Is Equity Release Right for You? The Benefits And Risks

For many homeowners aged 55 and over, equity release offers a way to unlock money tied up in their property without having to move.

Whether you’re looking to boost your retirement income, help family members financially, or pay for home improvements, equity release can provide valuable flexibility.

However, it’s not the right solution for everyone, and there are a lot of equity release myths out there. Understanding both the advantages and potential drawbacks is essential before making a decision.

What is equity release?

Equity release allows eligible homeowners to access some of the value built up in their home while continuing to live there.

The most common type is a lifetime mortgage, where you borrow against your property’s value without making monthly repayments unless you choose to. Instead, the loan is usually repaid when the property is sold after you pass away or move into long-term care.

The amount you can release depends on factors such as your age, property value, and the lender’s criteria.

The benefits of equity release

For the right person, equity release can provide significant financial freedom.

Access tax-free cash

The money released from your home is generally tax-free, giving you funds to use however you choose.

You might use it to:

- Supplement your retirement income

- Renovate your home

- Pay off an existing mortgage

- Cover unexpected expenses

- Help children or grandchildren onto the property ladder

- Stay in your home

One of the biggest attractions is that you can continue living in the home you love while accessing part of its value. For many people, this is preferable to downsizing or selling up.

Flexible repayment options

Many modern lifetime mortgages allow voluntary repayments, helping reduce the amount of interest that builds up over time without committing you to mandatory monthly payments.

The risks of equity release to consider

While equity release has become much more flexible over the years, there are important considerations.

Interest can build up

If you choose not to make repayments, interest is usually added to the loan. Over time, this means the total amount owed can grow significantly.

Your estate may be reduced

Because the loan is repaid from the sale of your property, there may be less money left to leave as an inheritance.

It could affect benefits

Receiving a lump sum could impact your eligibility for certain means-tested state benefits. Professional financial advice can help you understand whether this applies to your circumstances.