Money & later life · UK guide

Equity release: how it works, and what to weigh first.

Last verified 21 Jun 2026 · Source MoneyHelper + FCA + Equity Release Council

Equity release lets homeowners aged 55+ unlock tax-free cash from their home without moving. It can be the right answer for some — but the interest compounds, it can reduce means-tested benefits and what you leave behind, and you must take FCA-regulated advice first. Here’s how it works, the real risks, and the cheaper alternatives to check before you commit.

Age 55+Lifetime mortgage
Advice requiredFCA-regulated
No neg. equityERC guarantee
Check firstCheaper alternatives
Check the alternatives → What am I owed first?

How it works

There are two types of equity release, both regulated by the FCA:

TypeHow it works
Lifetime mortgage (by far the most common, from age 55)A loan secured on your home. You keep ownership. Interest usually rolls up (compounds), and the loan plus interest is repaid when you die or move into long-term care — normally from the sale of the home. Some plans let you pay interest or draw down in stages to slow the roll-up.
Home reversion (rarer, usually from 60–65)You sell all or part of your home to a provider for less than market value but keep the right to live there rent-free for life. On sale, the provider takes their share of the proceeds.

The money is tax-free and you can usually take it as a lump sum, smaller drawdowns, or a mix.

The real risks

Read these before anything else

Compound interest grows the debt fast. Because interest is charged on the interest, a lifetime mortgage can roughly double over time — you repay far more than you borrowed.

It reduces your family’s inheritance and the equity you might later need for care.

It can affect means-tested benefits — Pension Credit, Council Tax Reduction and others — because holding the cash counts as savings.

Fees apply — advice, solicitor, valuation and arrangement, typically £1,500–£3,000.

Protections from Equity Release Council member plans soften some risks: a no-negative-equity guarantee (you or your estate never owe more than the home sells for), the right to remain in your home for life, and the right to move/port to another suitable property. Always check these apply.

Check these cheaper alternatives first

  • Claim what you’re already owed. Huge numbers of older people miss Pension Credit, Attendance Allowance, Council Tax discounts and the Disabled Facilities Grant for home adaptations — run a benefits check before borrowing against your home.
  • Downsizing to a smaller or cheaper home frees up cash without any interest.
  • A retirement interest-only (RIO) mortgage — you pay the interest monthly so the debt doesn’t roll up.
  • Local authority help for care or adaptations, and grants.
  • A loan or gift from family, or family buying a share, can be far cheaper than compounding interest.
Often the cheapest money is the money you’re already entitled to

A free benefits check can sometimes find more, with no risk to your home, than equity release would net after interest. Do that first.

If you’re still considering it — do it safely

  1. Get free guidance from MoneyHelper (government-backed) to understand the options and the impact on benefits and inheritance.
  2. Use an FCA-regulated adviser — it’s a regulatory requirement to take advice — and ideally one that is a member of the Equity Release Council.
  3. Involve your family and your future plans (care, moving) in the decision.
  4. Never be rushed or cold-sold. Watch for scams (see our pension & investment scams guide) — a genuine adviser will give you time.
Do this now
  1. Run a free benefits check — claim everything you’re owed before borrowing against your home.
  2. Get free MoneyHelper guidance on equity release vs the alternatives.
  3. If you proceed, use an FCA-regulated, Equity Release Council adviser — and talk it through with family.

Free help: MoneyHelper · Citizens Advice 0800 144 8848 · Age UK 0800 678 1602. SortedUK is not FCA-regulated — this is general information, not financial advice.

Source verification Primary sources: MoneyHelper (what is equity release; lifetime mortgages), the Financial Conduct Authority (equity release advising/selling standards) and the Equity Release Council. Last verified 21 June 2026. Confidence: High — equity release is for homeowners (lifetime mortgages typically from 55), interest on a lifetime mortgage compounds so the debt can grow quickly, it can affect means-tested benefits and inheritance, set-up fees are typically £1,500–£3,000, regulated advice is required, and Equity Release Council plans carry a no-negative-equity guarantee and the right to remain for life. SortedUK is independent and not FCA-regulated — this is general information, not financial advice. Always take regulated advice for your own decision.

Equity release — common questions

Will I still own my home?

With a lifetime mortgage, yes — you keep ownership and the loan is repaid when you die or move into care. With home reversion you sell all or part of the home to the provider but keep the right to live there for life.

Could I end up owing more than my home is worth?

Not if your plan has a no-negative-equity guarantee (standard with Equity Release Council members) — you or your estate will never owe more than the home sells for. Always confirm this protection is included.

Will it affect my benefits?

It can. Releasing cash you then hold as savings can reduce means-tested benefits like Pension Credit and Council Tax Reduction. Check the impact (MoneyHelper can help) before deciding — and claim everything you’re owed first.

Is it a scam?

Regulated equity release through an FCA-authorised, Equity Release Council adviser is legitimate. But be wary of cold calls, pressure and “free reviews” — those are scam hallmarks. See our pension & investment scams guide and never be rushed.

Your home is your biggest asset — decide carefully.

Claim what you’re owed, weigh the alternatives, and take regulated advice before releasing equity. Want help seeing your options?

Check what I’m owed → Ask Sorted