Equity release and lifetime mortgages explained

Equity release lets homeowners aged 55 or over turn some of the value of their home into a tax-free cash lump sum, without having to move out or make monthly repayments unless they choose to¹. The money can be taken as a single lump sum, or you can set up access to a flexible borrowing facility you draw on as needed². The most common form is a lifetime mortgage: a loan secured against your home that is repaid when you die or move into long-term care and the property is sold³.

The trade-off is the cost. Because most plans involve no monthly repayments, interest is added to the loan year after year, and the debt grows. In one worked example, releasing £75,000 from a £250,000 home meant the borrower could relinquish up to 70% of the property's value by the end of the plan⁴. Equity release is now one of the most regulated financial products in the UK⁵, and plans from members of the Equity Release Council, the industry's standards body, carry guarantees that you can stay in your home for life and will never owe more than it is worth⁶.

What equity release is and who can get it

Equity release means borrowing against your home, or selling a share of it, while carrying on living there. It is aimed at homeowners aged 55 or over¹, and how much you can borrow is based on your age and how much your home is worth, not on what you can afford to repay each month¹⁰. That is the key difference from an ordinary mortgage: with equity release you do not need to meet a lender's affordability or income criteria³.

The money is a tax-free cash lump sum¹, and it can be used for whatever you choose: paying off debt, home improvements, helping family, or managing everyday costs². It can also be used to help manage debt or to repay an existing mortgage², and some people use it to purchase a property, though providers may have restrictions about property type and the process can take longer than a standalone equity release mortgage¹¹.

Two conditions shape who qualifies. The property needs to be in a good state of repair¹⁰, and if you already claim benefits you must tell the Department for Work and Pensions (DWP) or your council about the money you receive, because money held as savings can affect means-tested entitlement¹². The rules and guidance differ slightly across the UK: some guides cover Scotland only and tell readers elsewhere to seek different advice¹³, so check that any information you rely on applies to your nation.

Equity release is not the only way to get money out of a home. Alternatives include a mainstream mortgage, a retirement interest only mortgage, a personal loan, help from family, or taking a lodger¹⁴. A remortgage is another route, though it requires monthly repayments and an affordability assessment³. The dedicated page on the downsides of releasing equity sets out the risks in more detail.

Lifetime mortgage or home reversion plan: how each one works

There are two main types of equity release, and they work quite differently.

A lifetime mortgage is the most popular type⁶. You borrow some of your home's value, remain its owner¹⁰, and the loan, plus any interest, is repaid when you sell the property, die or go into care⁶. You usually do not have to make repayments while you remain in your home⁷. The lender will usually limit the amount you can borrow to around 60% of your home's value⁷.

A home reversion plan works differently: you sell a percentage of your home's value to a scheme provider and are entitled to remain in your home for life⁷. Rather than charging interest, the provider pays you less than the market value for the share in your property and keeps any increase in the value of the share sold⁷. You sell from 25% to 100% of your home¹³, and you are able to live in it rent-free for the rest of your life².

In both cases you own a lifetime lease guaranteeing you the right to stay in your home until death or when you move into long-term care⁵. Both types are regulated: giving advice on a home reversion plan or lifetime mortgage is a regulated activity under the Financial Services and Markets Act 2000¹⁵, and the Equity Release Council's standards cover both lifetime mortgage and home reversion products¹⁶. In law, a home reversion is an arrangement under which the reversion provider buys all or part of a qualifying interest in land from the reversion occupier, who must be entitled under the arrangement to occupy at least 40% of the land as a dwelling, with the entitlement ending on moving into a care home, dying, or the end of a specified period of at least twenty years¹⁷.

The sub-page on lifetime mortgage or home reversion compares the two in more depth, and retirement interest-only mortgages explain a related option where you do pay interest each month.

How much you can release: up to around 60% of your home's value

Under a lifetime mortgage plan, you can usually release from 20% to 60% of the value of your home⁸. Under a home reversion plan, you can typically sell from 25% to 100% of your home¹³. The exact figure depends on the plan and the provider.

The biggest factor is age. The maximum borrowing is based on your age and how much your home is worth¹⁰, and it rises as you get older: one market report put the maximum at between 40% and 44% of the market value of your home at age 70¹⁸. Sometimes your health will be taken into consideration as well². The younger you are, the longer interest has to roll up, so lenders offer smaller percentages.

The percentage is not the whole story, because the debt grows over time. In a worked example based on a £250,000 property with a lifetime mortgage at 5.5% over 25 years, releasing £75,000 meant the borrower could relinquish up to 70% of the property's value by the end⁴. The loan to value concept works the same way here as with any mortgage: the more you borrow relative to the home's worth, the less is left over later.

For comparison, remortgaging to release cash works on different limits. Someone remortgaging for £200,000 on a property worth £300,000, releasing £20,000, would be at a 66% loan to value³, but they would need to pass affordability checks and make monthly repayments. The page on how much can I borrow covers ordinary mortgage limits.

Interest roll-up: why the debt can double

With a lifetime mortgage you usually do not have to make repayments on the loan while you remain in your home; the loan is paid back after you have moved out or died⁷. Because you do not make repayments, the debt grows over time and can erode the value of your property¹⁹. Interest is charged on the loan, and then on the interest already added, so the effect compounds.

Making no repayments on your loan means you end up paying far more than you have borrowed, due to the compounding of interest, which could wipe out your property's value entirely²⁰. Your debt grows each year and you could end up with little when the property is eventually sold³.

You are not always locked into watching the debt grow. Many plans allow you to manage the interest by monthly repayments or overpayments²². Some products allow payments to be made to reduce the impact of this roll-up¹⁴. If you want to make partial repayments, you can do this penalty-free on lifetime mortgages that meet standards set by the Equity Release Council, often limited to 10% of the loan per year⁴. The page on paying interest on a lifetime loan explains the roll-up, optional and fixed payment options side by side.

Fees and charges: advice, legal, valuation and application

Equity release is not cheap to set up. You will have to pay application, legal and other fees, and these can be high²³. The fees to expect are:

• Advice fee: most equity release companies charge between £500 and £2,000 for advice²². Another guide puts the typical adviser cost at between £700 and £1,900, but notes some advisers receive commission from lenders instead of charging customers⁴.
• Valuation or survey fee: a fee to have your property surveyed may be charged¹³, though most lenders offer a free property valuation on new applications; there is often a fee for further advance applications¹⁰.
• Application fee: not all providers charge one, but it can be up to around £700⁴. You pay it when the transaction goes through, and you may be able to pay for it by borrowing a bit extra under the plan¹².
• Legal fee: all Equity Release Council-approved providers require you to seek independent legal advice²², which you pay a solicitor for.

Some fees can be added to the amount you borrow rather than paid upfront, which means interest rolls up on them too. Ask for a personalised illustration from your adviser to understand the features and risks of a plan, including all its costs²⁴. The offer documents must include a section titled "What will you owe and when?" with a table showing how interest is applied²⁵.

Advice is not optional. Under the Financial Conduct Authority's mortgage rules, customers for equity release transactions receive advice in all cases²⁶. Any advice will consider your personal circumstances, including an assessment of your income and expenses, and will explore alternatives to equity release²⁷. The general page on mortgage fees and charges covers the costs of ordinary mortgages for comparison.

Early repayment charges, moving home and switching

Ending an equity release agreement early can be expensive. You might have to pay an early repayment charge, and this can often be a significant amount⁷. Some providers charge for paying back the plan in full¹⁰, and there may also be early repayment charges if you repay what you owe within a short time after taking out the deal¹³. Early repayment charges may apply and should be checked when choosing a plan²².

There are important exceptions. If you move into long-term care and the property is sold, and no spouse or partner is still entitled to live in it, you will not have to pay any early repayment charges²⁸. There have also been examples where existing mortgage loan books were sold to new providers after a firm went into liquidation and customers had any early repayment charges waived²¹.

Moving home does not usually mean repaying. You are allowed to move to another property as long as your equity release firm agrees that the new property is suitable as security for your loan¹². You can repay the product or, depending on the property, transfer it to your new home, but there may be charges for doing so¹⁰. The page on moving house with equity release covers this in detail.

Switching to a cheaper plan later is possible, and some people switch equity release plans to get a better deal⁶, but the early repayment charge on the old plan is the main obstacle. The general guide to early repayment charges explains how these charges work, and repaying equity release early looks at the equity release specifics.

Effects on inheritance, benefits and care funding

Equity release reduces the value of your estate and the amount that will go to the people named as beneficiaries in your will²⁹. Taking out a plan could leave your family with little or nothing to inherit from your property³⁰, and any future inheritance will either be reduced or eliminated²². If leaving money behind matters to you, ask your adviser about "inheritance protection", which protects some of the property's future value¹⁰.

Benefits are the other big effect. Money you receive from equity release can be treated as savings for means-tested benefits such as Universal Credit and Pension Credit; funds paid directly to a mortgage lender are not usually treated as savings³¹. If you already claim benefits, you must tell the DWP or council about the money you receive¹². Taking out an equity release mortgage could affect benefit entitlement, so applicants should check with the relevant benefits agency before starting the application¹¹.

Done correctly, equity release should have no impact on an individual's tax position or their state benefits, but each person's circumstances need to be assessed¹⁴. The scheme also has wider effects worth weighing: it may affect your tax position, it may impact benefits you already get or could apply for, there are implications with securing other debts against your home, and consolidating debts over a longer period may mean you pay more overall¹⁰.

Care funding interacts with equity release in specific ways. If you move into long-term care and do not have a spouse or partner still entitled to live in the property, it will be sold and the amount you borrowed, plus interest, will be paid back to your provider²⁸. Some providers allow you to move in with a relative only if your medical needs require this; others may not be so specific²⁸. The pages on equity release when one partner dies or moves into care and equity release and benefits go deeper on both.

How to take out equity release: advice, solicitor and timescale

The process is adviser-led and legally supervised, and on average it takes eight to ten weeks from the application being submitted¹⁰.

1. Get advice. Before deciding, get advice from an independent financial adviser (IFA) who specialises in equity release²³. A fully qualified financial adviser should help you understand the steps involved and talk you through your options²⁴. The advice must consider your personal circumstances, including income and expenses, and explore alternatives to equity release¹⁶.
2. Read the documents. The adviser provides recommendations, a personal Key Facts Illustration and an Initial Disclosure Document summarising details and costs²⁵. The offer must include the "What will you owe and when?" section with its interest table²⁵.
3. Appoint a solicitor. You need to appoint your own solicitor to represent your interests once an adviser has recommended a suitable plan³³. Choose a solicitor who specialises in equity release and who is a member of the Equity Release Council¹⁰. The solicitor is required to ensure you receive completely independent legal advice about the risks, rewards and obligations attaching to the plan³³.
4. Meet face to face. The Council's requirement is that the legal advice must be face to face; if the solicitor cannot see you personally, they may appoint an agent or notary to see you on their behalf, and the solicitor signs a certificate to confirm this³².
5. Complete. The provider values the home, makes an offer, and the money is released, typically eight to ten weeks after the application¹⁰.

You can deal directly with a provider rather than through an adviser, but providers' own adviser teams generally only offer advice on their own products; after completion you receive an annual statement and may contact the provider direct³². The page on whether you need a solicitor covers the legal step, and mortgage advice: brokers, advisers and applying direct explains how advice works generally.

Protections: the no negative equity guarantee and Equity Release Council standards

The core protection on Equity Release Council member plans is the no negative equity guarantee. When your property is sold, and agents' and solicitors' fees have been paid, even if the amount left is not enough to repay the outstanding loan, neither you nor your estate will be liable to pay any more⁹. The amount you borrow, plus any rolled-up interest, can never go above the value of the property when sold at the end of the plan²¹. With some lenders you will never owe more than the value of your home if they offer this guarantee¹⁰.

The second protection is tenure. Products from Council members must meet standards: you have the right to remain in your property for life or until you need to move into long-term care⁶, and you can live in your property for life, or until you move into permanent residential care²⁹. You keep that right as long as the property remains your main home and you keep to the terms of the contract¹².

The Equity Release Council is the industry standards setter²⁷, a voluntary trade body to which advisers, providers, solicitors and other professionals in this market can belong⁹. Its standards govern how members should behave when providing advice, developing products, and supporting customers in managing their property wealth¹⁶. But the Council is not a regulatory body³⁴: it is not authorised to offer advice or to arrange equity release, and it has no enforcement powers over its members⁹. Regulation sits with the Financial Conduct Authority, and complaints go to the Financial Ombudsman Service.

If a member does not treat you as the Consumer Charter expects, the Charter says to discuss this with the member supporting you and ask them to treat you in a way that matches those expectations or explain why they cannot²⁷. The narrow page on the no negative equity guarantee covers that guarantee in full.

Risks, scams and where to get help

The main risks are financial. Equity release reduces your estate's value and could affect means-tested benefits or tax³⁴. Future property prices might be higher or lower than they are today¹⁰. Because you do not make repayments, the debt grows and can erode the property's value¹⁹. You remain responsible for maintaining and insuring your home, even if you no longer own it under a home reversion²³, and you can remain in your home only as long as the property is in good repair and you do not go bankrupt¹⁰.

Fraud is a real risk, and with equity release it is not so much lenders as borrowers who may be at risk²¹. The forms it takes include:

• Investment scams: fraudsters target people they know own their own properties and persuade them to release money and invest the cash in a plan proposed by the fraudster³⁵.
• Coercion: an unscrupulous person, who may be a trusted friend or even a family member, may persuade someone with a plan to release funds and give the money to them³⁵.
• Romance scams: fraudsters develop a relationship with victims and then start asking for money; in most cases they do not exist at all³⁵.
• Fraudulent application: someone close to a customer, possibly a friend, family member or carer, may forge application papers and signatures³⁵.

Advisers need to understand their customers' needs, objectives and future plans, and will ask more questions if they think a customer may be at risk³⁵. If someone pressures you to release money for their benefit, say so to your adviser or solicitor.

Where to get help:

• Free debt advice: StepChange and National Debtline publish guidance on equity release and whether it is right for people in debt². Business Debtline covers both England and Wales and Scotland in separate guides¹².
• Independent Age offers free advice on equity release and your home in later life²³.
• Complaints: first explain to your equity release company what you are unhappy about; if you are not happy with their response, you can bring the complaint to the Financial Ombudsman Service⁷. If your complaint has not been resolved after eight weeks, contact the ombudsman¹². Complaints about solicitors go to the Legal Ombudsman and surveyors to RICS³⁴.
• Ombudsman workload: in the first quarter of 2026/27, 71 complaints about lifetime mortgages were opened with the Financial Ombudsman Service, of which 13% were upheld³⁶.

The wider guides to scams and fraud, consumer protection in UK financial services and complaining to the Financial Ombudsman about your mortgage cover these routes in more detail.