What is equity release?
Simon Stanney
Last updated 14th December 2023 by Scott Robertson
10 min read
The information in this article is provided for general guidance only and is not offering financial advice.
Equity release is a way to access some of the money tied up in the value of your home if you are over the age of 55. You can release the money as a lump sum or in instalments, and can continue living in your house for as long as you’re able.
There are different equity release plans that allow you to release this cash, either by taking out a loan secured against your home, or by selling part or all of it. The two main types are lifetime mortgages (the most popular option) and home reversion schemes.
People choose equity release for many reasons, whether it's to pay off debts, live more comfortably in retirement, fund home improvements or to help a family member with a cash gift gift. Once you’ve paid off any remaining mortgage, the money is yours to spend as you wish.
On this page:
- What is equity in a house?
- Understanding equity release
- Types of equity release schemes
- How old do you have to be for equity release?
- Is equity release right for me?
- Equity release definitions and important terms
- Getting advice
What is equity in a house?
The equity in your home is the market value of your property minus any outstanding mortgage or other debt secured against it.
With the most common type of mortgages, your equity increases as you make mortgage payments and as your property increases in overall value.
Over the years, property prices in the UK have risen(www.ons.gov.uk opens in a new tab). So, if you bought your home some time ago, you could now find yourself with a good amount of equity.
Here are a few examples:
- If your home is worth £350,000 and your mortgage is paid off, you would have £350,000 equity
- If your home is worth £250,000 and you have an outstanding mortgage of £50,000, you would have £200,000 equity
- If your home is worth £150,000 and you have an outstanding mortgage of £20,000 and an additional secured loan from your mortgage lender of £5,000, you would have £125,000 equity
The exact amount of equity you can release will depend on your age and personal circumstances.
Use our 60 second equity release calculator
Release tax-free cash from your home
Understanding equity release
Equity release plans are available to over 55s who own a qualifying property in the UK.
Depending on the plan, you can release the money as a lump sum or in smaller instalments, and it’s up to you how you spend it.
The money you release will need to pay off any outstanding mortgage first. The rest is yours to spend as you wish, for example on home improvements or to help your family.
It’s a tax-free sum you can use however you like.
Once you’ve accessed your money, you won’t have to make any monthly repayments. If you’d like to make ad hoc or regular repayments, some plans offer this option. Choosing to make repayments – however small – will help reduce the amount of interest you pay over the lifetime of your loan.
With the most popular form of equity release, the outstanding loan (plus interest if unpaid) will be paid back when you sell your house – which will usually be when you (or, for joint policies, your partner) pass away or move into long term care.
Visit our How does equity release work? guide to learn more about the process and how to apply.
Types of equity release schemes
There are two main ways to release the equity tied up in your home without having to move:
- Lifetime mortgage – where you borrow money against the value of your home
- Home reversion scheme – where you sell all or part of your property in exchange for money
For an introduction to lifetime mortgages and home reversion schemes, visit our guide to different types of equity release.
An expert adviser will be able to help you determine if equity release is right for you and, if so, decide which type of equity release scheme suits you best and how much you could release.
How old do you have to be for equity release?
To take out equity release you need to be 55 years old or older. If you're taking out a joint equity release plan, you both need to be at least 55.
To take out a home reversion plan you must be 65 years of age or more.
There are other criteria to think about before you decide if equity release is right for you.
Is equity release right for me?
If you have money tied up in your home, and you’re looking for a way to fund a more comfortable retirement, equity release could be a way to boost your finances.
It could help top up your pension or other income when you stop working – and you can use the money to maintain or enhance your lifestyle in later life.
You’ll need to meet certain conditions in order to qualify for equity release plans. If you meet the criteria below, then you could be eligible:
- You're 55 or over
- You're the owner of a qualifying property in the UK
- Your property is worth £70,000 or more
Use our equity release eligibility checker to find out if you can apply.
If you have enough spare cash or other investments that will allow you to maintain your lifestyle or other spending goals in retirement, then equity release is less likely to best meet your needs. Make sure to consider alternative options that might be more suitable.
How does equity release affect benefits?
It’s important to remember that equity release can affect benefits you receive and may impact benefits that you might become eligible for in the future.
If you receive or may need to apply for means-tested benefits, they may be reduced, or you will no longer be eligible for them. These include:
- Pension Credit(www.gov.uk opens in a new tab)
- Universal Credit(www.gov.uk opens in a new tab)
- Council Tax Support(www.gov.uk opens in a new tab)
- Jobseeker's Allowance(www.gov.uk opens in a new tab)
- Income Support(www.gov.uk opens in a new tab)
- Employment and Support Allowance(www.gov.uk opens in a new tab)
A specialist equity release adviser will be able to advise what will happen to your benefits if you take out a plan.
They’ll talk you through the details and help you decide whether equity release is right for you.
Read our guide on how equity release affects benefits to find out more.
Equity release definitions and important terms
When researching equity release, some of the terms and phrases can be confusing. To make things clearer, we’ve created this glossary that explains the terms you might come across.
Getting advice
Equity release is a financial commitment related to your home, so it’s a big decision. As well as providing a roof over your head, it’s also a valuable asset and may form a significant part of your estate. Always take time to think through the pros and cons.
There’s a lot to consider, so it’s also important to get professional advice. This can be from a specialist financial adviser, a solicitor, or both to help you decide if it’s the right option for you.
For free, no-obligation initial advice, contact the SunLife Equity Release Service.
Next steps
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The thoughts and opinions expressed in the page are those of the authors, intended to be informative, and do not necessarily reflect the official policy or position of SunLife. See our Terms of Use for more info.