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What is equity?

Last updated 4th June 2019

For a homeowner, equity is the value of the assets owned. If you bought your home and took out a standard repayment mortgage, then every month you’ll have been paying off some of the money you borrowed as well as the interest accrued.

This should mean that over time, your mortgage will reduce, and you should have some “equity” in your home.

So, what is equity exactly?

Put simply, it’s the market value of your home, minus any outstanding mortgage debt. It is quite literally the amount of your home you actually own. If you’ve paid off your mortgage in full, you’ll have 100% equity.

If you’re not there yet, you’ll have a proportion. For example, if your home is worth £200,000 and your mortgage is £150,000, you’ll have £50,000 of equity.

mature couple looking over some papers

Can equity increase?

Many homes in the UK have risen in value over the years. So, if your home is worth more now than when you bought it, you have equity.

With a repayment mortgage, your monthly repayments also increase the amount of equity you have in your home, because the more you pay off, the less you owe.

Use our handy tool to see if your home’s gone up in value.

If it has, equity release could hold the key to a more comfortable retirement for you.

How to access your equity

With a lifetime mortgage, you don’t have to downsize or sell your home to access the equity you have. Equity release is a way to get hold of some of the money that’s tied up in your home, while you continue to live in it.

You can usually release somewhere between 20% and 50% of the equity in your home. The exact amount will depend on your age and personal circumstances. Our equity release calculator will give you an idea of how much you could release.

Types of equity release

There are two main ways to release equity without having to move out of your home. One is with a lifetime mortgage. This involves borrowing an agreed amount of tax-free money secured against your home.

Unlike a typical mortgage, you don’t have to make repayments, instead interest is added and everything is repaid when the property is sold - typically, when you die or leave your home permanently (e.g. you go into long-term care).

The other is through a home reversion plan, which lets you sell all or part of your home at a reduced price in exchange for a tax-free cash lump sum or a regular income.

Either way, once any existing mortgage is paid off, you can choose to spend the money on anything you like, from a new conservatory to funding care at home.

model house with question marks above it

How does equity release work?

To apply for equity release you need to be:

  • Aged 55+
  • A UK homeowner with a property worth over £70,000

The money you release is yours to spend as you wish. There are no monthly repayments as the interest is added to the loan amount each year, and you can keep living in your own home for the rest of your life.

If you haven’t paid off your mortgage yet you could still be eligible for equity release. You’ll just need to use some of your equity to clear your remaining mortgage first – and what’s left is all yours.

Equity Release impacts the size of your estate. Our handy equity release guide has a lot more information to help you. It’s well worth a look if you think releasing equity could be a good option for you. Remember, it’s a big decision and important to seek expert financial advice.

Remortgaging to release equity

Remortgaging your home is another way to release equity. If you’ve been paying off your mortgage for a while – or you’ve paid it in full – you’ll have equity in your home. And it’s this equity that you’ll be borrowing against.

But remortgaging to free equity isn’t always easy if you’re retired or approaching retirement. Individual mortgage lenders have their own maximum age caps and they’ll assess affordability, as your pension, or other assets, will need to cover the cost of repayments as well as the cost of living.

If you’re still unsure of these options, our article titled remortgage or equity release will help you understand the differences.

Equity release is a big decision for anyone to make, and it isn’t right for everyone. It will decrease the value of your estate and the amount you can leave as an inheritance when you die. It may also affect your tax position and entitlement to state benefits. So, always seek advice from an expert financial advisor before you commit to anything.

Want to talk to somebody about Equity Release?

Call our UK helpline FREE 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). 

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, Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). Dignity Funerals Ltd is a member of the National Association of Funeral Directors.

Who provides the Funeral Plans?

Dignity Funerals Ltd arranges and provides the funeral services, registered office: 4 King Edwards Court, Sutton Coldfield, West Midlands, B73 6AP (registered in England and Wales, No. 00041598). 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 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.