What is equity release and how does it work?

This content was reviewed and approved by Amy Fletcher.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

Equity release allows homeowners, typically later in life, to unlock some of the money tied up in their property without needing to sell or move out.

It can provide access to tax-free cash, but it’s important to understand how the different options work before deciding.

Read our guide to what equity release is and how it works.

What is equity release?

If you’re aged 55 or over, equity release offers a way to release money built up in your home and turn it into tax-free cash. It works like a loan secured against your property, which is typically repaid when you pass away or move into long-term care.

The most common option is a lifetime mortgage, sometimes called a later life mortgage. It lets you stay in your home while accessing its value, either as a one-off lump sum or through smaller, regular payments depending on what suits your needs.

Whether it’s home improvements, helping family with education costs, or enjoying a long-awaited holiday, equity release can make that happen. However, it’s important to remember that equity release will reduce the value of your estate and the inheritance you leave behind.

You can find out how much equity release you could access from your home using our free equity release calculator. You can also arrange a call to see if you’re eligible for equity release.

What are the different types of equity release?

There are two main types of equity release: lifetime mortgages and home reversion plans. Here’s how they differ:

Lifetime mortgage

The most common equity release product is a lifetime mortgage. You borrow money against your home while still retaining ownership. The loan, along with any interest built up over time, is usually repaid when the property is sold after you pass away or move into long-term care. When taking out a lifetime mortgage, you’ll typically choose between two options: a lifetime mortgage lump sum or lifetime mortgage drawdown.

Equity release with a lifetime mortgage is available to UK homeowners aged 55 and over, offering a way to unlock property wealth to support retirement, repay an existing mortgage or cover other expenses.

Home reversion plan

With a home reversion plan, you sell part or all of your home to a provider in exchange for a lump sum or regular payments, while continuing to live there rent-free. When the property is eventually sold, the provider receives their agreed share of the sale proceeds. Because providers typically buy the share below market value, this can reduce the amount left for your estate in the future.

LV= does not currently provide advice on home reversion plans.

Can anyone get equity release?

Equity release isn’t available to everyone, as each application is assessed individually to make sure it’s the right fit for both you and your property. Whether you can get equity release depends on a few factors:

Your age

As a general rule, you’ll need to be at least 55 years old, although some products are now available from the age of 50. To take out a home reversion plan, you (or both joint applicants) usually need to be at least 60 years old.

Your property

You’ll need to own a UK property that is your main home. It should be in a reasonable condition and will usually need to be worth £70,000 or more.

There are also a few situations where a property may not qualify. For example, homes with non-standard construction, such as prefab buildings or those with timber, steel, or similar frames, may not be eligible. Leasehold properties can also be more complex, depending on how long is left on the lease and whether there are any issues with it.

You may still be considered for equity release if you have an existing mortgage or secured loan, but this will depend on your home’s value and how much is outstanding. Any remaining borrowing secured against the property would need to be repaid when you take out equity release.

Family and dependents

Equity release can affect anyone living with you or planning to move in later. Dependents may need to sign a waiver confirming they understand they won’t have the right to remain in the property if you pass away or move into long-term care, and the same applies to anyone who moves in after the plan is set up.

It’s strongly recommended that family members or other occupants seek independent legal advice before signing any agreements.

Equity release: Advantages and considerations

Equity release can be complex and isn’t suitable for everyone. It’s important to understand both the benefits it may offer and the key considerations before making a decision.

A qualified equity release adviser can assess your personal circumstances, explore any alternatives, and, if suitable, recommend the most appropriate option for your needs.

What are the key benefits of equity release?

The benefits of equity release include:

• You can access a tax-free lump sum and/or receive smaller, regular payments to boost your income, while continuing to live in your home until you pass away or move into long-term care.
  

• You may still benefit if your property increases in value over time.
  

• You can usually move to another property in the future, provided it meets your equity release provider’s criteria.
  

• With a lifetime mortgage, you remain living in and retain ownership of your home.
  

• There are flexible repayment options for lifetime mortgages, including covering all the interest each month.

What are the main things to consider with equity release?

Several factors should also be taken into consideration regarding equity release, including:

• Equity release will reduce the value of your estate and the amount left to your beneficiaries. Your estate includes everything you own, such as money, property, possessions and investments.
  

• With a home reversion plan, the provider owns all or a share of your property.
  

• Taking a lump sum or additional income could affect your eligibility for means-tested benefits now or in the future.
  

• If you receive care at home funded by your local council, you may be asked to contribute more or start paying towards it.
  

• The money you release is a loan secured against your home, with interest typically repaid when you pass away or move into long-term care.
  

• You are not required to make repayments, therefore, the loan plus interest can grow quickly.
  

• Some lifetime mortgage providers allow partial or full interest repayments, but affordability checks are required to ensure you can meet the payments. 
  

• Any existing mortgage must be repaid as part of the equity release process.
  

• You must receive advice before releasing equity from your home. Initial guidance is free with no obligation. If you proceed and your plan completes, our advice fee of £1,795 will apply, along with any lender and legal fees.

Does equity release come with financial protections?

Yes. If you’re considering equity release, there are several safeguards in place to help protect you and your interests.

It’s wise to choose a provider that’s a member of the Equity Release Council, an industry body whose members follow strict standards designed to protect customers. This typically means you have the right to remain living in your home for life or until you move into long-term care, plus the flexibility to transfer your plan to another suitable property.

You will also benefit from the reassurance of the Equity Release Council’s requirement of a no negative equity guarantee, where applicable. This means you won’t owe more than the value of your home when it’s sold. All lenders that advise on or provide equity release must also be authorised and regulated by the Financial Conduct Authority (FCA).

For lifetime mortgages, interest rates must be either fixed or capped for the life of the loan, and many plans also allow optional, penalty-free repayments, subject to provider terms.

To stay fully protected, always seek advice from a qualified equity release specialist and ensure both your adviser and provider are FCA-authorised. If you ever have concerns, you should first raise them with your provider, who will follow a formal complaints process. If you remain unhappy with the outcome, you can escalate the issue to the Financial Ombudsman Service for independent review.

What are the alternatives to equity release?

Equity release may not be the best solution for everyone, and it’s important to consider whether other options could better suit your financial circumstances and retirement plans.

For some homeowners, downsizing to a smaller property or relocating to a more affordable area can provide access to additional funds without borrowing against their home. This can be a practical way to release equity while potentially reducing ongoing living costs at the same time.

Depending on your age, income, and financial situation, there may also be alternative borrowing options available, such as later-life mortgages or secured loans. Exploring these alternatives with a qualified financial adviser can help you understand the most suitable route for your individual needs.

Looking for professional equity release advice?

Thinking about unlocking cash tied up in your property? Our equity release advisers are ready to explore your options and explain the process, so you know exactly what to expect. Request a call back today or call us on 0800 756 8059.