Equity release: the risks, the costs and the alternatives

Last checked November 2026. Offers and rules change: confirm with the provider before you rely on them.

Equity release lets homeowners, usually aged 55 or over, take cash from the value of their home without moving out. It is expensive, hard to undo, and reduces what you leave behind, so treat it as a last resort after the alternatives, and never go ahead without regulated advice.

The two types

Lifetime mortgage

By far the more common type. You borrow against your home and keep ownership. There are normally no required monthly repayments. Instead, interest is added to the loan, and the whole amount is repaid when you die or move permanently into care, usually by selling the home. Some plans let you take the money in stages ("drawdown") so that interest builds only on what you have actually taken, and some let you pay some or all of the interest as you go.

Home reversion

You sell all or part of your home to a provider in return for a lump sum or regular income, and stay on as a tenant, rent-free or for a token rent, for life. You receive much less than the market value for the share you sell, because the provider may wait many years for its money.

Why it costs so much: compound interest

With a lifetime mortgage where nothing is repaid, interest is charged on the loan and then on the interest already added. This is compound interest, and over a long retirement it grows quickly.

A rough rule of thumb: divide 72 by the interest rate to see how many years it takes a debt to double. At 6% a year, a debt doubles in about 12 years and is four times the size after about 24. So £50,000 borrowed at 70 could be roughly £100,000 at 82 and £200,000 at 94. That is an illustration, not a quote; your adviser must give you a personal one.

What it can affect

• Means-tested benefits. Money you release counts as savings or income. It can reduce or stop Pension Credit and Council Tax Reduction, and with them the extras they unlock, such as the free TV licence at 75.
• Inheritance. There will be less, possibly much less, to leave to family. Talk to them first; some would rather help in another way.
• Moving later. You may be able to transfer the plan to another property, but only if the new home meets the lender's rules. Some retirement flats are not accepted, which can block a later move into retirement housing.

Try these first

1. A full benefits check. Large amounts of Pension Credit and Attendance Allowance go unclaimed. Use our benefits checklist.
2. Grants for the thing you need the money for. If it is a stairlift, bathroom or heating, see home adaptations and boiler and heating grants.
3. Downsizing. Moving somewhere smaller releases money with no interest to pay. See downsizing costs.
4. Other borrowing. A retirement interest-only mortgage, where you pay the interest each month so the debt does not grow, may cost less overall if you can afford the payments.
5. A deferred payment agreement with the council, if the need is care home fees.

The Equity Release Council standards

The Equity Release Council is the industry's trade body. Its members sign up to product standards for lifetime mortgages. At the time of writing (November 2026) its website lists these:

• Fixed or capped interest rates for the life of the loan.
• A home for life: the right to stay in your home for the rest of your life or until you move permanently into care, provided you keep to the terms.
• The option to move to a suitable alternative property, subject to the lender's criteria.
• A no negative equity guarantee: you or your estate will never owe more than the property is worth when it is sold, provided the terms are met.
• The ability to make repayments without a charge, within the provider's limits.
• Long-term care: early repayment charges waived if you move permanently into long-term care.

Every customer must also receive independent legal advice. These standards are a floor, not a recommendation: a plan that meets them can still be wrong for you.

If you decide to go ahead

• Check your adviser on the Financial Services Register and ask whether they look at the whole market.
• Get every fee in writing: advice, valuation and legal costs.
• Borrow the smallest amount you need, and ask what the debt will be in 10 and 20 years, in pounds.
• Ask how the plan affects your benefits and what it costs to repay early.
• Use your own solicitor, involve your family if you can, and take your time.

Common questions

Is the money really tax-free?

The cash released is not taxed as income, but what you do with it can have tax and benefit consequences, and the interest on the loan usually costs far more than any tax would have.

Can I lose my home?

Plans that meet the Equity Release Council standards let you stay for life as long as you keep to the terms, such as maintaining and insuring the property and living there as your main home.

What happens when I die?

The home is normally sold and the loan and interest repaid from the proceeds. Anything left goes to your estate. With a joint plan, this happens after the second person dies or moves into care.