What is equity release?
Equity release is a way for homeowners aged 55 and over to access the value (equity) locked in their property as tax-free cash. The two main products are:
Lifetime mortgage: The most common product. You borrow money against your property and pay no monthly repayments. Interest rolls up and is added to the loan. The full amount — original loan plus accumulated interest — is repaid when you die or move into long-term care, from the proceeds of selling the property.
Home reversion plan: You sell a share of your property (typically 25–75%) to a plan provider in exchange for a lump sum or regular income. You retain the right to live in the property rent-free for life. When the property is sold, the provider receives their share of the proceeds.
Lifetime mortgages are by far the more common product (around 95% of the market).
How much can you release?
The maximum you can release depends primarily on your age and property value. At age 55, you might release 20–28% of your property's value. At 70, perhaps 40–45%. At 80+, potentially 50–55% or more. Enhanced plans for those with qualifying health conditions often allow significantly more.
Is equity release a good idea?
This depends entirely on your circumstances. It can be a sensible option if:
- You need to fund retirement costs but have limited pension income
- You want to gift money to children or grandchildren (e.g., for house deposits)
- You want to pay off an existing mortgage or debts
- You want to fund home improvements or adaptations
- Your property is your main asset and downsizing isn't practical or desirable
The risks to understand before proceeding
Compound interest: Because interest rolls up, the amount owed can grow significantly over time. On a £100,000 lifetime mortgage at 5.5%, after 15 years you'd owe around £225,000. This dramatically reduces the value of your estate.
Impact on means-tested benefits: Releasing equity can affect entitlement to means-tested benefits including Pension Credit and some health-related benefits. Always assess this before proceeding.
Reduced inheritance: Equity release reduces the amount your beneficiaries will inherit. An inheritance protection guarantee can ring-fence a percentage of your property value, but at the cost of a lower release amount or higher interest rate.
Important consumer protections
Products from Equity Release Council members — all recommended by Nesto's advisers — include a no negative equity guarantee (you'll never owe more than your property is worth), the right to remain in your home for life, and the right to move to a suitable alternative property.
What are the alternatives?
An independent equity release adviser is required by regulation to consider all alternatives before recommending equity release. These include: downsizing, a retirement interest-only mortgage (where you pay monthly interest only), accessing other savings or investments, a family lending arrangement, or deferring equity release until you're older (when you can release more).
The conclusion
Equity release can be the right answer — but only after careful consideration of all alternatives, the full financial implications, and the impact on your estate and benefits. An independent equity release adviser will give you an honest assessment. Nesto matches you with an independent specialist for a free, no-obligation consultation.