Compare equity release mortgages

What are equity release mortgages?

Equity release mortgages are also known as equity release schemes. They are products that let you access the cash (equity) tied up in your home. An equity release scheme allows you to use the value of your home to either generate a cash lump sum, or take a regular income. It's only available to older homeowners.

Equity release schemes explained

Equity release schemes are types of mortgages only available to homeowners who are over 55 years old. 

There are two main types of equity release

• Lifetime mortgage - this means you continue to own your own home

• Home reversion plan - in this type of equity release scheme you sell some or all of your home in return for a lump sum of cash

Lifetime mortgages tend to be the most popular type of equity release scheme.

How does equity release work?

The money or equity you have tied up in your property can be converted into a tax-free cash lump sum or monthly income. You'll sometimes hear it being called an equity release loan or a home or house equity release loan.

With a home equity release mortgage, you're withdrawing money from the value of your home, but you don't have to move or sell your property. Often you don't even need to pay back mortgage interest while you're still living there.

They frequently come with negative equity guarantees - which means that the value of the loan and interest will never exceed the value of your home when it’s sold - meaning won’t pass on any debt or see other inheritance sacrificed to cover the cost of the interest on the loan.

What are the different types of equity release schemes?

There are two main types of property equity release mortgage loans.

A lifetime mortgage is when you get a lump sum secured against your home. It's paid back, with interest, when your home is sold. With a lifetime mortgage, you still own all of your home. The interest continues to go up until your property is sold. Most people who take out equity release use a lifetime mortgage.

A home reversion mortgage is when you sell all or part of your home to a provider, in return for a lump sum or monthly income. You'll be able to continue living in your home - rent free - for the rest of your life. At the end of the plan, the property is sold and the proceeds are divided according to the remaining proportions of ownership. This type of equity release scheme is often limited to over 65s.

With both of these options you can choose to 'ring fence' a proportion of the property's value for later use, such as for your family's inheritance.

Find out more about lifetime mortgages and home reversion schemes

Is equity release safe?

Equity release mortgages are regulated by the Financial Conduct Authority (FCA). The sale of equity release and advice given around it is also governed by the Equity Release Council (ERC). You should still make sure you compare mortgages and if possible get advice.

How risky is a lifetime mortgage?

Because the interest mounts up you end up owing more than you borrowed. This means when the home is sold there may be no equity left. But because equity release is regulated, you will never owe the equity release provider more than the total value of the property.

How do I find the best equity release rates?

What interest you end up paying on your equity release mortgage will depend on how you decide to pay off the mortgage.

How do I pay interest on equity release?

There are two ways you can pay off interest

Deferring interest on equity release

If you take out a lifetime mortgage and choose to roll up the mortgage, which means it only gets paid when the house is sold, then you’ll end up being charged compound interest. This means you could end up paying interest on interest. A good way to think about it is that any money you owe would double every 15 years. This is a good reason to be cautious of lifetime mortgages if you hope to leave a good inheritance for your family.

Paying off equity release interest as you go

You can choose to pay off the interest on the mortgage as you go. Some people take out smaller lifetime mortgages over the years. This avoids you having to pay interest on the entire sum for the whole period of time, which means the amount you end up owing will be less. Another good reason to do this is that your money could be better invested in your home - where it is likely to grow - than in a cash bank account. The third benefit to taking smaller lifetime mortgages over the years is that having lots of money in your account may reduce the benefits you are entitled to, including help with the cost of care. The value of your home is not included in any means test as long as you are living there – but cash in the bank is.

What should I use equity release for?

Property equity release can be helpful to people aged 55 and over, who've paid off their mortgage. Perhaps you'd like the extra money to boost your pension or standard of living, but you don't want to move out of the family home?

If you're wondering 'how much equity can I release?' then you can use an equity release calculator to work out how much cash you can free up from your property.

Can I take out an equity release scheme if I’m under 55?

The minimum age for equity release is 55. It is not usually possible to take out an equity release if you are under 55.

Learn more about equity release schemes.

How much equity release can I get from my property?

An equity release calculator is a tool you can use to work out how much tax-free cash you can free up from your property. If you don't know how much house equity you have, there are home valuation tools you can use online. It can also show you useful information about your specific situation. It could help you decide whether equity release on property is something you'd like to go ahead with or not. A lifetime mortgage calculator does the same thing.

Am I eligible for an equity release mortgage?

This depends on your situation as equity release companies have different criteria.

In general, you will need to:

• Own your own home, usually with no outstanding mortgage

• Be at least 55 years of age  - although some schemes have a higher minimum age

• Ensure your home is in good condition

Find out who can use equity release schemes to see if you're eligible.

How to find the best equity release interest rates

If you're looking to compare equity release mortgages and find the best interest rates on equity release, use our equity release comparison table above. It shows you the size of the loan you can get, the loan to value (LTV) ratio and the best equity release interest rates.

You'll be able to see the mortgage products you are eligible for and the best equity release rates available. Once you've decided, click 'check eligibility' and complete the enquiry form. You'll then be contacted by a mortgage adviser who will ask about your financial situation and discuss your options.

There are different types of equity release schemes. The type you should choose depends on your personal financial situation.

What are the pitfalls of equity release?

If you're wondering 'Is equity release good or bad?' then that depends on your particular situation. Equity release mortgages are certainly a lot more complex than ordinary repayment mortgages and you should proceed with caution, ensuring you fully understand what the costs will be before signing up.

Some of the disadvantages include:

• If you're releasing equity from your home then it means your family won't inherit all of it. Instead, the equity release company may end up owning some or all of the property

• There are several costs that come with equity release and this can affect the benefits you receive

• If you take out an equity release mortgage when you're 55, and then live until you're in your 80s or older, you'll incur a big debt over the years. If you're hoping to pass on your home to your family or heirs, this is worth thinking about

Read more about the benefits and risks of equity release.

Can I sell my house if I have an equity release mortgage?

Most equity release plans will allow you to move your mortgage to a new property if you decide to sell your house, as long as the new property meets the lender's criteria. However, depending on how much the new property costs, you might end up paying early repayment charges.

How much does equity release cost?

There are several equity release costs to be aware of and this can affect the benefits you receive such as pension credit and universal credit.

• Interest on equity release. When you're comparing deals, watch out for the equity release rates. You should be looking for a deal that's fixed or capped for the lifetime of the equity loan. With lifetime mortgage rates you can avoid any nasty surprises if interest rates rise

• A no-negative-equity guarantee. A good equity release loan should have a 'no negative equity guarantee'. This means your family won't have to pay back more than the value of your property when it's sold after you've died

• Interest payments. Check whether your equity loan lets you repay some of the interest as you go along. In the long run, this makes the cost of equity release lower overall

• Minimum withdrawal sum. See if there's a minimum sum you can withdraw each month, or a minimum lump sum. This will help you work out the total cost of what you're paying to access your equity

• Regulated companies and schemes. When you're looking at equity release plans or companies, look for schemes that are approved by the Equity Release Council (ERC). Also look for equity release providers that are regulated by the FCA (Financial Conduct Authority). You can check their register to find out

How do I find the best equity release rates?

With our equity loan comparison table at the top of this page, you can look at the best products for equity release, UK wide.

Compare interest rates on equity release and maximum LTV to find the best equity release deals.

If you click 'check eligibility' you can also see if you're suitable for the loan. And you can get quotes from equity release advisers who could give you expert equity release advice.

It's very important that you understand the features and risks of different equity release loan products. This will help you ensure you're getting an appropriate equity release mortgage for your financial situation.

Can I get equity release advice?

There's a lot to think about if you are considering releasing equity from your home and getting advice is important.

You may even be wondering, is equity release safe? If it all seems a little daunting or if you want to be sure you are making the right decision, consider paying for professional equity release advice.

A specialist equity release mortgage broker or independent financial advisor (IFA) can talk to you about the process and cost of equity release. They can also help you answer the question: is equity release a good thing? And more particularly if it’s right for you in your circumstances.

It's a good idea to use equity release advisers for this kind of product, to make sure you fully understand what you're doing. You need to be clear about the effect that this type of mortgage will have on the equity you hold in your home. You also need to look at the amount of equity that you'll be able to pass onto your family.

If you do decide to go ahead, an adviser can recommend the best equity release company for you, as well as which ones to avoid.

Use our enquiry form to get a personalised mortgage quotation.

What are the alternatives to equity release?

If you are under 55, you won't be eligible for equity release. But, if you'd like to access some of the equity in your home, you could downsize by selling your home and moving to a smaller, cheaper property to free up some cash. Or you could consider remortgaging to release equity.

Remortgaging to release equity

Another way you can access the capital in your home is by using a remortgage to release equity. This isn't the same as an equity release mortgage.

With a remortgage to release equity, you're taking out a lump sum from your property and paying interest on the amount that's outstanding. You'll usually have the option to repay the loan in full or make additional repayment contributions. When you remortgage to release equity, if you keep up the repayments and pay off your mortgage in full, the lender has no right to a share in your home. However, a remortgage to release equity may not be an option for some older people. Have a look at our remortgage comparison page to see the deals on offer.

Taking money from a pension

Since April 2015, there has been an option to take money from a pension fund from age 55. You can take up 25 per cent of your pension tax free, however you will pay income tax on any amount above that. 

Downsizing

If you live in a large-ish property then you may want to move to a cheaper, smaller property. This could be a better option, although moving does involve costs.  

Rent a room scheme

If you have a spare room in your home then you can rent out that room as part of the government’s Rent a Room scheme. You can charge up to £7,500 a year rent and not pay tax on the income. The room has to be furnished, however.  

Equity release: what happens on death?

When you die any amount you owe to the equity release provider will need to be repaid within 12 months. Normally this can be done by selling the property, but you may have beneficiaries who can pay off the loan. If there are other means of paying the loan, your property may not need to be sold.

Last updated: 11 October, 2021