Equity Release Pros, Cons and Alternatives: Plain Facts

Last checked: 31 October 2026

Equity release lets UK homeowners aged 55 and over take money from the value of their home without selling it, most commonly through a lifetime mortgage. Its main benefits are that no monthly payments are required, the borrower keeps ownership of the home with a lifetime mortgage, and Equity Release Council members follow set safeguards. Its main drawbacks are that interest rolls up and adds to the debt, the estate left behind is smaller, and means-tested benefits can be affected. Other ways to raise money include downsizing, savings, help from family and other types of borrowing. This guide sets out each side as facts. For the basics, see how equity release works.

What a lifetime mortgage is, in short

A lifetime mortgage is a loan secured on the home the borrower owns and lives in. Interest is added to the loan rather than paid each month. The loan and the interest added to it are normally repaid from the sale of the home when the last borrower dies or moves into long-term care. The money can be taken as one amount, or as a smaller first amount with further amounts drawn later (drawdown).

The benefits

• No monthly payments required: the loan and interest are repaid when the home is sold, so there is nothing to pay each month.
• Ownership stays with the borrower: the borrower keeps ownership of the home with a lifetime mortgage.
• Staying in the home: under Equity Release Council standards, customers can stay in their home with a lifetime mortgage for the rest of their life, or until they move permanently into long-term care, as long as it remains their main residence and the loan terms are kept.
• Money can be used for most purposes: for example home improvements, clearing an existing mortgage or other debts, or helping family.
• Flexibility with drawdown: with a drawdown lifetime mortgage, interest is only charged on money actually taken.
• Voluntary repayments: customers can make repayments without any charges, subject to the provider's lending criteria. Paying something back reduces how much interest builds up.

The safeguards set by the Equity Release Council

The Equity Release Council is the trade body for the equity release sector. Its members' lifetime mortgages must meet a set of product standards (Equity Release Council product standards):

These protections only apply to plans that meet the Council's standards.

The drawbacks

• Interest rolls up: because interest is added to the loan and then charged on the new, larger balance, the amount owed can grow a great deal over time. The longer the loan runs, the faster it grows.
• A smaller inheritance: when the home is sold, the loan and all the interest added to it are repaid first. What remains for beneficiaries can be much less than the value of the home.
• Effect on means-tested benefits: money released and kept as savings can reduce or stop means-tested benefits such as Pension Credit and Council Tax Reduction. For Pension Credit, gov.uk explains that savings over a set limit are treated as producing a weekly income (gov.uk: Pension Credit eligibility).
• Early repayment charges: paying off the whole loan early, outside the allowed repayments, can lead to an early repayment charge. Terms differ from one plan to another.
• Costs to set up: these can include a valuation fee, a lender arrangement fee, solicitor's fees and a broker fee.
• Fewer options later: with a lifetime mortgage in place, there is less equity left in the home for other plans, such as raising money later for care or moving to a more expensive home.
• Only a share of the value: lenders release only part of the home's value, and the amount depends on age, the home, health and any existing mortgage. See how much equity can be released.

Alternatives to equity release

A lifetime mortgage is one of several ways to raise money in later life. Each alternative has its own costs and effects.

Downsizing

Selling the home and buying a smaller or cheaper one can free up money without taking on a loan. It means moving, which involves costs such as estate agent fees, solicitor's fees, removal costs and Stamp Duty Land Tax where it applies in England and Northern Ireland, or the equivalent taxes in Scotland and Wales (gov.uk: Stamp Duty Land Tax). It also means leaving the current home and, for some people, the local area.

Using savings and investments

Money already held, such as savings, investments or pension funds, can be used instead of borrowing. Taking money from a pension can have tax effects and leaves less for later. Free, impartial information on pension options is available from MoneyHelper.

Help from family

Some families use a gift or a loan from relatives instead of borrowing against the home. Any arrangement like this can affect the people involved, and gifts can have inheritance tax effects (gov.uk: Inheritance Tax).

Other borrowing

Other types of loan or mortgage may be available, depending on age and income. Some lenders offer standard mortgages or interest-only mortgages to older borrowers, which usually require monthly payments and an income that can cover them. An unsecured loan is another form of borrowing, also with monthly repayments.

Benefits and grants

Some people have benefits they have not claimed, and some local councils offer grants or loans, for example for home repairs or adaptations. Pension Credit, for example, is a benefit for people over State Pension age on a low income (gov.uk: Pension Credit).

Renting out a room

Some homeowners take in a lodger. Under the government's Rent a Room Scheme, a set amount of rental income from furnished accommodation in the home can be received free of tax (gov.uk: Rent a Room Scheme).

Talking it through

Many people involve family members in their decision, so that those who may inherit the home know what is planned. MoneyHelper, the free government-backed money guidance service, has more information on equity release and its alternatives.

No quote is shown on this site. After an enquiry is sent, the visitor receives a phone call and an email from an equity release broker. The broker discusses whether a lifetime mortgage is suitable for the visitor's individual circumstances, and the broker will advise on the costs involved and what other options exist.

Key points

• Lifetime mortgages are only for UK homeowners aged 55 and over.
• No monthly payments are required, and the borrower keeps ownership of the home with a lifetime mortgage.
• Equity Release Council members follow standards including no negative equity, a home for life and charge-free voluntary repayments, subject to lending criteria.
• Interest rolls up, so the debt grows and the inheritance shrinks.
• Money released can affect means-tested benefits.
• Alternatives include downsizing, savings, family help, other borrowing, benefits and grants, and renting out a room.