equity release is secured against your property, the loan and any interest that has built up are usually repaid from the sale proceeds of your home after the last borrower dies or moves into permanent long-term care.
This means there may be less equity remaining for your beneficiaries.
However, this does not necessarily mean your family will inherit nothing.
The amount remaining depends on factors such as:
- The value of your property when it is sold.
- The amount originally borrowed.
- The interest that has accumulated.
- Whether you’ve made any voluntary repayments.
- How long the equity release plan has been in place.
Some providers also offer inheritance protection, allowing you to ring-fence a percentage of your property’s value for your beneficiaries.
If leaving an inheritance is one of your priorities, discuss this with your financial adviser before choosing an equity release product.
Can Equity Release Affect Your Benefits?
It can.
Receiving a lump sum or drawdown payments may affect your entitlement to certain means-tested benefits, depending on how much money you receive and how it is is held.
Benefits that could potentially be affected include:
- Pension Credit.
- Council Tax Reduction.
- Universal Credit.
- Other means-tested financial support.
Simply taking out an equity release product doesn’t automatically affect your benefits, but holding large amounts of cash in savings could.
This is one reason why professional financial advice is strongly recommended before proceeding.
Is Equity Release Safe?
Modern equity release products are significantly more regulated than they were in the past.
Today, equity release is regulated by the Financial Conduct Authority (FCA), helping provide important consumer protections.
Many providers are also members of the Equity Release Council, whose standards include:
- A No Negative Equity Guarantee on qualifying products.
- The right to remain living in your home for life, provided you continue to meet the terms of your agreement.
- Independent legal advice before completion.
- Clear product information.
- Transparent fees and charges.
Although these protections make equity release much safer than earlier generations of products, it remains a significant long-term financial commitment.
Taking regulated financial advice before making any decisions is essential.
Alternatives to Equity Release
Equity release isn’t the only way to unlock money tied up in your home.
Depending on your circumstances, one of the following alternatives may be more suitable.
Downsizing
Selling your current home and moving to a smaller property can release equity while reducing ongoing household costs.
Unlike equity release, downsizing doesn’t involve long-term borrowing or accumulating interest.
Remortgaging
Some retired homeowners may qualify for a traditional remortgage.
This can allow you to release equity while continuing to own your property, although monthly repayments are usually required.
Retirement Interest-Only Mortgages
A Retirement Interest-Only (RIO) mortgage allows you to pay only the monthly interest.
The original loan is normally repaid when the property is sold after the last borrower dies or moves into permanent long-term care.
Renting Out a Room
If you have spare accommodation, renting out a room may provide additional monthly income without borrowing against your property.
Selling Your Property
For some homeowners, selling provides the greatest financial flexibility.
Rather than borrowing against your home, selling allows you to release all of your available equity and potentially reduce future household costs by moving to a smaller or more suitable property.
Common Myths About Equity Release
There are several misconceptions surrounding equity release.
Understanding the facts can help you make a more informed decision.
Myth: “The bank owns my home.”
Reality: With a lifetime mortgage, you continue to own your property.
Only home reversion plans involve selling part or all of your property.
Myth: “My family won’t inherit anything.”
Reality: Equity release usually reduces the value of your estate, but many homeowners still leave an inheritance.
The amount depends on your property’s future value, the amount borrowed and the interest accrued.
Myth: “Equity release is only for people in financial difficulty.”
Reality: Many homeowners use equity release to improve their retirement lifestyle, help family members financially or fund home improvements.
Myth: “You can never repay equity release early.”
Reality: Some products allow voluntary repayments or early repayment, although charges may apply depending on the plan.
Always check the terms before proceeding.
Myth: “Equity release is my only option.”
Reality: Downsizing, remortgaging, Retirement Interest-Only mortgages and selling your home may all be suitable alternatives depending on your circumstances.
Common Mistakes to Avoid
Before taking out equity release, try to avoid these common mistakes:
- Borrowing more than you currently need.
- Not comparing providers.
- Focusing only on the interest rate.
- Ignoring the effect on inheritance.
- Forgetting to check how benefits may be affected.
- Not exploring alternatives.
- Failing to obtain independent financial advice.
- Overlooking early repayment charges.
Taking time to understand all of your options can help you make a more confident decision.
Practical Checklist
Before deciding whether equity release is right for you, consider the following:
✓ Obtain an up-to-date valuation of your property.
✓ Calculate how much money you actually need.
✓ Compare different equity release products.
✓ Understand all fees and charges.
✓ Review the long-term effect on your estate.
✓ Check whether benefits could be affected.
✓ Compare alternatives such as downsizing or selling.
✓ Obtain regulated financial advice.
✓ Speak to an independent solicitor.
✓ Discuss your plans with your family if appropriate.
Frequently Asked Questions
What is equity release?
Equity release allows eligible homeowners aged 55 or over to unlock some of the value tied up in their home without selling it immediately.
Who can get equity release?
Eligibility depends on factors including your age, your property’s value, the type of property you own and the provider’s lending criteria.
Can I stay in my home?
Yes.
With both lifetime mortgages and home reversion plans, you can usually continue living in your property for the rest of your life or until you move into permanent long-term care, provided you continue to meet the terms of the agreement.
Do I make monthly repayments?
Many lifetime mortgages don’t require monthly repayments, although some products allow voluntary payments.
Is equity release taxable?
Money released through equity release is generally tax free under current UK tax rules, although tax rules can change.
Can I repay equity release early?
Some products allow early or voluntary repayments, although charges may apply.
Always check your provider’s terms before proceeding.
Is equity release safe?
Yes, provided you use an FCA-regulated adviser and choose a suitable product.
Many providers also belong to the Equity Release Council and follow additional consumer protection standards.
What happens when I die?
The property is usually sold and the loan, together with any accrued interest, is repaid from the sale proceeds.
Any remaining equity forms part of your estate.
Will equity release affect my inheritance?
Potentially.
Because the loan is repaid from your property’s value, your beneficiaries may inherit less than they otherwise would have done.
What are the alternatives?
Alternatives include:
- Downsizing.
- Remortgaging.
- Retirement Interest-Only mortgages.
- Renting out a room.
- Selling your property.
How We Buy Any House Can Help
At We Buy Any House, we’ve helped homeowners across England and Wales since 2008.
While equity release may be the right solution for some people, others decide that selling their property provides greater financial flexibility without taking on long-term borrowing.
If selling is the right option for you, we offer:
- A free, no-obligation cash offer.
- No estate agent fees.
- Free legal fees.
- A fully managed sale from start to finish.
- Flexible completion dates to suit your plans.
- Completion in as little as three days, or on a timescale that works for you.
Our experienced property specialists will explain the process clearly, answer your questions and help you understand your options, with no obligation to sell.
Final Thoughts
Equity release can be an effective way to unlock money tied up in your home, but it isn’t the right solution for everyone.
Understanding how equity release works, the costs involved and the long-term impact on your finances is essential before making a decision.
Before committing to any product, compare all of your options carefully, including downsizing, remortgaging, Retirement Interest-Only mortgages and selling your home. Taking regulated financial advice and considering your long-term goals can help ensure you choose the solution that best supports your retirement.
Important Information
This guide provides general information about equity release in the UK. It is intended for informational purposes only and should not be relied upon as regulated financial, mortgage or legal advice. Equity release products are regulated by the Financial Conduct Authority, and eligibility, costs and product features vary between providers. Before taking out an equity release product, you should seek advice from a qualified FCA-authorised financial adviser and obtain independent legal advice.