7 things you need to know before you use equity release

For many homeowners, the value built up in their property can represent their biggest financial asset. Equity release is one way some people access part of that value later in life—whether to fund retirement plans, support family, or make day-to-day life easier.

It can also be a complex decision. The features of equity release mean it may not suit everyone, particularly if you want to protect inheritance, keep flexibility to move, or rely on means-tested benefits.

Below are seven key points to understand before you explore equity release.

1. Equity release is a form of mortgage

Equity release is not a savings product or a grant. It’s a mortgage secured on your home, designed for later-life borrowers.

In many cases, you’ll need to meet minimum age and home ownership conditions, and any existing mortgage on the property would typically need to be repaid using the equity release funds.

How you repay is also different to a standard mortgage. With many equity release plans, you don’t make monthly repayments during the term. Instead, the loan and associated interest are repaid when you die or move into long-term care.

2. Interest can build up over time

Because equity release plans are often structured without regular repayments, the interest can accumulate and compound.

That matters because the amount you owe can grow substantially over the years. The longer the plan runs, the more the balance can increase—so it’s important to think beyond the initial cash amount and consider the long-term cost.

Some plans may allow you to make voluntary payments (for example, to reduce or manage the interest), but the availability of this and the effect on the overall balance will vary by plan.

3. Equity release can reduce what you leave behind

If leaving your home (or part of its value) to loved ones is a priority, equity release is a decision that deserves careful thought.

As the loan balance usually increases over time and is repaid from the sale of the property, the amount available to beneficiaries may be lower than it would otherwise have been.

Many equity release plans include protections designed to prevent the debt exceeding the property’s value at the time of repayment (often referred to as a “no negative equity” guarantee). There may also be options to ringfence a portion of the property value for inheritance, but doing so can affect how much you can access.

4. Your home value and age can influence how much you can access

The amount available through equity release isn’t based on a single figure. It’s typically influenced by factors such as:

• the value of your property
• your age (and sometimes the age of a joint borrower)
• the plan type and features you choose
• the interest rate and how it applies

It’s also worth considering whether accessing the maximum amount is always the best approach. If you don’t have a clear use for the funds, borrowing more than you need can increase the long-term interest cost.

For flexibility, some equity release plans allow drawdown—meaning you can take an initial amount and potentially access more later, rather than taking everything at once.

5. Equity release may affect your ability to move

Many homeowners consider moving in later life, whether to downsize, move closer to family, or adapt to changing needs.

Equity release can make moving more complicated. Some plans may allow you to transfer (or “port”) the arrangement to another property, but this isn’t always straightforward and may depend on the new property meeting certain requirements.

Before proceeding, it’s sensible to consider your likely housing plans over the coming years and how the equity release structure could impact them.

6. It can affect means-tested benefits

If you receive means-tested benefits, it’s important to understand that equity release can change your financial position.

Taking a lump sum or receiving regular amounts may affect how your income or capital is assessed for certain benefits. The impact will depend on your personal circumstances and the type of benefits you receive.

Even if you’re not currently receiving means-tested benefits, it’s still worth thinking about how accessing funds could influence future eligibility.

7. There are alternatives—compare them before deciding

Equity release isn’t the only way to access funds from property wealth. Depending on your goals, alternatives may include:

• Downsizing to release equity without taking on a new loan
• Using other assets such as savings or investments
• Reviewing retirement income sources, including pensions
• Making changes to spending or budgeting to reduce the need for property-based funding

The “best” option depends on what you’re trying to achieve—whether that’s funding specific expenses, improving cashflow, supporting family, or protecting long-term financial security.

Key risks to keep in mind

Equity release can reduce the value of your estate and may affect eligibility for means-tested benefits. Because interest can accumulate over time, the overall cost can be higher than many people expect when they focus only on the initial cash amount.

General information only

This guide is for general information and does not constitute financial advice. Any decision about equity release should be based on your individual circumstances, and you may want to request a personalised illustration to understand the features and risks of a specific plan.

Lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.