Equity Release: What You Need to Know as a Homeowner Over 55
If you’re a homeowner aged 55 or over, you may have come across equity release schemes as a way to access the wealth tied up in your home—without having to sell or move. These schemes allow you to unlock tax-free cash from your property, either as a lump sum or smaller regular payments to supplement your retirement income.
Some equity release options also provide flexibility, allowing you to make interest payments to reduce the overall debt, or even ensure a guaranteed inheritance for your beneficiaries.
However, before deciding whether equity release is right for you, it’s crucial to weigh the pros and cons carefully. This is a significant financial decision that requires expert advice.
What is Equity Release?
Equity release allows homeowners to access the value of their property while continuing to live in it. In return, you receive either a lump sum, a steady stream of income, or both. The money can be used for anything—from boosting retirement income to funding home improvements or helping family members financially.
How Does Equity Release Work?
There are two main types of equity release schemes available in the UK:
1. Lifetime Mortgage
A lifetime mortgage is the most common type of equity release. Here’s how it works:
- You borrow money secured against your home.
- The loan is repaid when you pass away or move into long-term care.
- Interest can be added to the loan, which means the total amount owed can grow over time unless you choose to make repayments.
- Some plans offer the option to make voluntary payments to reduce interest accumulation.
2. Home Reversion Plan
With a home reversion plan, you sell all or part of your home to a provider in exchange for a tax-free lump sum or regular payments. You continue to live in the property rent-free until you pass away or move into permanent residential care. However, the amount you receive is usually lower than the market value of the portion of the property sold.
Who is Eligible for Equity Release?
To qualify for equity release in the UK, you must meet the following criteria:
✅ Aged 55 or older (for lifetime mortgages) or 65+ (for some home reversion plans)
✅ Own a property in the UK that is your main residence
✅ Your property must be in good condition and above a certain value
✅ If you have an existing mortgage or secured loan, it must be repaid using the released funds or other means
⚠️ If you have family members living with you, equity release may affect their right to remain in the home after you pass away or move into care. Seeking independent legal advice is recommended.
What Are the Benefits of Equity Release?
Equity release offers several potential benefits, including:
✔️ Stay in your home while unlocking tax-free cash
✔️ Maintain homeownership (if choosing a lifetime mortgage)
✔️ Flexibility – choose a lump sum, regular payments, or a combination
✔️ No monthly repayments required (unless you opt to make voluntary payments)
✔️ Potential to move home in the future if the new property meets lender requirements
✔️ Benefit from rising property values (for lifetime mortgages)
What Are the Drawbacks of Equity Release?
While equity release can be beneficial, there are also important considerations:
❌ Reduces the value of your estate – meaning your beneficiaries will inherit less
❌ May affect eligibility for means-tested benefits
❌ Interest can build up quickly, increasing the amount to be repaid (for lifetime mortgages)
❌ If you receive council-funded home care, they may request contributions from the released funds
Should You Consider Equity Release?
Equity release is a major financial decision that should not be taken lightly. It’s essential to consult a qualified equity release adviser to ensure it’s the right option for you.
Get Expert Equity Release Advice Today
If you’re considering equity release, our team of specialist advisers can help you explore your options and make an informed decision.