Equity release is a way for homeowners aged 55 and over to access the value locked in their property without having to sell or move. The most common type — a lifetime mortgage — lets you borrow against your home with no monthly repayments; the loan and interest are repaid when the property is sold.
What Is Equity Release?
Equity release allows homeowners aged 55+ to access the value tied up in their property without having to sell or move. It provides a tax-free lump sum or regular income, which can be used for anything — home improvements, helping family, supplementing retirement income, or paying off debts.
Types of Equity Release
Lifetime Mortgages (most popular — 99% of plans):
- A loan secured against your home that's repaid when the property is sold
- You retain full ownership
- Interest rolls up (compounds) unless you choose to make voluntary payments
- All Equity Release Council plans come with a "no negative equity guarantee"
Home Reversion Plans:
- You sell all or part of your property at below market value in exchange for a lump sum
- You retain the right to live there rent-free for life
- Less popular due to the discount on property value
If you're not yet 55, you may want to consider a standard remortgage, an interest-only mortgage, or a later-life mortgage instead.
Important Considerations
- Compound interest: With a lifetime mortgage, interest compounds rapidly. A £100,000 loan at 5% becomes roughly £163,000 after 10 years and £265,000 after 20 years
- Impact on inheritance: Equity release reduces the estate you leave behind — consider life insurance to offset this
- Benefits eligibility: Releasing equity could affect means-tested benefits
- Early repayment charges: Some plans charge penalties if you repay early — understand the fees involved
- Alternatives: Consider downsizing, a retirement interest-only mortgage, or standard remortgaging first. You should also have a will and lasting power of attorney in place
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Safeguards and Regulation
The Equity Release Council provides important consumer protections for its members' plans:
- No negative equity guarantee: You'll never owe more than your home's value
- Right to remain: You can live in your property for life
- Independent legal advice: Required before completion
- Regulated advice: Equity release is normally arranged through specialist regulated advice. FCA rules generally require an advised process, with limited execution-only provisions in defined circumstances.
- No-negative-equity guarantee: This is a standard of Equity Release Council-compliant products, not an automatic feature of every FCA-regulated equity release product — always check the plan's terms.
Frequently Asked Questions
- How much equity can I release?
- Typically 20-60% of your property value, depending on your age and the plan type. The older you are, the more you can release.
- Will I still own my home?
- With a lifetime mortgage (the most popular type), yes — you retain full ownership. With a home reversion plan, you sell all or part of your property.
- Do I have to make monthly payments?
- With most lifetime mortgages, no. Interest rolls up and is repaid when the property is sold (usually when you die or move into care). Some plans allow voluntary interest payments to manage the balance.
- Can I move home after releasing equity?
- Yes. Most lifetime mortgages are portable — you can transfer the plan to a new property, provided the new home meets the lender's criteria and is of sufficient value.
Sources & References
- Equity Release Council standards — Equity Release Council
- FCA — Equity release — Financial Conduct Authority
- Equity release: lifetime mortgages and home reversion — MoneyHelper (FCA)
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