Last updated: June 2026.
What equity release actually is
Equity release is a way of unlocking capital from your home without selling it or moving out. The two products available in the UK:
| Product | How it works | Most common today? |
|---|---|---|
| Lifetime mortgage | Loan secured against your home; you keep ownership; loan + rolled-up interest is repaid when the property is sold | Yes, accounts for ~99% of equity release |
| Home reversion | You sell all or part of your home to a provider in exchange for a lump sum/income; right to live there for life | Very rare today |
Most modern equity release products include important consumer protections set by the Equity Release Council:
- No-negative-equity guarantee: you can never owe more than the value of your home
- Right to remain for life in your home (or until you move into long-term care)
- Right to move your equity release to a new property if you move
- Fixed or capped interest rate for the life of the loan
How much can you release?
The percentage you can release increases with age. Approximate maximum loan-to-value:
| Age | Approximate maximum release (% of property value) |
|---|---|
| 55 | 20-25% |
| 60 | 25-30% |
| 65 | 30-35% |
| 70 | 35-40% |
| 75 | 40-50% |
| 80+ | Up to 55% |
These are typical figures, actual maximums depend on the lender, property type, location, and your medical history. Some lenders offer enhanced terms for applicants with certain health conditions (because life expectancy is shorter).
The compounding problem
The biggest single thing to understand about equity release: interest rolls up. You don't pay anything monthly, the interest gets added to the loan balance, which then itself attracts interest. Over 20+ years this can be dramatic.
Worked example: £100,000 released at 6% (typical equity release rate in 2026):
| Years from release | Amount owed at 6% compound |
|---|---|
| 5 years | £133,823 |
| 10 years | £179,085 |
| 15 years | £239,656 |
| 20 years | £320,714 |
| 25 years | £429,187 |
| 30 years | £574,349 |
A 65-year-old in good health has a 50% chance of living to 85+. So a £100,000 release at age 65 could realistically grow to £180,000-£320,000 owed at death.
If house prices haven't grown by as much, the inheritance value erodes accordingly. If house prices have grown more, some inheritance value survives. Either way, the released amount and its compounded interest reduce what you leave behind.
When equity release can make sense
Equity release isn't right for most people, but there are situations where it's the best available option:
1. Insufficient retirement income
Someone with low pension income but substantial housing equity may use equity release to fund essential living costs, particularly when downsizing isn't practical due to family or community ties.
2. One-off capital need without downsizing
Helping a child onto the property ladder, paying for major home adaptations, funding care costs at home, or paying off a mortgage that's about to reset to a higher rate.
3. Estate planning where IHT exposure is significant
Released capital used for lifetime gifts (subject to the 7-year rule) can reduce IHT on the eventual estate, sometimes by more than the interest cost. Counter-intuitive but real in specific cases. See family wealth transfer.
4. Specific lifestyle goals where downsizing isn't acceptable
Travel, major one-off purchases, supporting a child's wedding or education, where the homeowner is happy to trade some inheritance value for current spending.
When equity release doesn't make sense
1. As a first resort
Other options usually come first: cash savings, drawdown from ISAs/pensions, smaller borrowing, family help, downsizing. Equity release is expensive, it's a last resort, not a first.
2. If you might want to move soon
Although equity release is portable to a new home, the process is friction-heavy and may not work with all property types. If you're likely to move within 5-7 years, conventional borrowing or downsizing first is usually cleaner.
3. If means-tested benefits are at risk
A lump sum from equity release counts as your savings for means-tested benefits (Pension Credit, Council Tax Reduction, attendance allowance). Crossing thresholds can wipe out benefits worth more than the equity release was worth.
4. If you're using it to invest
Borrowing at 6% to invest in markets is rarely a sensible strategy. The math has to work in your favour over decades, with no guarantee. Almost never the right answer.
Alternatives to consider first
| Alternative | When it's better than equity release |
|---|---|
| Downsizing | When you don't strongly need to stay in your current home; releases capital with no interest cost |
| Retirement Interest-Only mortgage | If you can afford monthly interest; principal stays fixed, no compounding |
| Drawing more from pension/ISAs | If you have other capital available; usually more tax-efficient |
| Family loan | If family are able and willing; flexible terms, no commercial interest |
| Standard mortgage extension | If you can still qualify; cheaper than equity release |
| Local authority loan | For specific home adaptations, interest-free options sometimes available |
The financial advice requirement
UK equity release is heavily regulated. You must take FCA-regulated financial advice before completing an equity release plan, this isn't optional. The adviser will:
- Assess whether equity release is suitable for your situation
- Explore alternatives first
- Model the long-term cost and inheritance impact
- Recommend specific products if equity release is the right answer
- Coordinate with a solicitor who completes the legal work
Most equity release advisers charge a fee (typically £1,500-£3,000) plus may receive a commission from the lender. Get the full cost breakdown before you commit.
The conversation with family
Equity release reduces what you leave behind. For many people, having an open conversation with adult children before taking equity release is the most important non-financial step, children often have strong views on inheritance, and discovering the equity release decision after the parent's death can cause lasting family rifts.
The conversation isn't always easy. But it's better had openly than left for later.
Frequently asked questions
How much can I release from my home?
Typically 20-55% of your home's value, with the percentage increasing with age. At age 60, you might release ~25%. At 75, around 40-50%. The maximum percentage also depends on the lender's policies and your property's location and condition.
What's the difference between a lifetime mortgage and home reversion?
A lifetime mortgage is a loan secured against your home, you keep ownership, and the loan plus rolled-up interest is repaid when the property is sold (usually on death or moving into care). Home reversion is selling all or part of your home to a provider in exchange for a lump sum or income, with the right to live there for life. Lifetime mortgages are by far the more common option today.
Does interest really compound that aggressively?
It can. A £100,000 release at 6% interest rolled up over 20 years becomes £320,000+ owed. The Equity Release Council's no-negative-equity guarantee means you can't owe more than the property is worth, but you can definitely exhaust the inheritance value. This is the single most important thing to model before agreeing.
Can I still leave money to my children if I take equity release?
Yes, but less. The amount left depends on: how much you released, the interest rate, how long the loan was outstanding, and what happened to property values. Some plans now offer 'inheritance protection' that ring-fences a percentage of the property value for beneficiaries, at the cost of a lower release amount.
Are equity release plans regulated?
Yes. Lifetime mortgages and home reversion plans are FCA-regulated. The Equity Release Council sets additional standards on its members, including the no-negative-equity guarantee, the right to remain in your home for life, and the right to move home. Always check that a provider is both FCA-authorised and a member of the Equity Release Council.