Is equity release a good idea?

Whether or not equity release is a good idea for you will depend on your personal circumstances. Equity release isn’t the right choice for everyone, however if you’re a homeowner aged 55 or over and would like to tap into some extra cash, it might be right for you. Equity release  could be an option to consider, especially if:

  • Your retirement income needs exceed your current sources of income
  • You aren’t able or don’t want to move to a cheaper area or downsize
  • You’re comfortable leaving less to loved ones as an inheritance 
  • You have no beneficiaries to leave your property to

There are two types of equity release - reversion plans and lifetime mortgages, the latter being the most popular. A lifetime mortgage is a loan secured against the home you live in that doesn’t have to be repaid until you die or move into long term care. You can also choose to repay some or all the loan in the future if you wish.

When the time comes, the loan plus interest is usually repaid from the proceeds of selling your home. Any money left over would be paid to your estate.

Why might equity release be a good idea?

UK house prices have been rising consistently for well over a decade, leaving many UK homeowners having paid off (or almost paid off) their mortgage and a home worth a lot more than they paid for it. Equity release could give you a way to free up some of the wealth tied up in your home while you continue to live in it and importantly, own it.

Taking out equity release is a safe option, regulated by the Financial Conduct Authority and overseen by the Equity Release Council. It may also be a simpler option than a ‘standard’ mortgage, as equity release providers tend not to need as much personal financial information to make a decision. Most consider the youngest applicant’s age, where you live, the type of property you own and the amount of equity you have in your home. They are unlikely to take your income and outgoings (other than an existing mortgage) or credit history into account.

The money you release is tax-free and can be used any way you like, such as paying off your mortgage, clearing debts, topping up your pension income , helping family financially, renovating your home, paying for care or taking your dream holiday.

Choosing a lifetime mortgage from a provider who is a member of the Equity Release Council comes with other valuable benefits including:

  • No negative equity guarantee ensures that if the sale proceeds of your home are not enough to pay off the loan plus interest, your beneficiaries will not have to pay the shortfall. The lender will accept the loss.
  • Interest rates must be fixed or if variable have a cap that is fixed for the lifetime of your loan
  • The right to move to another property as long as your lifetime mortgage lender approves it

Find out how much money you could release from your home:

Try the calculator

Why might equity release be a bad idea?

Like any financial product, equity release involves risks that must be weighed up alongside the benefits, before deciding it’s right for you. Here are the main risks to be aware of, but it’s also worth reviewing the small print of any equity release offer you’re made.

  1. Equity release reduces the value of your estate, so there will be less for loved ones to inherit. On the other hand, it reduces your inheritance tax liability.
  2. Coming into a large sum of money may negatively impact your tax status and your eligibility for means-tested benefit.
  3. The compound interest payable on a lifetime mortgage means the total amount you owe can grow quickly. However, there are options available to help you limit the amount of interest building up.
  4. Equity release is a lifelong commitment that cannot be easily reversed if you change your mind.


Speak to an independent equity release specialist

To find out whether an equity release scheme could be a good idea for you, speak to an independent, qualified equity release adviser such as our chosen partner and fellow Equity Release Council member, Age Partnership.

Age Partnership’s award-winning equity release specialists can research and compare schemes from market-leading equity release providers and talk you through alternative ways to raise cash as you get older, so you can find a solution that best suits your specific needs.


Next steps

To see how much equity you could release from your home, use our free and easy to use calculator.

Try our equity release calculator

Or for free advice from equity release specialist Age Partnership, call 0800 368 8466.

Ways to contact us

Call 08001337380
Call 0800 368 8466
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Arrange a callback
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Try the calculator
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Age Partnership

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Equity Release Council

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We are authorised & regulated by the Financial Conduct Authority