What is Equity Release?

Equity release has become a popular way for homeowners to access some of the wealth tied up in their property, without the need to sell or downsize. Many people use it to boost their retirement income, fund home improvements, or help family onto the property ladder.

You can take the money as a lump sum or in smaller amounts over time, depending on your needs. Once any existing mortgage or secured loan on your home is paid off, the money is yours to use as you wish.

How does equity release work?

There are two main ways to release equity from your home:

Lifetime Mortgage

The most popular option for over-55s. This is a loan secured against your home that lets you access tax-free cash, with no need for monthly repayments. The loan, plus interest, is repaid when you pass away or move into long-term care, usually from the sale of your property.

• Lump sum or drawdown – Take the money all at once or in stages to control interest costs.
• Interest-only option – Make voluntary interest payments to stop the loan from growing.
• Enhanced lifetime mortgage – If you have certain health conditions, you could borrow more or get a lower interest rate.

Read more: Lifetime Mortgages Explained

Home Reversion Plan

A less common option where you sell part or all of your home in exchange for a cash lump sum or regular income. You can stay in your home rent-free for life, but you won’t own the portion you’ve sold.

• Available from age 65.
• No repayments or interest to worry about.
• If you only sell part of your home, your beneficiaries can inherit the remaining share.

Read more: Home Reversion Explained

Are you eligible for equity release?

Equity release is available to homeowners aged 55 and over, but your home must meet certain criteria. The good news? Unlike a standard loan, your income and credit score don’t matter.

Age Requirements

• You must be at least 55 for a lifetime mortgage (some lenders set a higher minimum age).
• For joint applications, the youngest homeowner must meet the age requirement.
• Home reversion plans are only available from age 65.

Property Requirements

• Your home must be worth at least £70,000.
• Ex-council and ex-MoD properties usually need to be worth at least £100,000.
• Some non-standard properties (e.g., timber-frame, concrete) may not be eligible.
• Leasehold homes may qualify, but most lenders require at least 75 years left on the lease.

Can You Get Equity Release with an Existing Mortgage?

Yes, but you’ll need to use some of the released funds to pay it off first. Watch out for early repayment charges from your current lender.

Does Property Location Matter?

Most homes in the UK qualify, but if your property is in an area where resale could be difficult (such as next to a busy road or a pub), some lenders may be hesitant.

Does Health Impact Your Eligibility?

Not necessarily, but if you have certain health conditions—such as diabetes or high blood pressure—you could qualify for an enhanced lifetime mortgage, which allows you to borrow more or secure a lower interest rate.

What Will Not Affect Your Eligibility?

Unlike traditional loans, equity release doesn’t require income checks or a strong credit history. Even if you’ve had financial difficulties, you may still qualify.

How much equity can you release?

The amount depends on your age, property value, and health.

• On average, homeowners released £124,000 in 2021 (Equity Release Council).
• The minimum release is typically £10,000, though some lenders have higher limits.
• The maximum release usually ranges from 20 to 60 percent of your home’s value.
• The older you are, the more you can borrow—a 55-year-old might access 20-25 percent, while someone in their 70s or 80s could release up to 60 percent.

Lump Sum vs Drawdown

• Lump sum – Take all the cash at once, ideal for big expenses like home renovations.
• Drawdown – Take smaller amounts over time, which helps reduce interest charges.

Can you move house if you have equity release?

Yes, most lifetime mortgages allow you to transfer your plan to a new property—provided it meets your lender’s criteria.

If you downsize, you may need to repay part of your loan, which could result in early repayment charges.

If you sell your home and choose not to transfer the plan, you’ll likely need to repay the loan in full.

How can you use equity release?

Once you’ve paid off any existing mortgage or secured loans, the money is yours to use however you like. So, what do most people do with it?

• Boosting retirement income – If your pension isn’t stretching as far as you’d like, equity release can provide a financial cushion.
• Clearing a mortgage or debts – Many people use it to wipe out mortgage payments or settle lingering debts, making retirement more comfortable.
• Home improvements – Want to finally upgrade your kitchen, add an extension, or future-proof your home with accessibility adaptations? Equity release can help.
• Helping family – Whether it’s giving your children a boost onto the property ladder or covering university fees for grandchildren, equity release lets you provide support when it matters most.
• Buying a second home – Always dreamed of a holiday home or a quiet retreat by the coast? This could be your chance to make it happen.
• Covering care costs – Whether it’s private home care or making adaptations to help you stay independent for longer, equity release can ease the financial pressure.
• Big-ticket purchases – Maybe you’ve always wanted a campervan for road trips, a new car, or that once-in-a-lifetime holiday. Now you can enjoy it without worrying about monthly repayments.
• Inheritance tax planning – Some people choose to gift money to loved ones while they’re still around to see them benefit, potentially reducing the inheritance tax burden later on.

Is equity release your best option?

Equity release can be a great solution, but before you commit, ask yourself—are there other ways to free up cash without borrowing against your home?

Could downsizing work?
Selling up and moving somewhere smaller could give you a lump sum while reducing bills. But is it practical? If you love your home or can’t find the right place, downsizing may not be for you.

What about renting out a room?
If you have extra space, a lodger could bring in a steady income without you having to take on debt. It’s not for everyone, but it’s worth considering.

Do you have savings or investments?
Dipping into existing funds might be a better move than taking out a lifetime mortgage. The key is to balance short-term needs with long-term security.

Could you qualify for a grant?
If you need money for home improvements, check if you’re eligible for government support—especially if your home needs adaptations for mobility or health reasons.

Can you use your pension?

For retirees seeking a reliable income, a pension annuity could be an alternative to equity release. While equity release allows you to unlock some of your home’s value without selling or moving, an annuity provides a guaranteed income for life by converting your pension savings into regular payments.

Equity release isn’t a one-size-fits-all solution. A chat with a financial adviser could help you weigh up your options and find the best fit for your future.