What is the catch with equity release?

Equity release lets you unlock money from your home while living there, but interest compounds over time, fees can add up, it may affect benefits, and it reduces inheritance.

Is equity release safe?

Yes, if you use an FCA-regulated provider and an Equity Release Council-approved plan, as these include consumer protections.

The Pros & Cons of Equity Release 2026 Guide

Q: Is there a catch with equity release?

Yes. The main catch is high long-term costs from compounding interest, possible early repayment fees, and the potential loss of eligibility for certain benefits and grants.

Q: Is there a better alternative to equity release?

Alternatives include downsizing, remortgaging, taking a personal loan, or applying for government grants depending on your circumstances.

Q: Why does equity release have a bad reputation?

Historically, it suffered from poor advice and high rates. Regulation and protections have since improved, including the ‘no negative equity guarantee’.

Q: Can you lose your house with an equity release?

No. As long as you meet the plan’s conditions (like living in the home and maintaining it), you can’t lose your house.

Q: Does equity release affect state pension?

It doesn’t affect your state pension directly, but it may impact eligibility for means-tested benefits like Pension Credit and Council Tax Reduction.

Q: Is equity release a good idea?

It can be for some, but you should consider long-term effects on inheritance and benefits. Always seek independent financial advice first.

If you’re over 55 and have paid off all, if not most of your mortgage, many equity release schemes allow you to release some of the funds tied up in your property, without needing to move out of your home.

This proves to be an increasingly popular decision, with total equity release lending steadily increasing from around £1bn in 2008 to over £6bn in 2022. Despite a large drop in 2023, the 2025 value rose 11% to £2.57bnfrom £2.3bn (2024).

In the same report, the Equity Release Council in January 2026 found that 21% of people were freeing up money for home improvements, 6% were holidaying with their equity, 4% were spending the money on large purchases (i.e. a car), and 13% were gifting the money to family members.

While there are benefits to freeing up equity in your property, there are implications that homeowners should be aware of, including interest rates, redemption penalties and more. We’ve created a guide explaining what equity release is and highlighting the pros and cons of taking out an equity release to help you make the right decision for you.

What is equity release?

Releasing equity in a property is a way of gaining access to the money tied up in your home and it involves exchanging a portion of your property’s value for a cash lump sum or smaller payments over time. You can use this money for anything, be that retirement, a holiday, a new car, a wedding or anything else. It’s worth knowing that equity release works similarly to a loan and comes with interest.

How does equity release work?

There are two types of equity release. In a home reversion scheme, an equity release company buys a fixed share of your property from you. Lifetime mortgages are when the loan has a fixed interest rate and there are no regular repayments to make.

Releasing equity is simply a way to unlock the money that’s tied up in your home, and it’s available as a tax-free lump sum. There are two ways to release equity from your home: either as a lifetime mortgage or a home reversion.

Lifetime mortgage

The most popular form of equity release plan is the lifetime mortgage, often with a drawdown plan that allows you to release funds regularly. Homeowners can take out a mortgage on their property while retaining ownership of it.

With a lifetime mortgage plan, homeowners make regular repayments or let the interest roll up – the unpaid interest of your plan adds to the total loan amount. This allows for debt to build up quite quickly, so if you’re in a position where you can afford to make regular repayments, the mortgage will end up being a lot less costly.

The loan itself is repaid when the last homeowner on the deed either passes away or moves into fulltime residential care.

Home reversion

Home reversion plans let homeowners sell shares of their house to a reversion provider, in return for cash or regular payments. How much a person chooses to sell is entirely up to them as the homeowner. Even if the owner sells 100% of the property, they reserve the right to continue living in the property, rent-free, until death.

The percentage homeowners retain will always stay the same, regardless of any unexpected change in property value.

When the homeowner sells, the value of the sale will be divided up between them and whoever owns the remainder of the home, as per the percentages each party owns. If the homeowner dies before they choose to sell, the property will be sold on their behalf, and the proceeds will be shared with the remaining people who hold shares of the property.

How long does equity release take?

The equity release timescale includes the application process, a survey, valuation, an offer and the release of the equity itself.

All in all, this process typically takes about 6-8 weeks.

Is equity release good or bad?

There are pros and cons that should be carefully considered based on your own situation and needs. We have summarised the key factors below:

Pros of equity release

You’ll have quick access to a tax-free lump sum of cash (or a series of smaller payments) to do with as you please.
If you release equity through a lifetime mortgage, you’ll still have complete ownership of your home, so you can stay in your own home, rent-free.
No need to sell or downsize.
Interest rates for equity release are fixed for the duration of the plan, so you can rest assured they won’t rise after you take out the product.
There’s no obligation to make any monthly repayments. The money doesn’t have to be paid back until after you pass or move into full-time care. There are options to pay the money back sooner if you prefer (although this may come with a fee).
Most equity plan lenders, such as popular providers SunLife, Aviva and LV, are members of the Equity Release Council and abide by set rules regulated by the Financial Conduct Authority (FCA).
You can use an equity release scheme to reduce the inheritance tax you may be liable to pay, if you reduce the value of your estate. It can also be a way of gifting cash to family members without the constraints of inheritance tax.
You’ll never owe more through equity release than the value of your home. When the time comes to repay the loan, it can be fully cleared by selling the property – with any remainder either helping to cover care costs or being distributed as per your will.

Cons of equity release

If you haven’t paid off your mortgage, releasing equity in your home will extend your repayment period and may result in increased interest rates. This can cost you more money in the long term.
Releasing equity may also mean that you’re able to pass on less inheritance. This may be a personal matter of weighing up your standard of living and what you want to leave after your death.
Equity release reduces the value of your estate, and this may mean that your means-tested state benefits are affected; this can include your pension credit, savings credit or council tax benefit.
Depending on your lender, there may be early repayment charges attached to the loan.
If you release equity from your property, you won’t be able to take out other loans against your property. You can, provided it is there, release further equity from your property, although this may vary by lender.

Equity Release FAQs

Is equity release a good idea?

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Equity release can be a good idea for some, especially those who need access to money and wish to stay in their home. If you choose to release equity from your home, it’s important to consider the long-term impact on your estate, inheritance and any benefits you receive. It’s a good idea to get some independent financial advice before releasing equity.

Equity release is considered safe if you choose a provider regulated by the Financial Conduct Authority (FCA)and a plan approved by the Equity Release Council (ERC). These products come with protections such as a ‘no negative equity guarantee’, but it’s still important to fully understand the terms and long-term implications.

How much equity can I release?

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There are a number of factors that affect how much equity you can release from your home, but as a rough guide, you can expect to be able to unlock 20-60% of your home’s equity through a lifetime mortgage or as much as 80-100% of your home through home reversion. Factors that will affect the amount of equity you can release are:

Your home:
- The value of your home
- The materials used to build your home
- The condition of the property
- The value of any outstanding debt secured against your property, i.e. a mortgage
- If your home is a listed building
Your life expectancy after taking out the plan

This is based on your age and health (or that of the youngest applicant in a joint application)

How much does equity release cost?

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The main costs associated with equity release, aside from the interest accrued, are fees for solicitors, a valuation and a surveyor. The fees can set you back between £1,500-£3,000.
Some consider the act of selling off part of their home through home reversion as a cost, but this is subjective.

Can I sell my house if I’ve released equity?

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Yes, you can still sell your house if you’ve taken out equity against the value of your property. You can repay the money to your lender and sell your house as normal. You should check with your lender about any early repayment fees.

You are also, dependant on your lender, able to take your equity release with you when you move. If you move to a property of the same (or greater) value, there shouldn’t be any problem, and they can simply ‘port’ your lifetime mortgage or home reversion scheme to the new property. If you’re looking to downsize however, you may be required to pay back some of the value of your loan.

Is there a catch with equity release?

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While equity release can provide a lump sum or regular income, the ‘catch’ is that it often comes with high costs over time due to accumulating interest, which can knock a fair amount off the value of your estate.

Also, there may be penalties for repaying the loan early, it might stop you from being able to claim Council Tax Reduction, Pension Credit and Universal Credit, and may make you ineligible for energy grants.

Does equity release affect state pension?

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Equity release itself doesn’t directly affect your state pension, which is not means-tested. However, the money you release could impact your eligibility for means-tested benefits such as Pension Credit, Council Tax Reduction and Universal Credit.

Can you lose your house with an equity release?

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No, you can’t lose your house, provided you meet the terms of your equity release agreement, like maintaining the property and living in it as your main home.

Is there a better alternative to equity release?

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There are a number of alternatives, although which one is best for you will depend on your financial situation:

Selling your current home and moving to a smaller, less expensive property can free up your money that’s tied up in property without taking out an equity release loan.
You could consider remortgaging to free up some funds, although you’d need to make monthly repayments.
Personal loans. If you only need a small amount of money, a personal loan could be more cost-effective.
Government grants. There may be grants or benefits available (depending on your situation), particularly for energy efficiency.

Why does equity release have a bad reputation?

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Equity release has previously had a bad reputation because of poor advice, high interest rates and some cases where homeowners ended up with little or no equity left in their homes.

The market has since improved with better regulation, more transparency and ‘no negative equity guarantees’ that mean you won’t owe more than your home’s value.

There are still negatives to equity release, which you can read about above.

Alternatives to equity release

If you are looking to free up money in your property quickly but don’t feel that equity release is for you, consider selling your home to House Buyer Bureau. We have been helping people sell their properties quickly, with no fuss or faff, since 2010 and are rated as Excellent on Trustpilot.

Our reputable, friendly house buying experts are on hand to guide you through our quick sales process and can make you a competitive, formal offer for your property – regardless of its current state. This means you can downsize efficiently and use the remaining funds to treat loved ones, pay off debts or enjoy an extra source of income.

Get in touch with one of our friendly house buying experts today to receive a free, no-obligation cash offer for your property.

Suzanne

Suzanne has over 20 years’ experience in the property industry. Every year, in her role as a Property Buying Consultant, she helps thousands of sellers find their way through the property maze, regardless of their reasons for selling or the type of property.

She regularly gets great feedback for being honest, friendly and keeping things simple for her customers.

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