Equity Release Guide: Types, Costs & Alternatives

What Is Equity Release?

Equity release allows homeowners aged 55+ to access the value tied up in their property without selling it. You can receive a tax-free lump sum or regular payments while continuing to live in your home.

Types of Equity Release

Lifetime mortgage (most popular): You borrow against your home's value. Interest rolls up over time and the loan is repaid when you die or move into care. You retain ownership. Some plans allow voluntary interest payments to manage the debt.

Home reversion: You sell all or part of your home at below market value in exchange for a lump sum or income, plus the right to live there rent-free for life. Less common and typically offers lower value.

How Much Can You Release?

Typically 20-60% of your property value, depending on your age and health. A 65-year-old with a £300,000 home might release £90,000-150,000. Older applicants and those with health conditions can release more.

Costs and Risks

Compound interest is the biggest risk. At 6% interest, a £50,000 loan doubles to £100,000 in about 12 years. This significantly reduces the inheritance you leave. Fees: Arrangement fees (£500-1,500), valuation (£300-500), solicitor (£800-1,500). Impact on benefits: A large lump sum may affect means-tested benefits.

Alternatives to Consider

Downsizing to a smaller property releases equity without interest costs. Retirement Interest-Only (RIO) mortgage where you pay interest monthly, protecting the capital. Letting a room under the Rent a Room scheme (up to £7,500/year tax-free). Council support for home improvements or adaptations.

Safeguards

Choose an Equity Release Council member for a no-negative-equity guarantee, meaning you will never owe more than your home is worth. Independent financial advice is mandatory.