What is equity release?

What are my equity release options?

There are two main ways of releasing equity:

• Lifetime mortgages (LTMs) which, depending on the product, are usually available once you’re 55 or older. They’re loans secured against your home. With a LTM you can choose to make some, all or no monthly interest payments. Your provider adds any unpaid interest to the amount you owe.
• Home reversion plans, which are usually available once you’re 60 or older. To release equity this way you sell part or all of your home to a provider. You can still live in it, but you won’t own all of it. Because you’ve sold part of your home rather than borrowed money against it, there’s no interest to pay.

We also offer another kind of equity release product:

• Payment Term Lifetime Mortgages (PTLM). They’re available once you’re 50+. They start with a payment term, which can last up until the oldest borrower's 75th birthday. You pay interest until it ends, which is when your PTLM starts working like a standard LTM and the interest will be added to the loan until you die or move into long-term care. If you don't keep up with your payments, as a last resort your lender may have to repossess your home.

If you’re asking: “What is an equity release mortgage?” LTMs or PTLMs are basically the answer as they're a loan secured against your home. But if your question is more general – like, say: “What is releasing equity?” or “What is equity release on a house?” – then home reversion could also be for you, as all three options allow you to release money from your home.

There are other ways you can access the money from your home. You might be able to remortgage your house using a traditional mortgage. Or if you don’t mind moving you could downsize to another, cheaper property.

Do all three types of equity release meet Equity Release Council standards?

The Equity Release Council (ERC) is the trade body that promotes high standards of conduct and consumer safeguarding for equity release providers. We’re an active and supportive member of it and all our lifetime mortgages comply with their standards.

You can take a look at their Consumer Guide to Equity Release for more details.

Who’s eligible for equity release?

Different equity release products have different eligibility needs, based on factors including your age, property value, type and location. You’ll need to be aged at least 50 (probably a bit older), and either own or possibly be buying your own home. The exact details depend on the kind of equity release product you go for - here’s a topline summary of how each of them works:

If you don’t meet these or any other criteria set by your lender, your equity release application might be refused.

• To find out more about applying for equity release, take a look at our How long does equity release take? article
• To see how much equity you could release from your home, check out our Equity Release Calculator

What is the maximum and minimum equity I can release?

When you’re releasing equity through a lifetime mortgage, you usually have to borrow a minimum of £10,000. If you have a product that allows you to draw down more money, each payment will usually need to be at least £1,000. Other providers may let you release more or less money. Home reversion works differently - you can choose to sell between 25% and 100% of the value of your home. 

“What is the maximum equity release?” has no single answer. The most you can borrow will be based on your age, the value of your home and the product you choose. If you choose a LTM you’ll find out exactly how much that could be when you apply. Our Equity Release Calculator will give you a sense of how much it could be. Our Equity release interest rates article will help you balance that by showing how much it can cost.

Equity release myths

“I could end up owing more than my home’s worth and leaving my children in debt”

• If you go with an equity release product with a No Negative Equity Guarantee, you or your loved ones will never owe your lender more than the value of your home. The No Negative Equity Guarantee won't apply to any monthly interest payments you fail to make on a Payment Term Lifetime Mortgage though.

“My partner or I could lose our home if one of us goes into a care home”

• Whether you’ve gone for a standard lifetime mortgage or a home reversion plan, your provider won’t look to claim any money back until the last surviving borrower goes into full time care or dies. However, if you choose a Payment Term Lifetime Mortgage and do not keep up your monthly interest payments, as a last resort your home may be repossessed. So it's important to think about how you'll be able to make those payments over the course of your payment term.

“Once you’ve taken out equity release you’re stuck in your house and can’t move!”

• You can usually sell your house and move to another one even after you’ve released equity on it. Our Can I sell my house if I have equity release? article explains the details. If you think you might need to move house, check with your provider when you’re setting it up.

“We’ll have to make monthly payments, just like with our mortgage”

• If you go for a home reversion plan, you’ve sold part of your house so there’s no reason to make any monthly payments.
• If you go for a standard LTM, you can usually choose whether or not you make monthly interest payments. If you decide not to do that, the amount you owe can grow quickly.
• If you go for a PTLM, it works like a standard mortgage, so you have to make monthly interest payments. But once that payment term ends, it works like a standard LTM – you can choose whether or not you make payments.

“I can’t release equity until I’ve paid off my existing mortgage”

• With home reversion, you do need to have paid off your mortgage. But that doesn’t apply to LTMs. In fact, paying off an existing mortgage is a common reason for taking one out. You can then spend any extra money however you want to.

Is equity release right for me?

That’s not an easy question to answer, because it depends on a lot of different factors that vary from person to person. They can include:

• how old you are
• how much your home is worth (or the home you're planning to buy)
• what your financial goals are
• if you have any other resources to draw on.

That’s why you can only take out equity release products through a qualified financial adviser. They’ll help you think through these questions and more. We’ve also put together an article about whether equity release is a good idea which might be a helpful starting point.