How Equity Release Works: UK Lifetime Mortgages Explained

Last checked: 29 October 2026

Equity release lets UK homeowners aged 55 and over take money out of the value of their home without selling it. The most common form is a lifetime mortgage: a loan secured on the home, with no monthly payments required. Interest is added to the loan, and the total is normally repaid from the sale of the home when the last borrower dies or moves into long-term care. This guide explains how a lifetime mortgage works, who can apply, what it means for inheritance and benefits, and which alternatives exist.

What a lifetime mortgage is

A lifetime mortgage is a loan secured against a property the borrower owns and lives in. The borrower keeps ownership of the home with a lifetime mortgage. The money can be taken as a single amount at the start, or as a smaller first amount with further amounts drawn later when needed (often called a drawdown lifetime mortgage).

Unlike a standard mortgage, a lifetime mortgage has no fixed end date. The loan, plus the interest that has built up, is repaid when the home is sold. This usually happens after the last borrower dies or moves permanently into long-term care.

Equity release also comes in other forms, but this guide covers lifetime mortgages only.

Who can get a lifetime mortgage

Lifetime mortgages are only for people aged 55 and over. The main conditions are:

• Age: the youngest borrower must be at least 55.
• Home ownership: the borrower must own a home in the UK and live in it as their main residence.
• The property: it must meet the lender's criteria, for example on its value, type and condition.
• Existing mortgage: any mortgage already on the home is normally paid off from the money released, so the lifetime mortgage becomes the only loan secured on it.

Couples can take a lifetime mortgage in joint names. The loan then continues until the second person dies or moves into long-term care.

How the amount is worked out

The amount a lender will release depends mainly on three things:

• Age of the youngest borrower: older borrowers can usually release a larger share of the home's value.
• Value of the property: the lender uses a valuation of the home.
• Health and lifestyle: some lifetime mortgages take medical conditions and lifestyle into account, which can increase the amount available.

Lenders also look at the type of property and where it is. The amount available in each case is set out by the broker. The full amount does not have to be taken: borrowers can release less than the maximum.

How interest works

With a lifetime mortgage, interest is not paid each month. Instead it is added to the loan, usually every month or every year. The next interest charge is then worked out on the new, larger balance, so interest is charged on interest that has already been added. This is called "rolling up" or compounding.

Because of this, the amount owed can grow quickly over time, and it grows faster the longer the loan runs. Taking a smaller amount, or using drawdown so that interest is only charged on money actually taken, means less interest builds up.

The Equity Release Council's standards require that interest on a lifetime mortgage is either fixed, or variable with a fixed upper limit for the life of the loan (Equity Release Council product standards).

Voluntary repayments

No monthly payments are required, but many lifetime mortgages allow borrowers to pay some interest or capital if they wish. Under the Equity Release Council's standards, customers can make repayments without any charges, subject to the provider's lending criteria (Equity Release Council).

Making voluntary repayments reduces how much interest builds up. Paying off the whole loan early, outside the allowed repayments, can lead to an early repayment charge. The terms differ from one plan to another.

Never owing more than the home is worth

Members of the Equity Release Council must include a "no negative equity" feature in their lifetime mortgages. This means the borrower, or their estate, will never owe more than the value of the home when it is sold, after reasonable sale costs. It applies as long as the home is sold for a fair market price and the terms of the loan have been kept (Equity Release Council product standards).

The Council's standards also say that:

• Home for life: 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.
• Moving home: customers can move to another suitable property and take the lifetime mortgage with them, subject to the lender's criteria at the time.
• Long-term care: if a customer moves permanently into long-term care, any early repayment charge is waived once a medical certificate is provided, as long as the loan terms have been kept.

The role of a solicitor

All customers taking out equity release through a member of the Equity Release Council must use their own independent solicitor (Equity Release Council). The solicitor acts for the customer, not for the lender. Their job is to explain the legal side of the plan, check the paperwork, and confirm that the customer understands what they are signing.

Many people also choose to involve family members in the discussions, so that those who may inherit the home know what is planned.

Effects on inheritance

A lifetime mortgage reduces the value of the estate left behind. When the home is sold, the loan and all the interest added to it are repaid first, and what remains goes to the estate.

Because interest rolls up over time, the amount left for beneficiaries can be much smaller than the value of the home. Some lifetime mortgages let the borrower protect a set share of the home's value for their family. Protecting a share means less money can be released at the start.

Effects on means-tested benefits

Money released from the home can affect means-tested benefits such as Pension Credit and Council Tax Reduction. These benefits look at savings and capital, so money from a lifetime mortgage that is kept in the bank can reduce or stop them.

For example, gov.uk explains that for Pension Credit, savings over a set limit are treated as producing a weekly income (gov.uk: Pension Credit eligibility). Free, impartial information on lifetime mortgages, including their effect on benefits, is available from MoneyHelper.

Alternatives to consider

A lifetime mortgage is one of several ways to raise money in later life. Other options include:

• Downsizing: selling the home and buying a smaller or cheaper one, which can free up money without taking on a loan.
• Savings and investments: using money already held, such as savings or pension funds.
• Help from family: a gift or loan from relatives, which some families use instead of borrowing against the home.
• Other borrowing: other types of loan or mortgage may be available, depending on age and income.
• Benefits and grants: checking whether any benefits or local council grants are available, for example for home repairs or adaptations.

MoneyHelper, the free government-backed money guidance service, has more information on equity release and its alternatives.

What happens after an enquiry

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, how much could be released, and the costs involved, including any fees.

Key points

• Lifetime mortgages are only for UK homeowners aged 55 and over.
• No monthly payments are required: interest rolls up and is added to the loan.
• The loan is normally repaid from the sale of the home after the last borrower dies or moves into long-term care.
• Under Equity Release Council standards, the borrower will never owe more than the value of the home, and can make repayments without charges, subject to lending criteria.
• Customers must use their own independent solicitor.
• A lifetime mortgage reduces inheritance and can affect means-tested benefits.