Mortgages
Jacquie Chapman
For many people over 55 who own their own home, equity release is still spoken about as “something you should never do”.
It is often misunderstood, occasionally feared, and sometimes dismissed outright based on decades-old information.
However, in the world of rising living costs, longer retirements, and wealth locked in homes, equity release has evolved into a flexible, well-regulated financial option that deserves its place.
It is no longer a niche product for people “with no other choices”. For many, it is a strategic decision that enables later life to be enjoyed, not endured.
Equity release is a way for older homeowners to access some of the money tied up in their home without having to sell it or move out.
In simple terms: if you own your home and it has gone up in value over the years, equity release lets you “unlock” some of that value as cash.
You can take the money as a lump sum, smaller withdrawals over time, or a mix of both.
There are two main types of equity release: a lifetime mortgage and a Home Reversion Plan.
The lifetime mortgage is the most common form of equity release.
Lifetime mortgages usually have a fixed rate of interest applied for the life of the loan. The interest rolls up over the term of the mortgage and no monthly payments are made.
The loan is usually repaid when you no longer live in your home.
For most equity release plans (especially lifetime mortgages), that means the money is paid back when:
At that point, the property is typically sold, and the proceeds are used to repay the loan plus any interest that has built up over time. Anything left over goes to your estate or family.
There is a further equity release option available (but not as widely used) which is know as a Home Reversion Plan. This is where you sell a percentage of your home and in return you receive a lump sum.
You still get to stay in your property for the rest of your life or if you have to move into long-term care.
When the property is sold, the company receives their percentage and the balance is paid to the estate.
One of the strongest advantages of equity release is the ability to unlock tax-free cash without having to sell or downsize. Your home remains yours, and you retain the right to live in it for life, or until you move into long term care.
This stability can be priceless for people who have lived in their homes for most of their lives and class it as part of them and something they do not wish to give up.
Whether it’s supplementing pension income, clearing interest-only mortgages, helping children on to the property ladder, funding home improvements, or simply enjoying retirement with greater peace of mind, equity release can provide access to capital that would otherwise remain inaccessible.
Some Equity Release plans also offer flexible drawdown options, allowing homeowners to release funds only when needed—helping to control interest costs over time.
Unlike traditional borrowing, most lifetime mortgages do not require monthly repayments. Interest rolls up over time and is repaid when the property is sold, providing reassurance for those on fixed or limited incomes.
Importantly, many plans now allow voluntary ad hoc repayments, giving borrowers control if their circumstances change.
Equity release today is a far cry from the products of the 1980s and 1990s. Plans regulated by the Financial Conduct Authority and approved by the Equity Release Council come with strict safeguards, including:
These protections mean neither you nor your estate can ever owe more than the value of your home.
Equity release can be expensive over time and the longer you live, the more money you – or rather your family – will owe.
Equity release also reduces the money that you leave behind, meaning your family will inherit less money after you’re gone.
Also, if you are in receipt of state benefits, you lose may lose them if they are means-tested.
With most equity release plans (like a lifetime mortgage), you’re not making monthly payments. Instead, the interest gets added onto the loan, and then future interest is charged on that bigger amount.
Therefore in plain terms, you’re paying “interest on interest,” so the debt grows faster over time.
One of the lesser known—but increasingly relevant—uses of equity release is its role in inheritance tax planning.
Property wealth frequently pushes estates above the nil rate band thresholds, creating potential IHT liabilities for beneficiaries. By releasing equity during lifetime, homeowners may be able to:
When gifts are made and the individual survives seven years, they may fall outside the estate for IHT purposes, depending on circumstances.
Additionally, some people choose to use equity release to fund regular gifts from surplus income or to settle existing debts, which can further simplify estate planning.
While equity release is not a ‘one size fits all’ solution for inheritance tax, it can form part of a broader, well advised strategy that balances personal enjoyment with family legacy.
False! With a lifetime mortgage—the most common form of equity release—you retain ownership of your property. The lender places a charge on the home, similar to a standard mortgage.
While equity release can reduce the value of an estate, it does not automatically eliminate inheritance. Many homeowners choose to guarantee an amount of their property value, and some plans allow repayment over time to preserve equity.
Beyond finances, many families would rather see loved ones enjoying life now than inheriting wealth later.
Interest does roll up, but rates are fixed or capped for life, and modern products include drawdown, voluntary repayments, and reserve facilities that help manage long-term costs more effectively than ever before.
In reality, many equity release clients are financially comfortable homeowners who want to use their assets more efficiently. It is increasingly used as part of holistic retirement planning rather than a last resort.
Equity release is not right for everyone, and it should never be entered into lightly.
It requires expert advice, family discussions, and a clear understanding of long-term implications.
However, dismissing it based on outdated myths does a disservice to homeowners who could genuinely benefit.
As property wealth continues to outpace pension savings for many, equity release has become a legitimate and responsible financial planning tool—one that prioritises choice, dignity, and quality of life in later years.
In an era where living longer also means funding longer retirements, perhaps the real question is not “Why would anyone use equity release?” but “Why should homeowners be criticised for choosing to enjoy the wealth they have worked a lifetime to build?”
There are other ways to free up capital tied up in your home.
Moving from a larger house to a smaller, cheaper property will help to generate money and, depending on the home, could also result in lower energy bills.
However, you will need to take into consideration the costs associated with buying and selling a home as well as moving costs, etc.
You may also prefer to stay in the home which you have made your own.
Another potential option is a retirement interest-only mortgage.
This is a mortgage that is based on pension income. You do not repay capital on a monthly basis, only the interest element.
However, this is generally not used since most people do not want to have an extra monthly expense.
A professional financial adviser can help you assess whether Equity Release is right for your circumstances and your financial goals.
If you decide to go ahead with Equity Release, a financial adviser can help you to choose the product which best suits your situation.
They can also help you with other implications of taking out an Equity Release plan, including estate planning and potential Inheritance Tax liabilities.
Get in touch with one of our advisers today to find out more.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR OTHER LOAN SECURED AGAINST IT.
Disclaimer: This article is for informational purposes only and does not constitute financial, tax, or legal advice. Tax treatment depends on individual circumstances and may change. The value of investments can go down as well as up and you may not get back the full amount you invested. Past performance is also not a reliable indicator of future performance. Always seek professional advice before making financial decisions.
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Equity release can be a good idea for homeowners over 55 who want to access tax-free cash tied up in their property without having to move.
It can provide financial flexibility in retirement, but it’s important to consider the long-term impact on your estate, inheritance, and overall financial plan before proceeding.
Yes, equity release is considered safe when taken through a plan regulated by the Financial Conduct Authority and approved by the Equity Release Council.
These plans include safeguards such as the No Negative Equity Guarantee and the right to remain in your home for life.
Yes. With a lifetime mortgage—the most common form of equity release—you remain the legal owner of your home.
The lender places a charge on the property, similar to a traditional mortgage, but ownership stays with you.
The amount you can release depends on factors such as your age, property value, and health.
Typically, the older you are, the more you can borrow. Most providers offer between 20% and 60% of your property’s value.
Yes, equity release can reduce the value of your estate, which may impact how much you leave to your beneficiaries.
However, some plans allow you to ring-fence a portion of your property’s value for inheritance or make voluntary repayments to preserve equity.
In some cases, yes. By releasing equity and gifting money during your lifetime, you may reduce the overall value of your estate.
If you live for seven years after making a gift, it may fall outside your estate for inheritance tax purposes, depending on your circumstances.
The main risks include:
This is why professional financial advice is essential before proceeding.
Most lifetime mortgages do not require mandatory monthly repayments. Instead, interest is added to the loan and repaid when the property is sold.
However, many modern plans allow optional repayments to help manage the balance.
When the last homeowner passes away or moves into long-term care, the property is usually sold and the loan—plus any accrued interest—is repaid. Any remaining value is passed on to your beneficiaries.
Yes, alternatives include downsizing, using savings or investments, or considering a retirement interest-only mortgage.
The best option depends on your personal circumstances and financial goals.
Yes. Equity release is a significant financial decision, and speaking to a qualified adviser ensures you understand the benefits, risks, and alternatives.
A professional can help tailor a solution that aligns with your long-term plans.
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Mortgages
Mortgages
Pension & retirement
Pension & retirement
Pension & retirement
Pension & retirement
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