Equity release explained

Equity release is a way for some homeowners to access cash from the value tied up in their property. Instead of repaying a mortgage through regular monthly payments in the usual way, many equity release plans are structured so the loan is repaid later—typically when you die, or when you move into long-term care.

Because equity release is secured against your home and can affect your finances for many years, it’s important to understand how the different schemes work, what the costs can look like over time, and what protections may apply.

What is equity release?

Equity release lets you access some of the equity you’ve built up in your home. Depending on the plan, the cash you receive may be taken as:

• a lump sum
• regular payments
• a combination of lump sum and payments

Many plans also offer deferred repayment, meaning the balance is usually repaid at a later stage rather than through monthly instalments.

Equity in a house: what does it mean?

In simple terms, equity is the portion of your property you effectively own. It’s commonly thought of as:

• the value of the property
• minus any existing mortgage balance
• equals the equity available

How much equity you may be able to release depends on the plan type, provider rules, and the property itself.

The two main types of equity release

Most equity release options fall into two broad categories:

1. Lifetime mortgages
2. Home reversion plans

They both aim to help homeowners access cash, but the way the provider is repaid and the way the property value is handled can be very different.

Lifetime mortgages

A lifetime mortgage is a loan secured against your home.

You may receive the money as a lump sum and/or regular payments. Instead of repaying the capital through monthly payments, the loan is usually repaid later—often when you die or move into long-term care.

Interest and how the balance can grow

Interest is charged on the amount borrowed. Over time, the way interest is handled can significantly affect the total amount repayable later.

Common approaches include:

• rolled-up interest: interest is added to the balance, so the amount owed can increase over time
• partly or fully paid interest: where you make some payments, which can help control how quickly the balance grows

What can influence how much you can borrow

While each provider has its own rules, typical factors include:

• your age (and sometimes the age of a partner)
• the value and type of property
• the property’s condition
• any existing mortgage arrangements
• relevant personal circumstances, where they affect the product terms

Home reversion plans

With a home reversion plan, you sell all or part of your property to the provider.

In return, you usually retain the right to live in the home for the rest of your life (or for as long as you meet the plan terms).

Because you are selling a share of the property to the provider, the provider typically pays less than full market value for the portion sold. The proportion you sell and the amount you receive can vary depending on the plan structure and factors such as age.

Drawdown equity release: releasing cash in stages

Some equity release plans include a drawdown facility.

With drawdown, you don’t necessarily take the full amount available immediately. Instead, you agree a maximum amount and can choose to release cash in stages when you need it.

This can be useful if you want flexibility, but it’s still important to understand how interest works on any amount you draw and how the plan is structured overall.

SHIP protections and why they matter

Equity release is a long-term commitment, so protections are important.

In the UK, some equity release plans are designed to meet standards associated with the Safe Home Income Plans (SHIP) framework, which is linked to the Society of Later Life Advisers (SOLLA).

While specific features vary by plan and provider, SHIP standards are intended to support key consumer protections such as:

• allowing customers to remain in their property for life (subject to meeting the plan terms)
• fair, clear and complete presentation of the plan
• the ability to move to another suitable property without an inappropriate financial penalty (where the plan terms allow)
• the right to choose an independent solicitor
• a SHIP certificate signed by the solicitor confirming the customer has been made aware of the terms and implications
• a no negative equity guarantee (so you don’t owe more than the value of the property at the time of repayment)

Reasons people consider equity release

Homeowners may look at equity release for a range of reasons, for example:

• funding home improvements or adaptations
• helping with family support
• paying off existing debts
• supplementing retirement income
• covering one-off costs

The right approach depends on individual priorities—particularly how you want to manage cashflow now, and what you want to happen later.

Equity release vs remortgaging to release equity

Some people compare equity release with a remortgage (taking out a new residential mortgage or restructuring an existing one).

A remortgage is typically repaid according to a defined mortgage term and repayment structure, often through regular payments. That means affordability and ongoing payment commitments are central considerations.

Equity release may be considered where monthly affordability is a key concern, because repayment is usually deferred. However, equity release can still be costly over time, and it can affect what remains in the property for inheritance.

Pros of equity release (for the right circumstances)

When equity release is suitable, potential benefits can include:

• access to cash without needing to move house
• deferred repayment in many plans
• flexibility in how funds are taken (lump sum, regular payments, or drawdown)
• potential to support retirement plans, clear debts, or fund essential spending
• protections and safeguards where SHIP standards apply

Cons and risks to consider

Equity release isn’t suitable for everyone, and there are important risks to weigh up.

Common considerations include:

• interest can build up over time, especially where interest is rolled up
• the plan may reduce the value left to pass on to family
• it can affect means-tested benefits depending on how funds are held and your wider circumstances
• early repayment or changing plans may trigger charges in some situations
• the long-term nature of the agreement can make it harder to reverse decisions later
• with home reversion, you may receive less than full market value for the share sold

Equity release costs: what to expect

The overall cost depends on the plan type and how long you remain in the property.

Interest is often a major driver

For lifetime mortgages, the way interest is structured can have a significant impact on the balance over time. Plans that roll up interest can increase the amount repayable later.

Other charges may apply

Depending on the plan, there may be additional costs such as:

• arrangement or product fees
• valuation fees
• legal (solicitor) fees
• transfer fees (where applicable)

The exact fee structure varies by provider and product, so it’s important to understand the full picture rather than focusing only on the cash amount you receive.

Key points to consider before choosing

Before comparing options, it helps to focus on:

• the total cost over time, not just the initial cash amount
• whether interest is rolled up or can be managed through payments
• how the plan could affect inheritance and long-term family outcomes
• potential implications for benefits, where relevant
• how your plans might change in the future and what that could mean for repayment and charges

Summary

Equity release is a way to access cash from the value of your home, usually with repayment deferred until a later event. The two main types are lifetime mortgages and home reversion plans, and they differ in how the provider is repaid and how the property value is handled.

Because equity release can be expensive over time and may affect inheritance and benefits, it’s important to compare options carefully and understand the long-term implications.

Why personalised illustration and independent advice matter

Equity release is a major financial decision. A personalised illustration helps show how a specific plan could work for your circumstances, including how interest may build up and what repayment could look like later.

Independent advice is also important because it can help you understand the risks, compare alternatives (including remortgaging), and consider how the plan fits with your wider goals.