How does equity release work?

Equity release is a way for older homeowners to take money from the value of their home while continuing to live in it. The money can come as a lump sum or in smaller amounts over time, and it is usually repaid from the sale of the home when the last borrower dies or moves into long-term care.

There are two types. A lifetime mortgage is a loan secured on the home, and a home reversion plan is the sale of part or all of the home to a provider. Lifetime mortgages make up the large majority of plans taken out.

Both are regulated, and a qualified adviser must assess the plan as suitable before it goes ahead (FCA Handbook, MCOB 8, accessed 20 Oct 2026). That advice covers the alternatives, such as downsizing or a standard mortgage, as well as the plan itself.

With a lifetime mortgage you borrow against your home and keep owning it. Interest is usually added to the loan, so the debt grows, and it is repaid when the home is sold. With home reversion you sell a share of the home for less than its market value and keep the right to live there for life.

In both cases you can stay in the home for the rest of your life, as long as it remains your main residence and you keep it in reasonable repair and insured. You can usually move to another suitable home, and the plan moves with you if the new property meets the lender's or provider's criteria.

When the plan ends, the home is sold, the lender or provider is repaid or takes its share, and anything left goes to your estate. How each type works in detail is covered in the lifetime mortgage guide.

Equity release is generally open to homeowners aged 55 or over for a lifetime mortgage, with a higher minimum age for most home reversion plans. The home must be your main UK residence, of a type the lender accepts and above its minimum value, and any existing mortgage is cleared when the plan starts.

Couples can take out a joint plan, so the home is not sold until the second person dies or moves into care. Age is based on the youngest borrower, which matters because age sets how much can be released.

Most lifetime mortgages do not need an income check, because nothing has to be paid each month. Interest-paying plans and retirement interest-only mortgages do check income, because payments are part of the deal.

The amount you can release depends mainly on your age, the value of your home and, for some plans, your health. Lenders set a maximum share of the property's value they will lend at each age, and that share rises with age, so a borrower in their eighties can usually release a larger proportion than one in their late fifties.

Enhanced plans can offer more to people with certain health or lifestyle conditions, because the plan is expected to run for a shorter time. Drawdown plans let you take less at the start and hold the rest in reserve.

An estimate for your own figures, including the effect of rolled-up interest over time, can be modelled on the equity release calculator, though only a lender's illustration gives the actual figure.

Taking out equity release usually follows five steps: an initial conversation with an adviser, a fact-find and advice, an application and property valuation, a review by your own solicitor, and completion. The adviser must set out the costs, the effect on your estate and benefits, and the alternatives before advising on a plan.

The lender then values the home and issues an offer. Your solicitor explains the terms to you independently, as Equity Release Council standards require, and the money is released once the legal work is done (Equity Release Council, Statement of Principles and product standards, accessed 20 Oct 2026).

The whole process often takes several weeks, depending on the valuation, the legal work and whether an existing mortgage has to be repaid. Firms that arrange equity release, and how their fees work, are listed on the equity release advisers page.

Most equity release is repaid only when the home is sold after the last borrower dies or moves into long-term care. Many lifetime mortgages also let you make voluntary payments without penalty up to a set limit each year, which slows the growth of the debt, and you can repay the whole plan early if you choose.

Repaying early in full can trigger an early repayment charge, which may be fixed or linked to market interest rates, and the terms set out when it applies. Some plans waive the charge in situations such as a move into care or the death of one borrower.

Home reversion plans work differently, because there is no loan to repay. The provider simply receives its share when the home is sold.

Equity release reduces the value of your estate, may affect means-tested benefits, and can be expensive over a long period because rolled-up interest compounds. It can also limit future choices, such as moving to a home the lender will not accept, so the disadvantages need weighing as carefully as the money it releases.

Inheritance tax, the effect on any partner who is not on the plan and the cost of repaying early are other points to check. The money released is not taxed as income, but it may count as savings for benefit assessments (MoneyHelper, Equity release, accessed 20 Oct 2026).

The pros and cons are set out in more detail in the guide to whether equity release is a good idea.