The real cost of equity release:
risks and alternatives

Written by: Vera Jezkova, Marketing Director
Reviewed by: Steve Heathcote, Chartered Financial Planner
Last reviewed: 12th March 2026

If you are 55 or over, own your home, and a large part of your wealth is tied up in property; equity release may already be on your radar. In the UK, equity release most commonly means a lifetime mortgage: a loan secured on your home that’s usually repaid when you die or move into long-term care. The most common forms of equity release are lifetime mortgages and home reversion plans (home reversion is not recommended as you sell you home and become a tenant).

For some homeowners, equity release works well helping to pay for home improvements, top up retirement income, clear an existing mortgage or make day-to-day life feel more comfortable. But it is also a long-term decision with real trade-offs, especially if interest rolls up over time. MoneyHelper (you will be leaving our website and entering a third-party website) warns that rolled-up interest can mean you repay far more than you originally borrow.

If you want tailored help, start here: equity release

If you want something practical first, download this:Download the free checklist – What to Check Before You Sign Any Equity Release Papers

Quick answer: what is equity release?

Equity release is a way of accessing some of the money tied up in your home while usually continuing to live there. In the UK, the most common route is a lifetime mortgage, where the loan plus interest is generally repaid when your home is sold after death or a move into permanent long-term care. But there are a few schemes available with set or no early repayment charges on full repayment.

There’s also another type called home reversion, where you sell all or part of your home in exchange for a lump sum or regular income, while keeping the right to continue living there. It is much less common than a lifetime mortgage.

If you’re looking for a more detailed explanation of the main products people want when they search this topic, go to lifetime mortgages.

For independent background information, you can also read the MoneyHelper guide to equity release — you will be leaving our website and entering a third-party website.

Take a look at our short video

Who is eligible for equity release? The full picture people need before they get their hopes up

This is one of the most important parts of the guide, because it stops researchers wasting their time, following the wrong path, or assuming equity release is available to everyone when it isn’t.

The short version is this:

If you are thinking mainly about a lifetime mortgage, the most common type of equity release in the UK, the starting point is usually that you must be a homeowner and the youngest applicant is normally at least 55. MoneyHelper says applicants must meet the provider’s minimum age, typically around 50 to 55, while the Equity Release Council says the youngest applicant generally needs to be at least 55.

If you are looking at home reversion, the criteria is often much stricter. MoneyHelper says some home reversion plans require all applicants to be over 60 or 65, and in some cases the home must be mortgage-free and above a minimum property value.

So when people say, “Am I eligible for equity release?”, the honest answer is:

It depends on your age, your home, your mortgage position, who lives there, and whether the property fits lender criteria.

1) Age

For lifetime mortgages, the usual entry point is 55+. If it is a joint application, the youngest person usually determines eligibility and how much may be available. MoneyHelper says all applicants must meet the provider’s minimum age, and the Equity Release Council says the youngest applicant generally needs to be at least 55.

For home reversion, some plans start later, often 60 or 65+.

2) You must own your home

This sounds obvious, but it matters. Equity release is secured against a property you own. The Equity Release Council says you need to be a homeowner, and provider criteria also commonly require that you own the property and live in it.

3) The property normally has to be your main residence

For a lifetime mortgage, the property is normally expected to be your main ongoing residence, not just somewhere you own on paper. MoneyHelper says the property must be your main residence.

4) The property must be in the UK and acceptable to the lender

The home must usually be in the UK, and it must meet the lender’s property criteria. In real life, this is where lenders may look more closely at lease length, construction type, condition, whether the property is unusual, or whether it could be difficult to sell. Provider rules vary.

5) The property needs enough value

There is usually a minimum property value, but it varies by provider. MoneyHelper says some home reversion plans have a minimum property value of around £70,000.

6) There must be enough equity in the property

Even if the home is valuable, there still needs to be enough usable equity. If you already have a mortgage or another secured loan, it usually needs to be repaid using the money released or before completion.

7) Existing mortgage or secured borrowing must be dealt with

A lot of people ask, “Can I still get equity release if I already have a mortgage?”

Often, yes — but the existing mortgage normally needs to be cleared, either before the plan starts or using part of the funds released.

8) Residency and application status can matter

Some providers also require UK residency and other provider-specific checks. That is not universal language for every lender, but it is sensible to mention because these questions do come up in real cases.

9) Who lives in the property matters

This is the real-life eligibility issue many people miss.

If a spouse, partner, adult child or relative lives with you, that has to be handled properly. In some cases it is straightforward. In others, it affects how the case is structured and what legal steps are needed.

And if you are a couple, this is especially important: the age of the youngest applicant usually matters, and if one person is not on the application or not on the property, that can create risks unless the advice and legal work are handled carefully. MoneyHelper confirms that for lifetime mortgages, the loan is generally repaid when the last borrower dies or moves into long-term care, which is why joint status matters so much.

10) Advice is effectively part of the eligibility journey

This is not a box-ticking product.

MoneyHelper says you must hire a solicitor for a lifetime mortgage, and the FCA has stressed that later-life mortgage borrowers need suitable advice and balanced information. So while advice is not “eligibility” in the narrowest sense, it is very much part of whether the plan can proceed properly.

A simple friend-to-friend summary

You are usually in the right starting zone for a lifetime mortgage if:

you are 55 or over

you own your home

it is your main residence

it is in the UK

the property meets lender criteria

there is enough equity

any existing mortgage can be repaid

your wider circumstances make the plan suitable after advice

Why equity release can feel so tempting

Let’s name what is really going on.

Most people do not search for equity release because they are fascinated by later-life lending. They search because something real is pressing on them.

Maybe it is:

the cost of adapting the home

a bathroom that no longer works for your mobility

the stress of a mortgage term ending

helping family while you can still see the benefit

wanting more breathing space each month

feeling asset rich and cash poor

And this is why equity release can feel so appealing – you stay in the home, you unlock cash, and in some cases, have the choice as to whether you want to make payments avoiding compounding interest.

This is exactly where people need the full picture. The FCA says lifetime mortgages are a significant later-life decision, and there is potential harm if promotions are unclear or unbalanced, or if advice is unsuitable.

How does a lifetime mortgage work?

A lifetime mortgage is a loan secured against your home. You continue to own the property and live there, and the loan is usually repaid later in life. MoneyHelper says this normally happens when the last borrower dies or moves into long-term care.

Many plans now offer flexibility. You may be able to:

The different types of lifetime mortgage

take a lump sum

use a drawdown facility

make some repayments

choose to make no repayments and let the interest roll up

or move home (taking the loan with you, subject to lender approval)

MoneyHelper explains that if you choose to pay nothing, monthly interest is rolled up and added to the loan. That is where compound interest becomes such a major issue over time.

If you are comparing this with another later-life borrowing route, read retirement interest-only mortgages.

Before you sign anything, Download the equity release checklist PDF.

Not all lifetime mortgages are the same, and this matters much more than most people realise.

Interest roll-up lifetime mortgage

With this type, the interest is added to the loan if you make no repayments. MoneyHelper says this includes compound interest, which means you can repay far more than you originally borrowed over time.

Interest-serviced lifetime mortgage

With this type, you make monthly or occasional payments to reduce or stop the interest rolling up. Some plans also allow capital repayment features.

Lump sum or drawdown

Some plans give you one lump sum. Others allow smaller drawdown releases so you only start paying interest on money once it is taken.

That is why “equity release” is not really one product. It is a family of later-life lending options, and the structure makes a huge difference to the long-term outcome.

The real cost of equity release: compound interest

This is the bit people often feel in their stomach before they fully understand it.

If you make no repayments, interest is added to the balance. Then the next calculated interest payment is charged on that bigger balance. Snowball effect. Compounding.

MoneyHelper says interest roll-up mortgages can mean the debt grows quickly due to compound interest. It also says, very plainly, that with compound interest you will repay far more than you borrow.

That does not mean equity release is wrong. It means the words “no monthly payments” should never be treated like free money. They come with a cost.

A good adviser should show you what the plan could look like:

with no repayments

with some voluntary repayments

with the maximum allowed repayments

over 10, 15 and 20 years

and alongside realistic alternatives

consider your overall wealth and capacity for loss

If this is the point where you feel you need something practical, Download the checklist before you sign any papers.

For neutral educational guidance, you can read the Financial Conduct Authority guidance on later-life mortgages — you will be leaving our website and entering a third-party website.

What does equity release cost?

When people ask about equity release costs, they often mean interest rates. But the real cost picture is wider than that.

MoneyHelper says the fee to release equity can vary and may be between £1,500 and £3,000, and it also lists legal advice, valuation fees, lender fees and adviser fees as other costs you should expect to plan for. It also warns that there might be early repayment charges for paying off the loan early.

You also need to budget for legal advice. MoneyHelper says you must hire a solicitor, and the Equity Release Council says all customers taking out equity release need independent legal advice.

If you want a related support page here, use mortgage costs and fees guide.

The pros and cons of equity release

The pros

Equity release can:

help you stay in the home you love

release money for repairs, adaptations or comfort

help clear an existing mortgage

give you more breathing space in retirement

let you support family now, not only later

provide flexibility through different product structures

Create a debt against the estate on death

For the right person, at the right time, that can make a real difference.

The cons

Equity release can also:

reduce the inheritance you leave

make debt grow quickly if interest rolls up

involve early repayment charges

affect means-tested benefits

be hard to unwind later

turn out to be poorer value than an alternative route

MoneyHelper specifically flags inheritance reduction, fast-growing debt from rolled-up interest, and the possibility that cash from your home could affect means-tested benefits or support.

Still weighing it up?

Will I lose my home?

This is the question people often carry quietly.

If a plan follows Equity Release Council standards, core protections include:

Home for Life: the right to live in your property for the rest of your life, or until you permanently move into care, provided the home remains your main residence and the terms are met

a No Negative Equity Guarantee

the ability to make repayments without charges, subject to provider criteria

waiver of early repayment charges in certain long-term care situations

That is reassuring. But it does not mean “do not worry about the terms”. It still matters that:

the property remains your main residence

the conditions are met

the advice is suitable in the first place

For more on recognised standards, see the Equity Release Council standards — you will be leaving our website and entering a third-party website.

How could equity release affect inheritance and benefits?

Let's deal with this honestly.

Yes, equity release can reduce the value of your estate. MoneyHelper says lifetime mortgages reduce any inheritance you leave, and home reversion can mean you no longer own all or part of the property and may have sold it for less than market value.

And yes, it can affect means-tested support. MoneyHelper says cash from your home could mean you are ineligible for certain means-tested grants, benefits and support in some cases.

That does not automatically make equity release wrong. But it does mean this should never be approached as a simple product purchase. It needs to fit your wider life, your family priorities and your future flexibility.

Add these helpful supporting pages here:

Check these two links for more information: (You will be leaving our website and entering a third-party website).

Will equity release affect inheritance?

Will equity release affect benefits?

What are the alternatives to equity release?

A strong article on equity release should never pretend equity release is the only answer.

Retirement interest-only (RIO) mortgages

MoneyHelper says a RIO mortgage can be an alternative to equity release. It is similar in that the loan is usually repaid when the house is sold later in life, but you make monthly interest payments and do not face the same compound-interest risk in the way you do with a rolled-up lifetime mortgage. It also says lenders normally expect the property to be your main home, enough equity to be in place, and proof that you can afford the monthly interest now and after retirement.

Downsizing

MoneyHelper highlights downsizing in retirement as one way of using your home to support retirement income, alongside equity release and other options.

Remortgaging or changing mortgage structure such as changing to a lender will no age restrictions or alternative income streams such as using pension or investment income to meet lender criteria.

For some people, especially if the issue is an existing mortgage term ending, a different mortgage route may be better value than equity release. MoneyHelper’s RIO guidance explicitly says these mortgages can help people remortgage in retirement.

Using savings, investments or a smaller borrowing solution

Sometimes the best answer is not one big product. It is a blend of pension planning, budgeting, smaller borrowing or using existing assets more strategically.

Before making your decision, request our equity release comparison and we’ll send it over. Simply include “Equity release comparison” in your message.

When should you speak to an adviser?

Sooner than most people think.

Not because you should rush into anything, but because proper advice often saves time, confusion and false starts.

The FCA says poor quality advice is unacceptable in this market and has warned about unclear or unbalanced promotions. The Equity Release Council says customers should receive tailored, thorough and transparent support, together with information about costs, tax, moving home and how house value changes may affect the plan.

A good advice process should cover:

your reason for needing the money

your income, savings and mortgage position

your family priorities

your inheritance wishes

your benefits position

realistic alternatives

what the plan could cost over time

independent legal advice

If the process feels like a sale instead of a conversation, stop and contact us and we will explain all in plain English.

Real-life examples: when equity release works --- and when another option is better

Case study 1: “I wanted to stay in the home I love, but I needed breathing space”

Margaret is 74 and has lived in her home for more than 30 years. She did not want to move, but the house needed updating and she wanted extra breathing space each month so unexpected bills did not feel stressful.

She explored equity release because a large part of her wealth was tied up in her home, not in savings. After taking advice, she looked at a smaller lifetime mortgage rather than releasing the maximum amount available. She also looked carefully at what the long-term cost could be if interest rolled up over time.

For Margaret, equity release was worth considering because she wanted to stay put, needed the money for a clear purpose, and understood the trade-off around inheritance.

The lesson: Equity release can make sense when the goal is clear, the amount borrowed is sensible, and the long-term cost has been properly explained.

Case study 2: "My mortgage was ending, but equity release was not the best answer"

David was 67 and worried because his interest-only mortgage was coming to the end of its term. His first instinct was to look at equity release because the idea of no monthly payments felt safer.

But once he reviewed the numbers properly, a retirement interest-only mortgage turned out to be a better fit. He had reliable retirement income and could afford monthly interest payments, which meant the balance would not grow in the same way as a roll-up lifetime mortgage.

For David, the easier-looking product was not the best one. A different later-life borrowing option gave him more control and protected more of the value in his home.

The lesson: Sometimes the right answer is not equity release at all — it is the option that solves the problem with less long-term cost.

Case study 3: "I thought I needed a big lump sum, but I actually needed a smaller plan"

Susan, 71, originally thought she wanted a large lump sum to help family, make home improvements and create a financial cushion. But after talking everything through, she realised she did not need as much as she first thought.

Instead of borrowing a large amount all at once, she explored a smaller solution and compared it against downsizing and other options. That gave her more flexibility and reduced the risk of taking more from the property than she really needed.

For Susan, the real breakthrough was not finding the biggest offer. It was understanding what problem she was actually trying to solve.

The best solution is often the smallest one that gives you the confidence, comfort, or flexibility you need.

Speak to Heathcote Financial Planning

If you would like a calm, straight-talking conversation about equity release, lifetime mortgages, RIO mortgages or later-life borrowing, the next step is simple.

If you are considering equity release, the first step is not to commit to anything. It is simply to understand your options clearly.

You can talk through:

what you want the money for
whether equity release is suitable
what the alternatives look like
what the long-term cost may be
what happens next if you choose to explore it further

No pressure. No obligation. Just clear, tailored guidance.

Book a free initial 20-minute call with an adviser to talk through your options and see whether equity release or another later-life borrowing route may be suitable.

Want to know who you’ll be speaking to? Read more about Steve Heathcote here.

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Frequently Asked Questions

Equity release can be useful for some homeowners, but it is not suitable for everyone. These FAQs explain the key points to consider, including safety, eligibility, costs, repayments, moving home, inheritance and alternatives.

Is equity release safe?

Equity release can be appropriate and well-structured for some people, but it is not suitable for everyone.

The quality of advice, the product chosen and the standards attached to it all matter.

Equity release should always be considered with regulated advice, a clear understanding of the long-term costs, and a full review of suitable alternatives.

Will I lose my home — or be unable to move — if I take equity release?

Plans that follow Equity Release Council standards include key protections.

These include the right to live in your home for life, or until you move into long-term care, provided it remains your main residence and you meet the terms of the plan.

They also include a No Negative Equity Guarantee and the ability to make repayments without charges, subject to provider criteria.

Moving home is usually possible if the new property meets the lender’s criteria, but conditions apply.

These protections are reassuring, but it still matters that the plan is suitable, the terms are understood, and you keep to them.

Can I move house if I have equity release?

In many cases, yes. Equity release plans that follow recognised standards should explain what happens if you wish to move to another property.

The Equity Release Council says customers should be told what happens if they want to move, and recognised standards include protections around moving to a suitable property, subject to conditions.

The new property must usually meet the lender’s criteria, so it is important to understand the moving rules before taking out the plan.

Can I make repayments later if I want to?

Yes, many modern lifetime mortgages allow repayment flexibility.

The Equity Release Council standards include the ability to make repayments without charges, subject to provider criteria.

Repayment flexibility can help borrowers reduce the balance or manage the impact of interest over time, but the rules vary by lender and product.

Do I need a solicitor?

Yes. Equity release creates a legal charge against the property, and this needs to be actioned by a registered solicitor or licensed conveyancer.

MoneyHelper says you must hire a solicitor for a lifetime mortgage, and the Equity Release Council says all customers taking out equity release need independent legal advice.

Independent legal advice is an important protection because it helps ensure you understand the legal implications before proceeding.

Am I eligible for equity release — and what could stop me?

For lifetime mortgages, the usual starting point is that the youngest applicant is aged 55 or over and you own a UK property that is your main residence.

Lenders also look for enough property value and equity, and they will usually expect any existing mortgage or secured loan to be cleared, often using the funds released.

Property type, condition, lease length and who lives in the home matter. Providers may also apply residency or other checks.

For home reversion, age thresholds are often higher, commonly 60 to 65 or over, and some plans require a mortgage-free property above a minimum value.

Independent legal advice is required, and suitable regulated advice is effectively part of the journey.

Is a lifetime mortgage the same as home reversion?

No. A lifetime mortgage is a loan secured on your home.

Home reversion involves selling all or part of your home in return for cash while retaining the right to continue living there.

Lifetime mortgages are generally more common, but the right option depends on your circumstances, objectives and the advice you receive.

What is equity release and how does a lifetime mortgage work in the UK?

Equity release lets you access some of the value tied up in your home while usually continuing to live there.

The most common route is a lifetime mortgage. This is a loan secured on your main UK residence that is typically repaid when the last borrower dies or moves into permanent long-term care.

You can take a lump sum or use a drawdown facility, and you may choose to make repayments or let interest roll up and compound.

There is also home reversion, where you sell all or part of your home in exchange for cash while retaining the right to live there. This is less common than a lifetime mortgage.

The structure of the plan matters because it affects long-term cost, flexibility, inheritance and future choices.

What will equity release really cost me — now and over time?

Upfront, expect total set-up costs in the region of £1,500 to £3,000, plus typical items such as legal advice, valuation, lender and adviser fees.

There may also be early repayment charges if you pay off the loan sooner than agreed.

Over time, the biggest driver of cost is interest. If you make no repayments, interest usually rolls up and compounds, so the balance can grow quickly and you can repay far more than you originally borrowed.

Many modern plans let you make voluntary interest or capital repayments to manage that long-term cost.

Your adviser should model scenarios such as no repayments, partial repayments and maximum repayments over 10, 15 and 20 years.

What are the main alternatives to equity release?

Common alternatives include retirement interest-only mortgages, known as RIO mortgages, downsizing, remortgaging, changing your mortgage structure, using savings or investments, or considering smaller targeted borrowing.

A RIO mortgage can be similar in that repayment usually happens later in life, but you make monthly interest payments and avoid the same roll-up risk.

Downsizing may release capital without creating long-term borrowing, but it may also mean leaving a home or location you love.

The best option is the one that solves your problem with the least long-term cost and the right level of flexibility, so alternatives should be compared alongside equity release.

How much equity can I release from my home?

The amount you can release depends on your age and health, ownership, the type and condition of the property, and the type of plan selected.

Product features such as optional overpayments or fixed early repayment charges may also influence what is available.

Lender guidance can also matter, including issues such as proximity to commercial property or industrial business parks.

In general, older applicants may be able to release a higher percentage of the property value, but the exact amount varies.

If there is an existing mortgage or secured borrowing, part of the money released may need to be used to repay it.

Can I get equity release if I still have a mortgage?

Yes, in many cases you can still take equity release, but the existing mortgage needs to be repaid as part of the process.

This is often done using some of the money released.

Whether this is possible depends on how much equity is available and whether the overall arrangement is suitable.

The lender instructs a conveyancer or solicitor to act on their behalf to register the charge.

Clearing an existing mortgage with equity release should be compared carefully against other later-life mortgage options.

Will equity release affect the benefits I receive?

It can. Releasing cash from your home may affect entitlement to some means-tested benefits, grants or support.

The impact depends on how much money you receive and what happens to it afterwards.

This is one of the reasons equity release should always be considered in the context of your wider financial situation, not as a stand-alone product choice.

There may be alternative solutions that are more suitable for your personal circumstances.

Will equity release reduce the inheritance I leave behind?

Yes, it can reduce the value of the estate you leave behind.

This is because the loan, plus any interest that has built up, is usually repaid from the sale of your home later on.

How much of an impact it has depends on the amount borrowed, how long the plan runs, the interest rate, and whether any repayments are made along the way.

Inheritance impact should be discussed clearly before proceeding, especially if leaving money or property to family is important to you.

Can I use equity release to pay off an existing mortgage?

Yes, some people use equity release to clear an existing mortgage, especially if the current mortgage term is ending in later life.

Whether this is a sensible option depends on the long-term cost, the alternatives available, and whether the plan fits your circumstances more appropriately than another later-life mortgage route.

This should be reviewed carefully because replacing one type of borrowing with another can have long-term consequences.

Can I take equity release as a lump sum or in smaller amounts?

Yes. Some equity release plans allow you to take one lump sum, while others let you release smaller amounts over time through a drawdown facility.

This can matter because interest is normally only charged on money once it has actually been taken.

As a result, the way the plan is structured can affect the long-term cost.

A drawdown facility may offer more control if you do not need all the money immediately.

How long does the equity release process take?

The timescale can vary depending on the lender, the property, the legal work and how straightforward the case is.

Equity release is not usually something arranged overnight.

Advice, lender checks, valuation and independent legal work all form part of the process.

It is sensible to allow time for everything to be reviewed properly before making a final decision.

What fees do I pay when arranging equity release?

The total cost can include adviser fees, legal fees, valuation fees and lender product charges, depending on the plan and provider.

It is important to look at the full cost picture, not only the interest rate.

Setup costs and any early repayment charges can also affect overall value.

A good recommendation should explain all fees clearly before you commit.

Is equity release better than downsizing?

That depends on what matters most to you.

Downsizing may release capital without creating long-term borrowing, but it may involve moving away from a home or area you love.

Equity release may allow you to stay where you are, but it can reduce the value left in your home over time.

The right route depends on your priorities, finances, future plans and whether you are comfortable with the long-term trade-offs.

Can I repay some of the equity release plan early?

Many modern plans do allow partial or voluntary repayments, but the rules vary by lender and product.

Some plans are designed to give borrowers more flexibility to reduce the balance or manage interest over time, while others may have limits or conditions attached.

Always check the repayment rules, allowances and any possible charges before choosing a plan.

Risk warning: Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home.

If your enquiry relates to a lifetime mortgage, please note: This is a lifetime mortgage. To understand the features and risks, ask for a personalised illustration.

If a fee is payable for our services, we will always confirm this in advance. All product names are stated accurately in line with regulatory guidance. For example, terms such as early repayment charge and higher lending charge are used consistently and transparently.

This article is provided for guidance only and does not constitute financial, legal, or professional advice. Regulations, market conditions, and personal circumstances are subject to change. Always consult a qualified financial adviser before making any decisions relating to mortgages or related financial products. Neither the author nor Heathcote Financial Planning accepts liability for any loss resulting from reliance on the information provided.

Company registration: Heathcote Financial Planning is a trading style of The Mortgage and Protection Partnership Ltd, authorised and regulated by the Financial Conduct Authority (No: 612049). Registered address: Olympus House, Olympus Park, Quedgeley GL2 4NF. Company No: 08734287.

The real cost of equity release: risks and alternatives