What is equity release?

Equity release is a type of mortgage that lets you access the money tied up in the value of your home. 

You can choose to make repayments and keep living in your home. The amount you borrow (plus interest) is repaid by selling your home when you die or move into long-term care.

The most common types of equity release are home reversion or a lifetime mortgage. 

But equity release comes with some risks, and you’ll need to first speak to a specialist equity release adviser or mortgage broker.
 

Equity is the part of a property you own. So, if you have a mortgage, the equity is the difference between your home’s current value and what’s left to pay on the mortgage.

If you’re a homeowner aged 55 and over, equity release may allow you to borrow this money from your home without selling.

You can take it as:

• a lump sum (most lenders say a minimum of £10,000), 

• smaller amounts taken when you need it or as a regular income – called a ‘drawdown’, or

• a combination of both. 

But it can be an expensive way to raise funds. The earlier you take out an equity release product, the longer you have the loan, and the more interest builds up.

It’s a lifetime commitment that can affect:  

• your future plans, including care at home, 

• eligibility for benefits, and

• inheritance.

Before deciding, you must speak to an equity release specialist about the risks or discuss other options with a mortgage adviser.

One option is to sell up and move to a smaller home (called downsizing). You can then use the sale profits to raise the funds you need. 

Read more in our downsizing guide.

You can consider taking out a retirement interest-only mortgage if you can afford to make monthly repayments.

Each month you’ll make a payment to cover the loan interest, but the amount you borrow is usually only repaid when you sell your home, move into long term care or when you die.

Think about cashing in any investments or using savings before taking out an equity release product.

If you’re considering equity release to pay off problem debt, speak to a trained adviser for help. 

Find free and confidential debt advice near you using our debt advice locator tool. 

There are two equity release options: 

1) Lifetime mortgage

This is where you take out a mortgage loan secured on your property - find out more about lifetime mortgages.

2) Home reversion plan

This is when you sell all or part of your property to a provider, usually below market value - read more about home reversion.

Whichever option you choose:

• you’ll stay living rent free in your home for the rest of your life

• there are usually flexible payment options, including the option to pay nothing 

• the loan, plus interest (if it applies), is repaid from the sale of your home after you pass away or move into long-term care.

To see how much you could release from your home, try searching for providers online or use StepChange’s free equity release calculatorOpens in a new window

It depends on your individual circumstances. Consider the pros and cons of each option.

A mortgage adviser or equity release specialist can recommend the best choice for you - see below for details of where free help is available.

Equity release firms must give you certain important information to help you decide if you should enter a scheme. A specialist adviser will help you understand your choices and make the right decision for your circumstances.

Find an equity release specialist using the Equity Release Council (ERC) directoryOpens in a new window Or to get support with other mortgage options, use our guide to find a professional adviser.    

ERC members have specific standards (guidelines) to meet when making a recommendation, including:

• assurance you’ll stay in your home for life, or until you move into care,

• no-negative equity guarantee, and 

• fixed or capped interest. 

They must say if a standard is not met with the lenders they recommend and clearly explain the risks to you. 
 
Our Retirement adviser directory also lists registered financial advisers who specialise in retirement planning.  
 
Always check your adviser is registered with the Financial Conduct Authority (FCA)Opens in a new window 

When contacting an adviser, confirm:

• their fees

• what other fees you’ll pay (such as legal, valuation and set up costs)

• if they search the whole market

• what type of equity release products they can offer.

Once you’ve spoken to an adviser, they will make a recommendation for your situation and provide:  

• a ‘suitability letter’ or ‘product confirmation letter’, and

• a Key Facts Illustration (KFI).

Together these give you a personalised report. The KFI outlines the terms of your recommended plan, including:

• the name of the provider and description of the scheme

• the overall cost of the scheme and any fees to pay

• the service you're getting, plus any other features

• the interest rate deal (for lifetime mortgages) 

• details of regular payments and how much they would be if interest rates increased (for lifetime mortgages).

Make sure you read it fully and ask them to explain anything that is unclear. 

You can use this information to shop around and compare similar schemes from other providers.

Once you’re happy and agree to your plan with your adviser, your application will need to be approved.

When this is confirmed, you’ll receive an offer document.

It will include details like:

• the fees 

• your name and address

• the amount you’ll receive

• any special conditions such as clearing any outstanding mortgages.

Be sure to read it carefully. If you’re not happy or unsure, you don’t have to go ahead. 

Finally, you’ll need to hire your own solicitor to check the details once you have agreed on an equity release plan. 

If you are struggling to make ends meet and are looking for financial help, there are agencies and charities that provide free information and advice.

If you want to use equity release to clear debts or help with your monthly repayments, remember that the equity loan will also need to be repaid.

If you’re worried about money, read our guide on Help if you're struggling with debt.

There are other things you can do to resolve your difficulties, including getting free debt advice.

• National DebtlineOpens in a new window or call 0808 808 4000

• StepChange Debt CharityOpens in a new window

• PayPlanOpens in a new window

• Money Adviser Network

Find a free debt adviser near you, online or on the phone.

If you want to use equity release to support the care needs of you or your partner, talk to your council about getting a care needs assessment. This checks if you’re eligible for local authority support. 

Use our Benefits calculator to quickly find out what you could be entitled to.

Depending on your age and circumstances, you may be also entitled to energy grants, financial aid or government support. 

• Energy Saving TrustOpens in a new window or call 0800 444 202 (for England, Wales and Northern Ireland), 0808 808 2282 (for Scotland)

• Nest (Wales)Opens in a new window

• Foundations (England)Opens in a new window

• Care and repair Cymru (Wales)Opens in a new window

• Care and repair (Scotland)Opens in a new window

• NI Direct (Northern Ireland)Opens in a new window