What is equity release?

Equity release is a way to borrow money from your home without selling it. You can do this while continuing to live there as normal. The amount you borrow is usually repaid when you die or move into long-term care.

Important. Lloyds does not offer equity release mortgages. 

The headlines

  • Equity release mortgages are usually only offered to homeowners aged 55 or over.
  • There are 2 types of equity release, a lifetime mortgage and a home reversion plan.
  • You could also borrow more from your lender, or remortgage, to release equity from your home. This is different to an equity release mortgage.

In this guide

How does equity release work?

What are the main types of equity release?

Why release equity from your house?

Things to consider

Can you remortgage to release equity?

Frequently asked questions

How does equity release work?

Equity release is a form of borrowing that means taking equity out of your home. 

Your home equity is the amount of your property that you own. For example, if you own a property worth £250,000 and have a remaining mortgage balance of £200,000, you would have £50,000 equity.

If you’re aged 55 or over, you might be able to release some of this equity from your house. It’s up to you how you choose to do this. For example, you could take it as:

  • a lump sum of money
  • regular smaller amounts
  • a combination of the 2.

There are 2 main types of equity release

Lifetime mortgage

A lifetime mortgage allows you to take out a loan that is secured against the property. Interest is added to the loan and you won’t repay the loan or interest until your home is sold later in life or after you die.

Learn more about lifetime mortgages

Home reversion plan

A home reversion plan is where you sell all or part of your property to access money tied to it. You can then keep living in the property under a lifetime tenancy. The money is repaid when you sell your home or when you die or move into care. 

Why release equity from your house?

Access your money tax free

The money you release from your home doesn’t count as taxable income. This could make equity release a tax efficient way to access some of the value from your home.

Stay in your current home

When you release equity from your home, you can continue living there. This could be an ideal way to access money tied up in your home without selling and moving. 

You still benefit if your house price increases

If you release equity and your property value goes up, you’ll still see an increase in the part you own. 

Money for home improvements or retirement

Unlocking money tied to your home could help increase your retirement income. You could also use the money for funding home improvements or to help with care support costs in later life. 

Things to consider

Equity release mortgages might have higher interest rates

Lifetime mortgages can have higher interest rates than standard mortgages. If you don’t make regular payments to reduce the cost then the interest you owe can roll up and significantly increase over time. 

You could be giving up some of your ownership 

If you apply for a home reversion, a company or provider buys all or part of your home. While you’d still be able to live in your property, this means you might have to give up some of your ownership.

It can reduce inheritance

Your home is usually your biggest asset. By releasing equity, you’re taking cash out of that value now so there’s less left to pass on later. 

It can impact benefits and support

Equity release might impact you getting means-tested benefits. By increasing the amount of cash you have, you may not be entitled to benefits such as pension credit, housing benefit, Universal Credit and council tax reductions. Means testing is also used for social care support. You might want to consider this before applying.

Important. Lloyds does not offer equity release mortgages. It’s a good idea to speak to a regulated financial adviser before making any decisions.

What is the Equity Release Council?

The Equity Release Council is the main industry body for equity release in the UK. It sets standards and rules for lenders, advisers and solicitors and explains what you should expect as a customer.

If you use a provider that’s a member of the Equity Release Council, you usually get:

  • a no negative equity guarantee
  • the right to stay in your home for life
  • fixed or clearly defined costs
  • the ability to move home.

Not every provider is a member of the Equity Release Council. It’s a good idea to speak to a regulated financial adviser before making a decision.

Can you remortgage to release equity?

Yes, you could remortgage your home to release equity. Remortgaging to release equity is different to equity release. It works by taking out a new, larger mortgage on your home to free up cash you’ve built.

There are lots of reasons you might remortgage to release equity. This could be to finance a home improvement project or to pay off debts. If you remortgage to release equity, your mortgage payments and interest could increase – but could be lower than an equity release mortgage.

With a Lloyds mortgage, you may also be able to apply to borrow more if you’re over 55, as long as it’s repaid by the age of 80.

You could lose your home if you don’t keep up your mortgage repayments

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Important legal information

The content on this page is for reference and does not constitute finance advice.

For impartial financial advice, we recommend government bodies like the MoneyHelper.