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Equity release mortgage
Equity release lets homeowners aged 55+ access money tied up in their property without selling or moving out. The most common form, a lifetime mortgage, is repaid — usually from the sale of the home — when the last homeowner dies or moves into long-term care.
To start exploring your options, you'll be introduced to Royal London Equity Release Advisers, who can give you personalised advice.
A lifetime mortgage is a loan secured against your home. It will reduce the value of your estate and could affect your entitlement to means-tested benefits.
Key takeaways:
Homeowners 55+ can borrow against a home worth £70,000+ to access tax-free cash.
Interest can be paid monthly or rolled up (increasing total debt).
It reduces your estate's value and may affect benefits, so always seek expert advice.
What is equity release?
Equity release lets you access money tied up in your property to help you:
Repay an existing mortgage
Make home improvements
Support family members financially
Top up retirement income
Unlike downsizing, you remain in your home.
Generally, there are two types of equity release schemes: a lifetime mortgage and home reversion. Here's the breakdown of each.
| Lifetime mortgages | Home reversion |
|---|---|
| The most common route, available from age 55. | Usually only available from the age of 65 |
| You borrow against your home's value, but there's no requirement to make repayments — though you can choose to pay some off voluntarily if you want to slow how the loan grows | You sell all or part of your home to a reversion company, in exchange for a lump sum, a regular income, or both |
| You keep full ownership of your home throughout | You keep the right to live there, usually rent-free under a lease — though some schemes charge a below-market rent |
| Some plans let you take an initial lump sum now and draw down more later — interest only builds up on the money you've actually released, not the full amount you're approved for | When the property eventually sells, you (or your estate) get the value of whatever share you kept — the reversion company gets the rest |
| The loan and interest are repaid when the home is sold, typically when you move into long-term care or pass away | |
| Most plans come with a no negative equity guarantee, so you won't owe more than the home is worth | |
| The amount owed can grow quickly | |
| Repaying early can trigger an early repayment charge |
How does equity release work?
The most popular form of equity release, you borrow against your home with the option to make flexible monthly repayments or allow the interest to be added to the loan and roll up, which increases the overall cost of borrowing. The amount will then become due for repayment when the last homeowner enters long-term care or dies.
You have options to take a one-off lump sum or smaller amounts over time, known as a drawdown. You may also move home later, subject to the lender’s criteria.
What are the safeguards?
Lifetime mortgage products from providers who are members of the Equity Release Council come with safeguards:
You’ll never owe more than your home is worth
You can stay in your home for life
Interest rates are fixed or capped
Voluntary repayments are allowed
What costs are involved?
With a lifetime mortgage, the main cost is the interest charged on the amount you borrow. You can choose to pay this interest each month, or let it be added to your loan. If you choose the latter, the interest builds up over time, meaning the total amount owed will increase.In addition to interest, there are other costs to consider:
Arrangement fees – Some lenders charge a set fee or a percentage of the amount borrowed for setting up the mortgage.
Legal fees – You’ll usually need a solicitor to pay a fee for a specialist equity release solicitor to handle the legal work.
Valuation fees – Many providers include a free property valuation, but some may charge for this service.
Your adviser will provide a full breakdown of all costs before you proceed, so you know exactly what to expect.
Are you eligible?
Eligibility now splits cleanly by scheme type, rather than being stated once for "equity release" generally:
Lifetime mortgage
Aged 55 or over
Own a UK property worth at least £70,000
Use it as your main residence
Looking to release a minimum of £10,000–£15,000
Home reversion
Aged 65 or over
Own a UK property in good condition
May be subject to a minimum property value set by the provider
Pros and cons of equity release
Equity release can free up cash in retirement, but it reduces the value of your estate and isn't right for everyone. Weigh these before deciding:
| Pros | Cons |
|---|---|
| Access cash without selling or moving home | Reduces the inheritance you leave behind |
| Tax-free lump sum or flexible drawdown | Interest compounds if unpaid, which can grow the debt significantly over time |
| No negative equity guarantee with ERC-registered lenders | May affect entitlement to means-tested benefits (e.g. Pension Credit, Council Tax Reduction) |
| You can still benefit from house price growth on your share | Arrangement, legal, and sometimes valuation fees apply |
| Voluntary repayments are usually allowed, letting you control how much the loan grows | Can be more expensive than alternatives like downsizing over the long term |
Before you decide
Consider alternatives such as downsizing, remortgaging, a retirement interest-only mortgage, renting out a room, or using existing savings or investments.
The most important consideration of equity release is that you as a customer have a full enough understanding of the products available to make a confident and informed choice. Always seek expert advice.”Laura Hamilton, Mortgage Expert
Equity release FAQs
What is the Equity Release Council?
The Equity Release Council (ERC) is the voluntary trade body that oversees the equity release sector and is regulated by the Financial Conduct Authority (FCA). It ensures that its members uphold certain values and standards of conduct through several product safeguards aimed at protecting customers.
What happens if I owe more than my house is worth when I die?
The ‘no negative equity guarantee’ means that you will never have to repay more than the value of your home. This means that your beneficiaries will not need to repay anything from your estate or their own pockets if the sale of your home does not cover your entire debt.
Essentially if you do owe more than the value of your home then the lender takes a loss - which is their risk to consider.
What should I worry about when releasing equity?
The best way to limit any worries that you may have about taking out equity release is to choose a ERC (Equity Release Council) certified expert adviser and ensure you thoroughly understand all of the risks involved with equity release. The main things to consider will vary slightly depending on which type you opt for, but in both cases you will need to consider:
Impact on inheritance
If you’re hoping to leave an inheritance behind for loved ones, it’s important to understand the impact equity release will have on this. Some plans allow you to 'ring fence' some of your home’s value for inheritance purposes. This is known as the ‘inheritance protection guarantee’ and might be a valuable option if leaving an inheritance is important to you.
Whether any means tested benefits you have would be affected
If you receive means-tested benefits from the government, taking a large lump sum payment of any kind can affect your eligibility to them, as you may end up above the savings threshold. Therefore taking a large lump sum during equity release won't be beneficial to everyone.
It may be possible to prevent this by taking a smaller upfront lump sum and split the remaining loan into regular payments. Speak to an equity release expert about your benefits if you are concerned about this.
Does equity release affect my pension or benefits?
It doesn't affect your State Pension, which isn't means-tested. However, releasing a lump sum can affect means-tested benefits like Pension Credit, Council Tax Reduction, or Universal Credit if it pushes your savings above the relevant threshold. Taking a smaller initial amount via drawdown, rather than a large lump sum, can help manage this.
What's the difference between a lifetime mortgage and home reversion?
A lifetime mortgage is a loan secured against your home — you retain full ownership. Home reversion involves selling all or part of your home to a provider in exchange for a lump sum or income, while retaining the right to live there rent-free. Lifetime mortgages make up the vast majority of the UK equity release market.
Disclaimer: Every effort is made to provide accurate information as of the publishing date. However, given the fast-moving nature of the mortgage market, products or rates may have changed since this was written.
