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Equity release guide

Find out what you need to know about releasing equity from your home in our handy equity release guide.

Unlock tax-free cash from your home

If you’re in or approaching retirement and have owned your home for some time, chances are you’ve benefited from the dramatic rise in UK house prices over recent years. So now you’re living in your most valuable asset but your pockets are no deeper, because the money is actually tied to bricks and mortar.

If this sounds like you, equity release can help you unlock some of the cash tied up in your home, without you having to sell up and downsize to a smaller, cheaper property. In fact, more and more people are choosing to raise money for retirement in this way – and in the UK today, someone takes out an equity release plan every 15 minutes.

Get the retirement you deserve

With more of us living longer, retirement has become a new phase in life to hopefully be enjoyed for many years. It’s an exciting prospect but also a potentially challenging one when it comes to money – especially if your pension doesn’t cover everything you need it to, and you don’t know how you’ll make up the shortfall.

Releasing some of the equity in your home can give you a tax free lump sum or smaller cash injections to top up your retirement income. And that means you can put your money to good use, rather than leaving it stuck in your property.

Could equity release be right for you?

Types of equity release schemes

Lifetime mortgage

Lifetime mortgage is the most popular type of equity release scheme. Basically, you borrow against the value of your home while you continue to live in it. Unlike a typical mortgage, you don’t have to make repayments, instead interest is added and everything is repaid when the property is sold.

Home reversion schemes

You sell all or part of your home at a reduced price and in exchange, you receive a cash lump sum and live rent-free in your home for life or until you move into long-term care.

Read more about the different types of equity release plan.

Deciding how to release equity in your home

Deciding which scheme works for you will depend on your current circumstances and your plans, including:

  • The value of your home
  • How much equity is available in your home
  • Your age
  • Whether you would like to leave an inheritance
  • Whether you want to retain ownership of your home

How does equity release work?

Here is a simple summary of how a lifetime mortgage works:

  • A lifetime mortgage is a loan secured on your property and is available to UK homeowners aged 55 and older
  • You can access some of the equity tied up in your home tax-free, while continuing to live there
  • Choose to take a one-off lump sum, or a smaller amount upfront with the facility to borrow more in the future
  • The total you can borrow will depend on your age, your health and the value of your home
  • You don’t have to make monthly repayments because the interest is added to the loan amount each year
  • The loan plus interest is repaid when the property is sold — typically, when you die or leave your home permanently (e.g. you go into long-term care)

For details of how a home reversion plan works, read our article What is equity release?

Important things you should know

  • Think carefully before borrowing against your home. You must always get professional advice from a specialist adviser, a lawyer or both
  • The interest added to a lifetime mortgage can build up quickly and increase the amount you owe
  • Releasing equity from your home will reduce the value of your estate and the amount you’re able to leave as an inheritance when you die
  • Equity release may affect your tax position and your entitlement to state benefits
  • The future market value of your home could be higher or lower than it is today

How it can help

Many people are living far longer than previous generations and have more time to make the most of their later years. But living longer can put a strain on your finances and your retirement pot may struggle to fund the way of life you’ve worked so hard for. Equity release could be a practical way for you to get hold of extra cash.

If you still have a mortgage, the money you unlock with equity release must go to pay this off first – which means you can enjoy a retirement with no monthly mortgage payments. After that, any money left over is yours to spend as you wish. Some people want to make life a little easier every day or help finance things they’ve always wanted to do. Others decide to give a living inheritance to their family – so they can see the joy it brings during their lifetime.

Here are just a few of the ways you could use the tax-free cash you unlock from your home.

A more comfortable retirement

  • Clear outstanding debts
  • Retire a little earlier than planned
  • Top up your regular income
  • Fund home improvements

Help the family

  • Help children get on the property ladder or set up a business
  • Pay education fees or living costs
  • Finance a wedding or other family events
  • Reduce the inheritance tax burden

Practical realities

  • Adapt your home to your needs as you get older
  • Fund care at home
  • Pay funeral costs
  • Pay medical or legal bills

Well-deserved treats

  • Take regular holidays or the holiday of a lifetime
  • Finance a new car or caravan
  • Fund leisure activities and hobbies
  • Treat yourself to something you’ve always wanted

Questions?  Read our FAQs

Try our FREE Dream Shopping Basket

If you’re considering equity release, you might already know how you’d like to spend the money.

Our Dream Shopping Basket lets you explore the ways you might choose to spend the money and make your very own wish list.

How much equity can I release?

Usually, it’s possible to release between 20% and 50% of the equity (or value) in your home – but the exact amount will vary depending on your circumstances.

When working out how much equity you can release, providers will look at two main things:

  • How much your property is worth – a surveyor, sent by your equity release provider, will provide a professional valuation
  • How long you’re likely to live after taking out your equity release plan – based on your age (and that of your spouse for joint applications) and your health

Try our FREE equity release calculator

Want to see how much money you may be able to unlock from your home with a lifetime mortgage? Use our equity release calculator for an estimate.

How safe is equity release?

As with any financial product, it’s important to make sure you do your research on the product or service and provider before making any decisions.

Today, the equity release market is fully regulated – and all equity release providers and advisers must be regulated and supervised by the Financial Conduct Authority (FCA). So, whether you have a lifetime mortgage or a home reversion plan, you can be sure that significant supervision and regulation is in place for equity release mortgages

For additional reassurance, there’s also the Equity Release Council (ERC) – a trade body whose members agree to abide by a strict code of conduct, including:

  • A no-negative equity guarantee – so you will never owe more than your house is worth, and you don’t need to worry about saddling your family with debt
  • The ability to transfer equity release schemes to another property without paying a penalty

To check if your chosen provider or adviser is a member of the ERC, you can use the find a member portal on the ERC website. For full details, read the ERC’s full Statement of Principles.

Take it step by step

Releasing the equity in your home is a big decision. It’s important to consider all your options before deciding whether this is the right way for you to finance your plans – and make sure you understand the pros and cons.

First, ask yourself:

  1. Do you have any savings and investments that you could use?
  2. Could you move to a smaller property? Remember to take moving costs, fees and stamp duty into account
  3. If you only need a relatively small amount of money, would an unsecured loan be easier? Or could you borrow it from a family member and repay them from your estate?
  4. If you still have a mortgage, is it possible to extend your mortgage term for a few more years? (This is likely to depend on your age)
  5. If you’re on a low income, have you checked what grants or benefits you may be entitled to?

You should always seek professional advice so you understand what’s involved and fees you’ll need to pay. An independent expert adviser will be able to assess your personal situation and advise on the best option for you.

For extra reassurance, you could get a specialist solicitor to explain your legal obligations.

It’s also important to include your family in the decision so they understand how it would work for you and affect them, particularly in relation to inheritance.

Am I eligible for equity release?

Eligibility can vary between provider and depends on the type of equity release scheme.

Typically, to be eligible for an equity release lifetime mortgage you must be 55 or over and for a home reversion plan you must be 60 or over. You must be the homeowner and your property will need to be of standard construction and worth more than the minimum value required by your provider, usually around £70,000.

Can I release equity in my home if I'm still paying off my mortgage?

Yes you can. However, you will be required to pay off your outstanding mortgage using the cash you release from your home.

Could releasing equity from my home affect the welfare benefits I'm entitled to?

This will depend on your personal situation. Means-tested state benefits could be affected if you receive a cash lump sum as a result of releasing the equity in your home.

Do I have to pay tax on the money I release?

No, you don’t. The money you release from your home is tax free.

If you decide to put some of this money into savings or investments, tax may be payable on any income or interest you earn.

Can I release equity in my home and then move?

Yes, if you have chosen a scheme provided by a member of the Equity Release Council, you can move home and transfer your scheme without penalty (subject to your lenders agreement), as long as your new home complies with the scheme provider’s criteria. If you're downizing, you may need to repay some of the equity release loan.

Do I have to take a cash lump sum all at once?

Not necessarily. Some equity release schemes have a ‘drawdown’ facility that allows you to release money from your home as and when you need it or receive a regular income instead.

Can I release the equity in my home and leave an inheritance?

Yes you can, although releasing equity in your home will reduce the value of your estate.

With a lifetime mortgage, you usually have the option to preserve part of your home’s value to leave as an inheritance. If you’d like to do this, make sure you let your adviser know so they can find a plan that suits your needs.

With a home reversion scheme, you can choose to only sell part of your home, leaving the rest as an inheritance.

Is there a risk of owing more than my home is worth?

No there isn’t. If you use a home reversion plan to release equity, you sell all or part of your property at the outset for a reduced price and owe nothing.

A lifetime mortgage is a loan secured on your home so the amount you owe will grow, but as long as your mortgage has a ‘no negative equity guarantee’, you will never owe more than your home is worth.

What fees might I have to pay?

You will usually have to pay arrangement fees, legal fees and valuation fees. You will also have to pay for any legal and independent financial advice you receive.

With a lifetime mortgage, you may be able to have some of these costs added to the loan. With a home reversion scheme, you may be able to have some of the costs deducted from the amount of money to be released.

Where can I get expert advice?

The SunLife Over 55 Equity Release Service is here to put you in contact with an independent expert adviser, so you can decide whether or not equity release is right for you.

When you make and keep your appointment with your adviser, we’ll send you a FREE £25 gift card.

Whenever you’re ready, we’re here for you

For more information and to check your eligibility, call The SunLife Over 55 Equity Release Service today on 0800 633 5566 or request a call back.

Here's the information that you need to know about who we are and the other companies that we work with in order to provide our products and services.

Who are SunLife?

Phoenix Life Limited trades as SunLife and is the provider of the Guaranteed Over 50 Plan, SunLife Insurance and the life insurance policy payment option for Funeral Plans. Phoenix Life Limited’s registered office is at 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 1016269). Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

SunLife Limited distributes financial products and services and is a company limited by shares, registered office: 1 Wythall Green Way, Wythall, Birmingham, B47 6WG (registered in England, no. 05460862). SunLife Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register (registration no. 769427).

You can contact us by post at SunLife, PO Box 1395, Peterborough, PE2 2TR or by phone on 0800 008 6060.

If you choose to add Funeral Benefit Option to your Guaranteed Over 50 Plan the funeral services are arranged and provided by Dignity Funerals Limited. Dignity Funerals Limited is a company registered in England and Wales No. 00041598. VAT registered No. 486 6081 14. 4 King Edwards Court, King Edwards Square, Sutton Coldfield, West Midlands, B73 6AP. Telephone No. 0121 354 1557. Fax No. 0121 355 808. Part of Dignity plc. A British Company. Dignity is not authorised or regulated for this activity by the Financial Conduct Authority or the Prudential Regulation Authority but is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services. Dignity Funerals is not authorised or regulated for this activity by either the Financial Conduct Authority or the Prudential Regulation Authority. Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

The life insurance policy that pays for your funeral will be provided by Phoenix Life Limited, trading as SunLife.

Who provides My Smarter (ISA)?

My Smarter (ISA) is provided by Scottish Friendly Asset Managers Limited. Authorised and regulated by the Financial Conduct Authority. Details can be found on the Financial Services register, registration No. 188832. Member of The Investment Association. Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ.

Who provides the Will writing services?

Hugh James is authorised and regulated by the Solicitors Regulation Authority (SRA Number:303202).

The information contained on this website is based on Hugh James' understanding of the law of intestacy in England and Wales only as at April 2014. The law in Scotland and Northern Ireland is significantly different. This is for information purposes and is not intended to be legal advice.

Who provides Family Life Insurance?

SunLife Family Life Insurance is provided by Scottish Friendly Assurance Society Limited which is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Details can be found on the Financial Services register (registration number 110002). Registered Office: Scottish Friendly House, 16 Blythswood Square, Glasgow G2 4HJ. 

Who provides SunLife Pet Insurance

SunLife Pet Insurance is arranged and administered by BDML Connect Limited. BDML Connect Limited is authorised and regulated by the Financial Conduct Authority (No. 309140). Registered in England and Wales Number 02785540. Registered Office: 45 Westerham Road, Bessels Green, Sevenoaks, Kent, TN13 2QB.

Who provides SunLife Home Insurance

SunLife Home Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.

Who provides SunLife Car Insurance

SunLife Car Insurance is arranged and administered by BISL Limited and underwritten by a panel of insurers. BISL Limited are an intermediary authorised and regulated by the Financial Conduct Authority. Registered in England no. 03231094. Registered office Pegasus House, Bakewell Road, Orton Southgate, Peterborough PE2 6YS.