What Is Equity Release?

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What is equity release?

If you are an home owner you may have heard a lot about equity release schemes but have still found yourself asking what is equity release and how does it work?  Equity release schemes are a range of products offered by certain lenders that allow you to access some of the money (equity) your home is worth without having to move. This money is tax free and can be spent however you like.

Types of equity release scheme

Lifetime mortgages

Lifetime mortgages are a type of loan you can take out for usually up to 56% of your market value, this loan is secured against your home. The amount you borrow is repaid along with any interest through the sale of your property after you die or move into a care home. If you choose to have a ‘roll up’ lifetime mortgage then the full amount is repaid through the sale of your home, however because you cannot repay any of the interest on it, it gets compounded on your debt meaning the amount you owe can increase quickly. Interest only mortgages give you the option to repay some of this interest through monthly payments to help reduce the amount ultimately paid off through the property sale. There are also fixed rate mortgages, with this option there is no interest on your loan, instead during the application you agree how much more will ultimately repaid to the lender from the sale of the property.

Lifetime mortgages registered with the Equity Release Council carry a ‘no negative equity’ guarantee. This means if the amount you ultimately owed to the lender was greater than the value of your house you would not owe them any more than the amount your home sold for, so the debt cannot be carried onto your estate.

Any revenue left over from the sale of your home once the debt is repaid can be passed on to your beneficiaries, you also have to the option to move as long as the lender approves that the new property is a suitable replacement.

Home reversion schemes 

The other type of equity release scheme is home reversion. This works by you selling your home, or a part of it, to a reversion company for less than its market value. They will in return let you continue to live in the property as a tenant either for free or at a discounted rate of rent. After you die or move into a care home they will sell the property on.

Many reversion plans give you the option to be paid from a one off lump payment or to receive regular ‘income’ payments. Some reversion providers will also let you move as long as they approve of the new property.


It is important that you carefully consider all of your options before committing to any plan, equity release is not right for everyone and it will reduce what you can leave behind to your loved ones and it can affect your entitlement to certain state benefits. Equity release is normally a lifetime commitment so you may wish to look into alternatives to raise capital such as downsizing or relocating to a more affordable area, you could also see if you are entitled to any state benefits you are not currently in receipt of.

Find out more about equity release

To find out more about the different types of equity release and if there is a plan right for you, simply click on the link and fill in the quick form and an equity release specialist will get back to you with free, no obligation quotes and advice.

Equity release is available to UK homeowners aged between 55 and 95 and allows you to release capital from your home. The money released can be used for any purpose, and can be taken as a tax free lump sum or in smaller amounts if preferred.

Key features include:

  • Available to homeowners aged 55 to 95
  • Release capital tax free from your home
  • You choose how to spend the money
  • Lump sum & drawdown options
  • You cannot release equity without taking advice

You can release equity from your home with either a lifetime mortgage or a home reversion scheme. The most popular type of equity release is a lifetime mortgage, where a loan is secured against your home & you retain full ownership of your home.

Key features include:
  • The amount you can release will depend on your age
  • The minimum age you can be is aged 55 with 95 as an upper limit
  • The minimum property value on which an equity release plan can be secured on is £70,000
  • The older you are and the higher the value of your property the more equity you can release

When capital is release by the plan provider, instead of making monthly interest repayments, interest is usually added to the loan. this is known as compound interest. At the end of the plan (usually when either of you pass away or move into long term care) your house will be sold & the equity release plan provider will be paid back from the house sale proceeds with the balance paid to your estate.


There are different types of equity release plan and can be summarised as follows:

Lump sum lifetime mortgage
  • Provides a tax free lump sum secured against your home giving you access to a pot of cash.
  • Funds released can be used for almost any purpose
  • You retain full ownership of your home
  • Interest rolls up and is added to the loan. Typically repaid when you pass away or move into long term care
  • Some plans allow you to guarantee  a percentage of the future value of your home for your loved ones’ inheritance. Other options include the option to pay monthly interest
  • You need to take advice before you can take a lifetime mortgage out
Drawdown lifetime mortgage
  • Lets you drawdown cash in stages after an initial lump sum
  • You will only pay interest on the funds drawn down
  • These plans are more flexible so you do not miss out on means tested benefits
  • Drawn down funds can be used for any purpose e.g. home improvements, pay for university fees
Home reversion plan
  • Need to be aged 65+ to qualify
  • Involves selling all or part of your home for a tax free cash lump sum
  • The money you receive can be used for any purpose
  • Your share of the property will benefit from house price increases
  • When you pass away or sell your home, the home reversion provider takes its percentage from the sale proceeds.

For a quick estimate of what you could borrow use the link below:

Equity Release Calculator »

A lifetime mortgage is a loan secured against your house that allow you to release some of the equity you have built up.

Also known as equity release mortgages, like retirement interest only (RIO) mortgages they are only available to over-55s, and the loan is fully paid off when the last person living in the property dies, sells the home or goes into care.

The main difference is that RIO mortgages require borrowers to pass affordability checks and commit to making regular payments for life. With an equity release plan there are no such checks required.

There are a number of variables that can determine how much you may be able release from your home.

The key thing are your age and the value of your property.

The table below provides an approximate indication of how much equity you can expect to release from your home depending upon how old you are from a lifetime mortgage (Home Reversion Plans may offer a higher amount):


55 25
56 26
57 27
58 28
59 29
60 32
61 33
62 34
63 35
64 36
65 37
66 38
67 39
68 40
69 41
70 42
71 43
72 44
73 45
74 46
75 48
76 49
77 50
78 51
79 51
80 52
81 52
82 53
83 53
84 54
85 54
86 54
87 54
88 54
90 54

Lifestyle factors can also come into play, so if you are a smoker or are overweight the amount you can release may be increased.

For a quick estimate of what you could borrow use the link below:

Equity Release Calculator »

FREE & no obligation – Equity release service

Equity Release Quotes >>


Equity release may affect your entitlement to state benefits and will reduce the value of your estate. It may involve a lifetime mortgage or home reversion plan. All content set out in this website is provided for information only and should not be considered as advice. It is strongly recommended that you seek advice of a qualified, independent financial advisor before making any decisions to take out an equity release product.

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