Is equity release a good idea?

Updated: 4th February 2025

When is equity release a good idea for later life lending?

Written in line with our editorial policy.

There are pros and cons to equity release so its suitability depends on your individual circumstances. There are risks to a plan: you’ll leave a smaller inheritance for your family, for instance. But there are important potential benefits too, such as that weight lifting off your shoulders after clearing your mortgage or a burdening loan.

In this article we’ll discuss the following to help you decide “is equity release a good idea for me?”:

• What does equity release involve?
• When is equity release a good idea?
• When might equity release be a bad idea?
• Is equity release safe?
• Is equity release right for me?

Once you have read the following guide, speak to one of our selected advisers for all the information and guidance you need. Our friendly team can put you straight through when you call 0808 178 3055, or request a call back. 

What does equity release involve?

Equity release is a financial product that allows homeowners to unlock some of the money from their property’s value. 

When you explore your options, you will need to decide between a lifetime mortgage and a home reversion plan. 

• Lifetime mortgages. Available to over 55s, this is a loan with no mandatory monthly repayments to make as the interest can be left to roll up each month. You can minimise the interest by making ad hoc voluntary payments or by arranging an interest-only equity release plan. You will still own 100% of your home.
• Home reversion plans. Available to over 60s, this option involves selling all or some of your home to a reversion company in exchange for the tax-free money you need. You continue to live in your home as a tenant, paying no rent, for the rest of your life.

Your equity release plan typically comes to an end when you pass away or move into long-term care, at which point your home is put up for sale to settle your plan. Any money left over from the sale of your home is then paid to you or your estate.

Want to know how much you could unlock from your home? Check your eligibility and get your free quote now!

When is equity release a good idea?

Equity release may be a good idea for homeowners who have ruled out other ways to get a cash boost for their finances. But please bear in mind that it can work out to be an expensive way to borrow money, and there may be cheaper options available to you.

Here are just some of the typical circumstances when arranging equity release might be a good idea:

• Paying off an interest-only mortgage when your term is due to end and you have no other means of repaying the outstanding capital.
• Clearing loans, credit cards or a standard mortgage to achieve a bigger disposable income each month.
• Making essential home repairs or improvements when you can’t get approved for a loan or afford the monthly repayments.
• Gifting an early inheritance to family members who are in need of financial help now.

There are many other reasons that homeowners unlock some of their property wealth with equity release. See our article ‘What can you use equity release money for?’ for more information.

Whether equity release is a good idea for you or not depends of course on your individual circumstances and financial situation. This is why speaking to a specialist adviser who can discuss alternatives with you is so important: there may be a better financial option available which you haven’t thought of. 

When might equity release be a bad idea?

Equity isn’t right for everybody, and in some cases equity release could actually be a bad idea. To avoid your own equity release horror story, it’s essential you seek guidance from a qualified equity release specialist who can explain all the pros and cons of a plan.

For instance, a plan will reduce the value of your estate and the amount of inheritance you leave. This could make it a bad idea for you if you want to leave all of your home to your family when you pass away. 

If you don’t mind leaving a smaller amount to your family then you could arrange a plan with Inheritance Protection built in. This allows you to ringfence a percentage of your home’s value for your family to inherit, regardless of how much interest accrues on your plan.

Equity release may also be a bad idea if you intend to move home soon, as you may find your choices are more limited with a plan in place. This is because your new home will need to meet your lender’s criteria before they will agree to moving your plan to it.

You should also be very careful about arranging a plan if you rely on means-tested benefits, as equity release can affect your eligibility for some of these.

You can read more about the above and other pitfalls to equity release which you should consider before arranging a plan.

Examples of equity release suitability

To further help get to grips with ‘Is equity release a good idea?’, we’ve put together two simple examples. As always however, please remember that our articles are for information only and you should take personalised equity release advice to work out what’s right for you.

Example 1: Where equity release is a good idea

Samuel and Linda are both in their early seventies. They own their home outright and have lived there for many years. They love the area, get on well with their neighbours, and don’t want to move. Unfortunately, they have recently used up the last of their savings and rely just on their State Pensions to live on. This is just enough to cover their daily living expenses, but doesn’t cover emergencies and essential bigger purchases. 

They have two children who are both doing well financially, buying their own homes, and aren’t relying on a big inheritance in the future. However, with families of their own, they aren’t in a position to help their parents when it comes to regular money.

Samuel and Linda decide to set up a drawdown lifetime mortgage. They take a modest release of £15,000 initially to make some essential purchases, including a newer used car as theirs is on its last legs. They also put a £30,000 reserve facility in place, so they have that reassurance that they can access further cash when they need it, subject to the lender’s terms and conditions.

They make their decision only after talking it through with the family, and after receiving specialist equity release advice. As part of the advice process, they also have to appoint a solicitor specialising in equity release for additional support through the process.

Example 2: Where equity release is a bad idea

Margaret is 66 years old, lives alone, and has recently retired. She still owes over £10,000 on her mortgage and has just a modest private pension on top of her State Pension to cover her living expenses. She would like to clear the mortgage as she finds it hard to make the monthly repayments. She also wants a little extra cash to cover pressing purchases and set something aside for a rainy day.

Although she is eligible for equity release, Margaret would like to leave her home to her daughter or, better still, find a way for her daughter to live in it now. It’s a lovely house that’s perfect for her daughter’s young and growing family. Margaret has no strong emotional objection to moving, and in any case it is too big for her needs.

After considering her options Margaret decides against equity release. The alternative she wants to explore is to sell her house to her daughter, who can afford the required mortgage payments. Even after selling her house at a reduced price to help her daughter out, Margaret can afford a smaller property nearby. She is also able to clear her outstanding mortgage and have cash left over to make her retirement more comfortable.

Margaret and her daughter take financial advice on these matters. In particular, the difference between the house’s real value and the agreed price constitutes a ‘gift’ and there could be inheritance tax implications. Also, some mortgage lenders may shy away from cases involving the purchase of a house from a family member, so this will also need looking into. 

Is equity release safe?

Equity release has come such a long way in recent years thanks to the hard work of the Equity Release Council. Homeowners today are given far greater protections and assurances than ever before when they arrange a plan.

Here are just some of the reasons that our selected advisers will only recommend plans from members of the Equity Release Council:

• Equity release lenders who are members of the Equity Release Council must agree to adhere to their rules, including their five equity release guarantees.
• The Equity Release Council insists that all customers must receive independent face-to-face legal advice before signing up to a plan.
• Their standards for members ensure that all brokers, advisers and providers offer high-quality products and services to customers and act with integrity and transparency.
• To ensure their high standards are met, all members must agree to abide by its Principles and Outcomes.

Of course, there are still some risks of equity release to consider, but knowing that you will be dealing with firms who are members of the Equity Release Council should give you peace of mind. Additional protection is in place because firms in this sector are also regulated by the Financial Conduct Authority.

Is equity release right for me?

Arranging equity release could work out to be a beneficial financial solution for you and your family depending on your financial wants and goals. But as with any financial product, there are drawbacks to arranging a plan, so you must fully understand the potential risks before making a decision.

The best way to decide if equity release is a good idea for you is to speak to a qualified equity release adviser. They will be able to check if any of the alternatives to equity release could be a better option for you first. 

If there isn’t a more suitable financial option for you then they can explain your equity release options and answer all your questions.

Our selected advisers will take the time to understand your unique wants and needs for your retirement. This will help you decide if a plan will help you to achieve your financial goals. You can get in touch with them today by calling 0808 178 3055, or request a call back.

When it comes to answering “is equity release a good idea”, nothing compares to speaking with a qualified adviser. Equity release is typically a lifetime commitment, so it’s vital you make the right decision for you.

Remember, all the initial advice and information you receive from our selected advisers is given free of charge to help you decide whether a plan could suit you. Only if you choose to go ahead with a plan will you receive a fee for advice, which can be paid from the money you release from your home.

Please note: This article is provided for information purposes only and does not represent financial, mortgage or investment advice. If in doubt, you should seek independent financial advice. Think carefully before securing other debts against your home.

Answering your questions

Is equity release a good thing if you want to clear debt? 

You may find that equity release is a suitable way to clear one of the most common forms of debt: your outstanding mortgage. In fact, your equity release lender will insist that you clear any existing mortgage with some of the cash you release.

Equity release can also be used to clear other debts, such as loans, credit card debts and store cards. Creditors putting pressure on you to repay them may ease off if they know that you are arranging an equity release plan to pay them.

However, you do need to think carefully before securing other debts against your home. Make sure you get professional equity release advice (such as the service offered by our selected advisers) to weigh up the pros and cons. You may also find the guide from National Debtline of interest. 

 Is equity release safe compared to years ago?

You have the reassurance of considerable consumer protection when taking out an equity release plan – more so than may have been the case a few decades ago. In particular, for more than 30 years, the Equity Release Council has been setting standards, principles and outcomes that its members must commit to. Further regulation and protection are in place from the Financial Conduct Authority and the Financial Services Compensation Scheme.

About Clare Yates. With over a decade’s experience writing about later life financial planning, Clare offers a wealth of knowledge about equity release, pension annuities, wills, LPAs and more. When she isn’t writing, Clare likes to spend her time baking and going on walks with her husband, two children and their rescue dog. Follow Clare on LinkedIn