If you own a home and need extra cash, equity release might be on your radar. It lets you turn part of your house value into a lump sum or regular payments without moving out. The idea sounds straightforward, but the details matter – especially the type of plan, how interest is charged, and what you’ll owe back.
There are two main flavors: a lifetime mortgage and a home reversion deal. With a lifetime mortgage, you borrow against your home and the loan plus interest rolls up over time. You don’t make monthly repayments; the balance is usually settled when you die or move into long‑term care. A home reversion plan means you sell a share of your property (often 25‑50%) to a specialist and keep living there rent‑free. You’ll get a smaller cash amount up front, but you won’t owe interest.
Interest rates on lifetime mortgages are higher than standard mortgages because the loan is unsecured until death. Some providers let you choose a fixed rate, while others offer a variable rate that can change with the market. The interest compounds, so the debt grows faster than a regular loan. That’s why it’s crucial to run the numbers and see how much of your home will be left for heirs.
First, ask yourself why you need the money. If it’s for a one‑off expense like home repairs, a lump‑sum lifetime mortgage might fit. If you want a steady income stream, some plans let you take monthly payments instead of a big payout. Second, consider your health and life expectancy. The longer you live, the more interest accrues, eating into the equity you leave behind.
Third, compare providers. Look at the interest rate, any early repayment charges, and the level of cash you get for the same percentage of equity. Our article “How Much Do You Repay on Equity Release? All You Need to Know in 2025” breaks down the maths with real‑world examples, so you can see the impact of different rates.
Finally, talk to a qualified adviser. Equity release is a big decision and can affect your eligibility for state benefits. A specialist can run a free assessment, check if you qualify for the government’s equity release guarantee, and help you pick the plan that matches your goals.
Remember, equity release isn’t free money – it’s a loan that sits on your home until the end of the term. Make sure you understand the total amount you’ll owe, how it will affect your estate, and whether you’re comfortable with the interest build‑up. With the right research and advice, you can unlock cash without selling your house outright.
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