01 February 2024

Equity release lets you access tax-free cash from your home.

There are lots of reasons people take it out. Common ones include paying off debt, gifting to family or making home renovations.

You can only take out equity release through a qualified financial adviser – if you don’t have one, you can find one at Unbiased. Your adviser will make sure that you:

  • only borrow as much as you need
  • understand how the product works
  • are sure that it’s the right choice for you.

What is equity release and how does it work?

Equity release is a way of releasing cash from your home. You can do this through a lifetime mortgage or a home reversion plan. We go into more detail about these two products and how you can access the money in our article 'How equity release works'.

Depending on the product you choose, you can access the money:  

  • as one lump sum
  • in small, ongoing amounts
  • as a combination of the two.

Note that any payments you get can affect any means-tested benefits you’re getting.

When you’re releasing equity through a lifetime mortgage, you can choose to repay all, some or none of the interest each month. If you choose a product that doesn’t include monthly interest repayments, your provider will add any interest to your loan. The amount you owe can build up quickly. That will cut down any inheritance you can leave your loved ones. The money itself doesn’t need to be repaid until you die or move into long-term care.

With a home reversion plan, you can sell between 25% and 100% of your home and the money is paid back through the sale of your home after you die or move into long-term care. 

On the plus side, with most equity release products you won't have to worry about negative equity, which means owing more than the value of your home. Most UK equity release products are overseen by the Equity Release Council (ERC), which mandates a No Negative Equity Guarantee for them.

Hopefully that’s answered your basic questions about what is equity release. UK readers can find out more by reading our articles about:

Want to learn more about equity release?

Find out more about our range of equity release products, and try our equity release calculator to see which product might best suit your needs.

What are my equity release options?

There are two main ways of releasing equity using equity release products:

  • Lifetime mortgages (LTM) 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 65 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 all of own it. Because you’ve sold part of your home rather than borrowed money against it, there’s no interest to pay.

We’ve also just started offering a new kind of equity release product:

  • Payment Term Lifetime Mortgage (PTLM) is unique to us. They’re available once you’re 50+. They start with a payment term, which lasts either until you retire or (if you don’t) till you’re 75. You pay interest until it ends, when your PTLM starts working like an LTM and the interest will be added to the loan until you die or move into long-term care. At least one borrower has to be in work. 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 sets standards for equity release providers. We’re an active and supportive member of it.

Most traditional LTMs – including ours – and home reversion plans meet ERC standards. But the PTLM doesn't. That’s because during your payment term it works like a normal interest-only mortgage - you have to pay all the interest every month. If you don’t keep up with your monthly interest payments the No Negative Equity Guarantee doesn't apply to the missed payments and the interest on them, and we might – as a last resort – have to repossess your home.

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

What is the maximum and minimum equity I can release?

When you’re releasing equity through a lifetime mortgage, you usually have to borrow at least £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.

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.

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Get equity release advice

Our equity release specialists are waiting to answer your questions about equity release.

For any other enquiries please get in touch via our contact us page

0808 301 7044

Monday to Friday 9:00am - 6:00pm
Saturday 9:00am - 1:00pm
We may record and monitor calls.

 

FAQs

What is the catch with equity release?  

Your financial adviser will explain it to you in detail, so you’ll be fully aware of its downsides as well as its upsides. When you release equity this way nothing should take you by surprise, so there shouldn’t be a catch. To find out more, take a look at our Is equity release a good idea? article.

What is the interest rate on equity release?

Different lenders offer different interest rates. The interest rate on your loan will be locked in from the time you take out your loan. The way that you pay interest will depend on which equity release product you’ve chosen. Find out more in our article on equity release interest rates.

What is “Remortgage to release equity”?

This is when you remortgage to replace your existing mortgage with a new, larger one. The new mortgage pays off your previous one and puts any leftover cash straight into your pocket. Find out how to do that with this Unbiased article.

What is the best age to take out equity release?

There’s no best age – you just have to be over 55 generally, or just over 50 if you’re going for our new Payment Term Lifetime Mortgage. So really the answer is – whenever it’s right for you.

How much does equity release cost?

When you set up a lifetime mortgage, you’ll have to cover costs like arrangement and solicitors’ fees, plus valuation, survey and electronic transfer fees. If you choose not to pay any monthly interest it will be added to the loan, so the amount you owe will increase over time. You can learn more in our article about the costs of equity release. Home reversion plans may not come with the same costs as a lifetime mortgage, but you might not enjoy the benefits of any increase in the value of your home.

Can I use equity release to pay for care?

You can use equity release to pay for in-home care, adaptations to your home like a walk-in shower, care home fees or any other care related costs. But once the last remaining borrower dies or moves into full time care, you have to pay back your loan. You can learn more about care costs on our later life care page.

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