What can equity release be used for?

*Updated August 2023*

The money you raise through equity release could be used for almost anything including:

  • Home improvements
  • Helping support your family financially
  • Supporting your monthly income so you can live more comfortably
  • Paying off debts
  • Purchasing a second home
  • Pay school or university fees
  • Travelling
  • Helping you pay for care in later life

In this article, we answer your questions on how equity release can be used.

Can I pay off my mortgage with equity release?

Yes, you can use the cash you raise to pay off your mortgage, freeing up more of your monthly income for you to spend on other things.

With equity release, you don’t have to make any monthly repayments and the loan doesn't need to be repaid until you die or move into permanent long-term care. Also, with equity release interest rates comparatively low right now, it could be a simple and affordable way to clear your mortgage.

If you choose an equity release lifetime mortgage, you actually have to pay off your current mortgage, as well as any debts you've secured against your home using the money you release, or your savings if you have enough.

What you need to bear in mind is that the interest rolls up each year, so the amount needing to be repaid can grow very fast. If this concerns you, look for an interest only lifetime mortgage or one with the option to make partial repayments, to reduce this risk.

Can I use equity release to pay for home improvements?equity release for home improvements

Yes, you can. Whether you need cash for urgent repairs, a total home makeover or some helpful mobility aids to enable you to enjoy your home more freely, an equity release scheme could help make it more affordable.

A drawdown lifetime mortgage could give you an initial lump sum to pay for any work you need doing immediately, as well as a cash reserve. The cash you have in reserve can be drawn on as and when you like, and you’ll only pay interest on the money you have taken.

Improving your home could add value to your property and make it easier to sell, as well as making it more attractive and comfortable for you to live in.

Can I use equity release to pay for care?

Yes, equity release can be used to pay for long-term care at home without having to rely on family or friends. If you're not eligible for local authority support, or the money provided is insufficient to cover the full cost of home care (or not to the standard you want), equity release is a simple way to fund your own contribution.

The benefit of equity release is that you can continue to live in your own home with access to tax-free money to help pay for in-home care.

However, if there’s a chance you may need to go into residential care soon, equity release probably isn't appropriate for you. This is because the loan plus interest must be paid back in full when the borrower moves into a care home permanently.

Can I use equity release to clear my debts?

Yes, you can use equity release to clear your debts. Debt is worrying at any time of life, but as you get older and your income starts to fall, it can become harder to meet the repayments and the everyday cost of living. If you have loans or credit card balances that you're paying for every month, an injection of tax-free cash via equity release could help.

Using equity release to pay off your creditors means you can stop making monthly repayments, free up cash to make life more comfortable and remove the risk of legal action or your home being repossessed.

Equity release will reduce the size of the inheritance you are able to leave, as the loan plus rolled up interest is repaid when you die or move into long term care, usually through the sale of your home. But on the other hand, you won’t be leaving any debts to be paid off from your estate.

Can I release equity to help my family?

Yes, if you want to help your family, but you don't have enough savings or income to do so, equity release could help.

Equity release can provide tax-free cash to give your children or grandchildren much-needed support, as a kind of early inheritance. You could for example, help them continue their education, put a deposit on a home or start out in business.

Your family will benefit while you’re still around to see the difference your support is making to their lives. Equity release also reduces the value of your total estate, which could mean your heirs will pay less inheritance tax later.

However, HMRC impose time constraints on making cash gifts, even to close family, which can affect whether tax is payable, so always talk to a qualified professional adviser with a good knowledge of tax before going ahead.

Can I use equity release to buy a second home?

Yes, taking out equity release on your current home could be one way to raise funds to buy a second home. However, you can only release equity on your main residence, so you will need to live in your current home for at least six months of the year.

You would also probably have to buy the second property outright, since extra mortgages or loans secured on either home could complicate things and might break the terms of your equity release plan.

Our equity release expert, Ashley Shepherd suggests thinking about how you might want to use the money you release before you speak with your financial adviser. They can then talk you through all your options based on these goals.

Thinking about equity release? 

Whatever your plans, always seek professional financial advice before committing to equity release. However, be aware that some advisers only recommend certain equity release companies or plans, which might not be the best choice for you.

This is one of the main reasons why we have chosen to team up with award-winning equity release broker Age Partnership. As a specialist, their expert advisers will research equity release plans across a wide range of leading providers to find the right plan for your finances and your personal situation. What’s more, they have negotiated preferential rates with lenders that you may not find elsewhere.

For a free initial discussion, call 0800 368 8466 to speak to a specialist adviser.

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

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Ways to contact us

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