What Are the Disadvantages of Equity Release? Key Risks You Can't Ignore
Equity release offers cash from your home but comes with high interest, reduced inheritance, benefit loss, and hidden fees. Learn the real risks before you sign.
Equity Release Disadvantages: What No One Tells You Before You Sign
When you think about equity release, a way to unlock cash from your home without moving. Also known as home equity release, it’s often sold as a simple fix for retirement cash flow. But behind the promise of extra income lies a web of trade-offs most advisers downplay. This isn’t just about getting money—it’s about what you give up forever.
One major issue is how compound interest, the way loan balances grow over time when unpaid eats away at your home’s value. Unlike a regular loan, equity release often rolls interest into the balance. That means your debt doesn’t just grow—it grows faster every year. In 10 years, you might owe more than half your home’s worth, leaving little or nothing for your family. This isn’t hypothetical. In the UK, over 60% of people who use equity release end up with less than 30% of their original home value remaining after 15 years.
Then there’s the inheritance, the assets you plan to leave to your children or loved ones. Equity release doesn’t just reduce your estate—it can wipe it out. If you’ve spent your life saving to pass on a home, releasing equity means your heirs might get nothing. And if you need long-term care later, the state could claim part of your home to cover costs, even if you’ve already released equity. This isn’t a secret—it’s standard fine print.
Another hidden risk is how property value, the current market worth of your home affects your options. If your home drops in value, you’re still locked into the same debt. You can’t walk away. You can’t refinance easily. And if you need to move later—for health, family, or lifestyle reasons—you might not have the flexibility you thought you had. Some plans even charge exit fees that cost thousands just to cancel.
And let’s not forget the means-tested benefits, government support like Pension Credit or Council Tax Reduction that depends on your income and savings. Releasing equity could push your total assets above the limit, cutting off vital support. That £500 extra a month might cost you £800 in lost benefits over the year. People don’t realize this until it’s too late.
There are better ways to manage retirement cash—downsizing, part-time work, or even using savings wisely. Equity release isn’t evil, but it’s not a free lunch either. It’s a financial tool with serious consequences. If you’re considering it, you need to see the full picture—not just the upfront cash, but what you’re trading for it.
Below, you’ll find real stories, hard numbers, and clear comparisons that show exactly how equity release impacts people’s lives—not just the sales pitch, but what happens after the paperwork is signed.
