Releasing equity from your home

Equity release lets homeowners aged 55+ access the value tied up in their home without having to sell. You take out a lump sum (or drawdown income), and the loan plus interest is repaid from the sale of the property when you die or move into permanent care.

It can be the right decision for some people, a way to fund retirement, help children with a house deposit, or clear other debts. It can also be the wrong decision, locking in expensive debt that compounds and erodes the inheritance you leave. A good adviser will talk you through both sides honestly before recommending anything.

Important: Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits. For equity release products we act as introducers only.

Lifetime mortgage vs home reversion

Lifetime mortgage

By far the most common (~99% of equity release). You take out a loan secured on your home but keep full ownership. Interest rolls up (compounds) until you die or enter care, when the loan plus interest is repaid from sale. Fixed rate for life, typically 6-8%.

Drawdown lifetime mortgage

A flexible version of the lifetime mortgage. You take a smaller lump sum now and draw down more later when you need it. Interest only accrues on what you've actually drawn, a way to reduce compound interest.

Home reversion plan

You sell part (or all) of your home to a provider in exchange for a lump sum or income, but continue living there rent-free. You no longer fully own the property. Rare now; very few providers still offer it.

Interest-paying lifetime mortgage

A variation where you pay the interest monthly from your income, rather than letting it roll up. Keeps the debt static rather than compounding. Requires income to cover it. Best option if you can afford the interest payments.

The serious considerations

Compound interest makes debt grow fast. At 7%, a £50,000 loan taken at 65 doubles roughly every 10 years. By age 85, the debt is around £200,000. If your home is worth £400,000, half the value is now gone.

Benefits impact. Pension Credit, Council Tax Reduction, and other means-tested benefits are calculated on your capital. Taking a lump sum of £50,000 can push you over the threshold and lose you £thousands per year in benefits. We always check this first.

Inheritance reduction. Whatever you release reduces what your children inherit. For some families, that's fine. For others, it's a major issue. Talk to your family about it before committing. Some products offer inheritance protection guarantees, a minimum percentage protected.

No-negative-equity guarantee. All Equity Release Council-approved products guarantee that you (or your estate) will never owe more than the property is worth. This is essential, so check that any plan you are shown is Equity Release Council-approved.

What else might work instead

Downsizing

Sell your current home, buy a smaller/cheaper one, keep the difference. Capital is fully yours. No interest compounding. But involves moving and leaving a home you may love.

Retirement interest-only (RIO)

A standard mortgage that runs for life, with monthly interest payments from pension income. No compounding. When you die, the capital is repaid from sale. Lower total cost than equity release if you can afford interest payments.

Standard mortgage into retirement

Many lenders now lend to 75-85 on standard mortgages. If you're working part-time or have good pension income, this can be cheaper than equity release.

Family support

Sometimes the right answer is a family loan or early inheritance from adult children, with a proper written agreement. No commercial interest, keeps the money in the family.