Glossary · UK
What is Equity Release?
A financial product allowing homeowners aged 55 or over to access the equity in their home as a lump sum or drawdown facility, without having to sell or move out.
Full Definition
Equity release encompasses two main products: lifetime mortgages and home reversion plans. A lifetime mortgage is the most common form. The homeowner borrows against their property value at a fixed or capped variable interest rate (typically 5-7% in 2026). Interest rolls up over the lifetime of the loan unless the borrower makes voluntary repayments. The loan plus rolled-up interest is repaid on death or entry into long-term care from the sale of the property. Equity Release Council (ERC) standards include: a no-negative-equity guarantee (you can never owe more than the home is worth), the right to remain in the property for life or until moving into care, and the right to make voluntary interest payments. The proceeds of equity release are not subject to income tax or capital gains tax. However, they reduce the value of the estate for IHT purposes. Means-tested benefits (Universal Credit, Pension Credit) may be affected if cash reserves from release exceed thresholds. Home reversion plans involve selling a percentage of the property to a provider at below market value in exchange for a lump sum, while retaining the right to live there rent-free. These are less common and regulated differently.