Equity release is a financial product that allows homeowners aged 55 or over to unlock some of the value (equity) in their home without needing to sell it or move out. The money released can be taken as a lump sum, in smaller regular amounts, or a combination of both, and can be used for any purpose — retirement income, home improvements, helping family members, or paying off debts.
There are two main types of equity release: lifetime mortgages (where you take a loan secured against your home, with interest rolling up over time) and home reversion plans (where you sell a share of your home in return for a lump sum or regular income). Lifetime mortgages are by far the more common of the two.
All equity release products sold in the UK must be approved by the Equity Release Council, which provides important consumer protections including a no-negative-equity guarantee (you will never owe more than your home is worth). Equity release reduces the value of your estate and is not suitable for everyone, so independent specialist advice is required by regulation before you can proceed.
You are 68, own your home outright worth £350,000, and want to access £80,000. You take out a lifetime mortgage at 5.5% with no monthly payments — interest rolls up. After 15 years, the total owed has grown to approximately £178,000 (£80,000 plus rolled-up interest). When the property is eventually sold, the lender is repaid from the proceeds and the remainder goes to your estate.
Key Points
- Available to homeowners aged 55 and over
- Allows you to access your home's value without moving
- Two types: lifetime mortgages and home reversion plans
- Interest typically rolls up, increasing the amount owed over time
- Specialist independent advice is mandatory before proceeding