How to Release Equity from Your Home: Expert Guide for UK Homeowners (2025)

In this expert guide, we’ll explore all your options on ‘how to release equity from your home’, whether you’re looking to fund home improvements, supplement your retirement income, or manage other financial needs. We’ll cover everything from how the process works to the potential risks and alternatives you should consider before making this significant financial decision.

Equity release offers a way to unlock money tied up in your property without having to move home. To make an informed decision about this financial option, you first need to understand what home equity is and how it works.

Understanding home equity

Home equity represents the portion of your property that you truly own. Put simply, it’s the difference between your home’s current market value and any outstanding mortgage or secured loans against it. For instance, if your property is worth £400,000 and you still owe £200,000 on your mortgage, your equity would be £200,000.

Calculating your equity involves a straightforward process:

1. Determine your property’s current market value
2. Add up all outstanding loans secured against your property
3. Subtract the total debt from the property value

This calculation gives you both the amount and percentage of equity you’ve built up. For example, with a home valued at £280,000 and an outstanding mortgage of £170,000, you would have £110,000 in equity, which equals approximately 39.3% equity.

How equity builds over time

Your equity naturally increases through several means. Initially, every mortgage payment you make (unless you have an interest-only mortgage) contributes to building equity by reducing the principal amount owed.

Additionally, property value increases can significantly boost your equity position. If your home’s market value rises by £79,416 over two years while you’ve paid £11,912 of your mortgage principal, your equity would increase by £91,328 during that period.

Home improvements represent another way to increase equity, although it’s worth noting that not all upgrades deliver the same financial return. Focus on improvements that genuinely add value to your property.

Furthermore, making overpayments on your mortgage (within the limits set by your lender) accelerates equity building by reducing your loan balance faster than scheduled payments alone.

How do you release equity from your home?

Once you’ve built substantial equity, you might consider releasing some of it. In the UK, there are several primary methods for doing this:

Lifetime mortgage – This involves taking a loan secured against your home’s value without making monthly repayments. Instead, interest accumulates over time and is typically repaid from your estate after you pass away or move into long-term care. This option is primarily available to homeowners aged 55 and above.

Home reversion plans – With this approach, you sell part or all of your property to a provider in exchange for a lump sum while retaining the right to live there rent-free. These plans typically require you to be at least 60 years old.

Additional borrowing on your current mortgage – This involves increasing your existing mortgage or taking out a second charge loan against your property.

The equity release process typically takes around 8 to 10 weeks from application to receiving funds. During this time, your property will be valued, legal checks will be conducted, and you’ll need to receive advice from a qualified financial adviser.

Consequently, releasing equity is a significant financial decision that requires careful consideration. It can affect your tax position, welfare benefits eligibility, and the inheritance you leave behind. For this reason, always seek professional financial and legal advice before proceeding with any equity release option.

In the UK, understanding the various equity release schemes available is crucial for making informed financial decisions. Each option comes with distinct features, requirements, and implications for your property ownership.

Lifetime mortgage explained

Lifetime mortgages represent the most popular equity release product in the UK, accounting for 99% of the equity release market. This type of equity release allows homeowners aged 55 and over to take out a loan secured against their property while retaining full ownership.

With a lifetime mortgage, you can access your funds in several ways:

• As a single tax-free lump sum
• Through smaller, regular payments
• Via a drawdown facility, where you take money as needed

The key characteristic of a lifetime mortgage is that there are typically no monthly repayments required. Instead, interest accumulates over time and compounds annually. Both the loan and rolled-up interest are repaid from your estate when you either die or move into long-term care. For couples, repayment only occurs after both individuals have either passed away or moved into care.

Notably, modern lifetime mortgages come with important safeguards. The “no negative equity guarantee” ensures you’ll never owe more than your home’s value when sold, even if property prices fall.

Home reversion plans

Home reversion plans offer a fundamentally different approach to equity release. With this option, you sell all or part of your home (typically between 20% and 60%) to a provider in exchange for a tax-free lump sum or regular payments.

These plans are normally available to those aged 60 and above. Despite selling a portion of your property, you retain the right to live there rent-free for the remainder of your life through a “lifetime lease”.

A crucial distinction from lifetime mortgages is that no interest accumulates with home reversion plans. This occurs because you’re selling part of your property rather than borrowing against it. Nonetheless, providers purchase your share at below market value, typically offering between 20% and 60% of the true worth.

When your plan ends (usually upon death or moving into care), your property is sold, and the proceeds are divided according to the ownership proportions. The percentage you retain remains fixed regardless of property value changes.

Borrowing more on your current mortgage

A more straightforward alternative for accessing equity involves additional borrowing on your existing mortgage. This approach allows you to increase your current mortgage amount, subject to your lender’s approval.

Most lenders require that you:

• Have made mortgage payments consistently
• Have held your mortgage for at least six months
• Are looking to borrow a minimum amount (typically £5,000-£10,000)

The maximum you can borrow generally ranges up to 90% of your property’s value for residential mortgages. Unlike specialised equity release products, this option requires monthly repayments, but offers terms from 3 to 40 years.

This method is particularly suitable for those under 55 who cannot access traditional equity release products. Moreover, it often comes with lower interest rates compared to lifetime mortgages, although your home remains at risk if you cannot maintain the payments.

Each equity release option presents distinct advantages depending on your age, financial circumstances, and long-term plans. Therefore, seeking professional financial advice is essential before deciding how to release equity from your home.

Mortgageable offers a free Equifax Credit Report as part of its service, with no obligation to proceed. Something worth considering.

To qualify for equity release, you must meet specific eligibility criteria that vary by provider and product type. Examining these requirements early in your research phase ensures you don’t waste time exploring options that aren’t available to you.

Minimum age and property criteria

Age restrictions remain the primary qualification factor for releasing equity. For lifetime mortgages, you must typically be at least 55 years old. Home reversion plans require you to be at least 60. In cases of joint applications, the age of the youngest applicant is always used to assess eligibility.

Property value plays an equally crucial role in determining your eligibility. Currently, most lenders require your home to be worth a minimum of £70,000, though some providers set higher thresholds of £75,000.

Beyond age and value, your property must be:

• Your main residence in the UK
• In good condition and maintained to a good standard
• Either mortgage-free or with a minimal outstanding mortgage

Location and property type restrictions

The location of your property substantially affects your equity release options. Homeowners in mainland England, Wales or Scotland have access to all available plans. Conversely, for Northern Ireland residents, options are limited to just two lenders.

Regarding island properties, equity release is possible on the Isle of Wight but not on the Isle of Man. Likewise, lenders consider local factors that might affect future resale, such as proximity to commercial premises, railways, or flood plains.

Most standard construction properties qualify for equity release, including houses, flats, and bungalows. Lenders have grown increasingly flexible regarding property types, now often accepting properties with annexes, flat roofs, or those with some business activity.

How to take equity out of your home if under 55

If you’re under 55, traditional equity release products aren’t accessible, but alternative methods exist. One option is to remortgage your property, which involves refinancing your current mortgage to access built-up equity. This requires passing affordability and credit history checks.

Another possibility is taking out a second charge mortgage—an additional loan secured against your property that exists alongside your primary mortgage. This approach works well if you currently have a favourable interest rate on your existing mortgage.

For couples where one partner is under 55, you might still qualify for equity release if the younger partner is removed from the property deeds. This requires independent legal advice and signing a waiver, incurring additional costs.

Finally, downsizing—selling your current home and moving to a smaller property—remains a straightforward way to release equity without taking on additional debt.

Beyond understanding what equity release is and who qualifies, examining the financial implications is essential before proceeding. When considering how to release equity from your home, you must account for various costs, potential risks, and practical timelines.

Typical fees involved

Releasing equity typically costs between £1,000 and £3,000 in setup fees. These upfront expenses include:

• Arrangement fees – Ranging from £0 to £3,000 depending on the provider. Some lenders charge a flat fee (typically £599), whilst others may charge nothing or calculate it as a percentage of your loan.
• Valuation fees – Often provided free by lenders, though some may charge based on your property’s value.
• Solicitor’s fees – Typically £750-£1,250 for the legal aspects of your equity release, covering all necessary paperwork and legal checks.
• Advice fees – Financial advice is legally required, with most advisers charging approximately £1,500. Some providers offer advice through commission rather than upfront fees.

How long does equity release take?

From application to receiving funds, the equity release process typically spans 4-8 weeks. Lifetime mortgages usually complete in 4-6 weeks, whilst home reversion plans may take up to 8 weeks.

The process involves several key stages: making an application through a financial adviser, getting your property valued, receiving a loan offer, obtaining legal advice, and finally completing the mortgage.

Impact on inheritance and benefits

Releasing equity reduces the value of your estate, subsequently affecting inheritance tax calculations. Since the loan and interest are repaid from your estate upon death, your beneficiaries will receive less.

Importantly, equity release can affect means-tested benefits if you save enough of your tax-free lump sum. Currently, having savings above £16,000 makes you ineligible for means-tested benefits. Benefits potentially affected include Income Support, Housing Benefit, Universal Credit and Pension Credit.

Interest accumulation and repayment

With lifetime mortgages, interest compounds over time, meaning you pay interest on both the original loan and any previously accrued interest. For example, a £40,000 loan at 5% interest would grow to £65,155.77 after just 10 years.

Most plans offer fixed interest rates for life, protecting you from future rate increases. Whilst no monthly payments are typically required, many modern plans allow voluntary repayments of up to 10-15% annually without penalties, helping to control the final balance.

Overall, understanding these financial implications ensures you make an informed decision about how to release equity from your home.

Related reading: 

• Reasons for remortgaging.
• Remortgaging to release equity.
• Remortgaging to buy another property.
• Remortgaging with bad credit.
• Remortgaging for home improvements.
• I own my house outright can I remortgage? 
• Capital raising mortgages.

Before committing to equity release, exploring alternative options may prove more suitable for your financial needs. These alternatives can offer different advantages depending on your circumstances.

Downsizing your home

Selling your current property and moving to a smaller, less expensive home represents the most direct way to release equity. This approach can free up a significant amount of money—on average £134,405 in recent years.

Downsizing offers several benefits:

• Potential ongoing cost savings on energy bills and maintenance
• No debt or interest accumulation
• Opportunity to find a home better suited to your needs as you age

Yet, consider the substantial costs involved, including estate agent fees (typically 1% plus VAT), stamp duty, and moving expenses.

Using savings or investments

Examining your existing savings and investments should be your first consideration. Often, the interest charged on equity release exceeds returns from savings accounts or investments, making it financially prudent to use these funds first.

This approach involves less complexity, quicker access to funds, and avoids incurring new debt against your property.

Remortgaging or second charge loans

For those unable to access traditional equity release products, remortgaging your existing mortgage or taking out a second charge loan presents viable alternatives.

A second charge mortgage exists alongside your primary mortgage, but typically comes with higher interest rates due to increased lender risk. Essentially, you’re borrowing more against your property’s value while continuing to make monthly repayments.

This option proves particularly valuable if your current mortgage has a favourable interest rate that you’d lose by remortgaging.

Releasing equity from your home represents a significant financial decision that requires careful consideration of all available options. Throughout this guide, we’ve explored how you can access the wealth tied up in your property while understanding the full implications of such choices.

After all, whether you opt for a lifetime mortgage, home reversion plan, or additional borrowing on your current mortgage depends entirely on your circumstances. For those aged 55 and above, traditional equity release products offer ways to access tax-free cash without monthly repayments. Conversely, homeowners under 55 still have viable alternatives through remortgaging or second charge loans.

Before making any decisions, you should weigh the £1,000-£3,000 setup costs against the potential benefits. Additionally, consider how the typical 4-8 week timeline fits with your financial needs. The impact on your inheritance and benefits eligibility also deserves thorough examination, especially regarding interest accumulation over time.

Undoubtedly, alternatives such as downsizing, using existing savings, or remortgaging might better suit your situation. Each option comes with its advantages and disadvantages that must be evaluated against your long-term financial goals.

Remember that professional financial advice remains essential when deciding how to release equity from your home. By seeking qualified guidance and thoroughly understanding all aspects of equity release, you can make an informed choice that best supports your financial well-being both now and in the future.

Understanding your equity release options can help you make informed decisions about accessing the wealth tied up in your property whilst protecting your financial future.

• Age determines your options: Traditional equity release requires you to be 55+ for lifetime mortgages or 60+ for home reversion plans, but under-55s can explore remortgaging alternatives.

• Expect £1,000-£3,000 in setup costs: Budget for arrangement fees, solicitor costs, and mandatory financial advice over a typical 4-8 week completion timeline.

• Interest compounds significantly over time: A £40,000 lifetime mortgage at 5% grows to over £65,000 in just 10 years, substantially reducing your estate’s value.

• Consider alternatives first: Downsizing can release £134,000+ on average without debt, whilst using existing savings often proves more cost-effective than borrowing.

• Professional advice is legally required: Equity release affects inheritance, benefits eligibility, and tax position, making qualified financial guidance essential before proceeding.

The decision to release equity should align with your long-term financial goals and personal circumstances. Whether accessing funds for home improvements, supplementing retirement income, or managing other needs, understanding all implications ensures you choose the most suitable path forward.