Release cash from your home without moving. Everything you need to know about equity release.
Equity release is a way for UK homeowners aged 55 and over to access the wealth tied up in their property without having to sell it or move out. Your home is likely to be your most valuable asset, and equity release allows you to convert some of that value into tax-free cash—either as a lump sum, in smaller instalments, or a combination of both.
The money released can be used for any purpose: supplementing retirement income, funding home improvements, helping family members onto the property ladder, paying off an existing mortgage, or covering care costs. According to the Equity Release Council, the UK equity release market was worth over £6 billion in recent years, reflecting growing demand.
There are two main types of equity release: lifetime mortgages and home reversion plans. Lifetime mortgages account for the vast majority of the market—over 99% of plans sold.
A lifetime mortgage is a loan secured against your home. You retain full ownership of the property. Interest is charged on the loan, and most people choose to let the interest roll up (compound) rather than make monthly payments. The loan plus accumulated interest is repaid when you die or move into long-term care, usually from the sale of the property.
A home reversion plan involves selling part or all of your home to a provider in exchange for a lump sum or regular payments. You retain the right to live in the property rent-free for life. When the property is eventually sold, the reversion provider receives their percentage share of the sale proceeds.
The amount you can release depends on your age, the value of your property and your health. As a general guide, homeowners in their mid-60s can typically release between 20% and 35% of their property value. Older homeowners can release more—those in their 80s may be able to access 50% or more.
If you have certain health conditions (such as diabetes, high blood pressure or a history of smoking), you may qualify for an enhanced lifetime mortgage, which offers a higher release amount or a lower interest rate. This is because the lender expects the loan term to be shorter.
Lifetime mortgage interest rates are typically fixed for life and currently range from around 5% to 7% MER (Monthly Equivalent Rate). Because most borrowers do not make repayments, interest compounds over time, which means the total debt can grow significantly. For example, a £50,000 loan at 6% with no repayments would grow to approximately £90,000 after 10 years and £160,000 after 20 years.
Setup costs include a valuation fee (£300–£700), solicitor’s fees (£800–£1,500), a financial adviser fee (often £1,500–£2,000 or a percentage of the amount released), and sometimes an application fee. These costs can sometimes be deducted from the amount released.
⚠️ The compounding effect of rolled-up interest means the debt can double every 10–12 years. This significantly reduces the inheritance you leave to your family. Always model the long-term cost projections before proceeding, and consider whether making voluntary interest payments could be affordable.
All equity release plans sold by members of the Equity Release Council (ERC) come with important safeguards. The most significant is the no-negative-equity guarantee, which ensures that you (or your estate) will never owe more than the value of your home, regardless of how much interest has accumulated or how property prices have moved.
ERC members also guarantee the right to remain in the property for life, the freedom to move to another suitable property (porting the plan), and transparent information about how the product works. Equity release advice is regulated by the FCA, and all advisers must hold appropriate qualifications.
Before committing to equity release, consider whether alternatives might meet your needs. Downsizing to a smaller or cheaper property releases equity outright and avoids ongoing interest costs. A retirement interest-only (RIO) mortgage allows you to borrow against your home while making monthly interest payments, preventing the debt from growing.
Other options include renting out a room under the Government’s Rent a Room scheme (tax-free income of up to £7,500 per year), applying for means-tested benefits you may be entitled to, or using other savings and investments before tapping into property wealth.
💡 Equity release can affect your entitlement to means-tested benefits such as Pension Credit, Council Tax Reduction and Universal Credit. The cash you release becomes a capital asset, which may push you over the savings thresholds for these benefits. Always check the implications with a specialist adviser.
Equity release is a major financial decision that affects your wealth, your family and your options in later life. It is not right for everyone. Key questions to consider include: do you have other ways to access the funds you need? How important is leaving an inheritance? Could you manage the costs of a RIO mortgage instead? Have you discussed the decision with your family?
The FCA requires that equity release advice is given by a qualified specialist adviser. This is not an area where you should proceed without professional guidance.
Equity release is a regulated product and you must receive advice from a qualified adviser before proceeding. An independent financial adviser specialising in later-life planning can assess your full financial picture and help you decide whether equity release is the right option. Find a financial adviser through Nesto to get impartial, regulated advice on equity release and retirement planning.
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