Is Equity Release a Good Idea?

Life doesn’t always go as planned. Some people may be approaching retirement and are worried that their pension has not performed as well as expected.

Perhaps the need to retire early due to ill health has occurred and have concerned about future care costs. Other expenses may have taken priority over funding a comfortable retirement.

The State Pension alone may not be enough to live on in later years. However, for anyone owns their own home, there may be another solution.

Are you familiar with the term ‘equity release’? It is regularly advertised on daytime TV. But TV commercials are aimed at selling and are light on facts.

There are several factors to consider before deciding whether equity release is the right option.

What is Equity Release?

Equity release allows people to use the value of their home to provide either a lump sum or income. Depending on the product, the minimum age is typically between 55 and 65. There are two types of equity release products:

Lifetime Mortgage

A lifetime mortgage allows people to borrow against their home while retaining ownership. Interest accrues and can compound over time; the total loan plus interest is usually repaid when the property is sold, typically after death or a move into long-term care.

Home Reversion

A home reversion plan is slightly different, as you sell your home (or a share of it) while retaining the right to live there rent-free for the remainder of your life.

The proceeds can be paid as either a lump sum or regular income. The price is often lower than market value to account for the years the company will own the property without receiving any rent or capital.

In both cases, it is usually possible to ring-fence a proportion of the property to pass on.

An adviser can help you determine which type of plan works best for your circumstances.

What Are the Benefits?

Like any financial product, equity release is not suitable for everyone. It may benefit you if:

• Aged over 55, own your home outright, and it is your main asset. Equity release can help with Inheritance Tax planning if your home makes up the majority of your estate, and it exceeds the IHT threshold. The value of your estate will reduce as you draw on and spend the capital.
• A lump sum or income to supplement your retirement. It is important to consider the amount you need and why. It is also worth considering other avenues available to you. Are you maximising the income available from your pensions? Could you rent out a room or take on a part-time job? Are there areas of your budget that could be addressed? Equity release is just one part of the financial planning puzzle, and should never be considered in isolation.
• No plans to downsize your home or retire abroad.
• Not dependent on means-tested State Benefits. The capital you receive from equity release may affect your eligibility.

What Are the Disadvantages?

• You will not be able to pass on your home (or the full value of it) to your beneficiaries. You may wish to discuss it with them before proceeding.
• There are usually arrangement costs, and a lifetime mortgage generally charges a higher interest rate than a standard mortgage to account for the additional risk the lender assumes. Good advice is essential to securing the best deal.
• It is unlikely that full capital value of the property will be paid out. There is a premium for convenience, as equity release does not require you to move home or find a buyer for your property. Selling the property yourself may be more financially beneficial in the long term, but you will also need to consider any renovations, upgrades, or cosmetic touches needed to make the house more attractive to buyers. None of this is an issue with equity release, provided the property is maintained to a good standard.
• If your plans change, there may not be sufficient equity in your home to downsize or relocate. Early repayment charges would apply if you cancel the plan within the first few years, and the money would need to be repaid.

Is It For Me?

Equity release may benefit you, but there may be other, more financially sensible options in the long term. Good advice is vital, as an advisor will consider all available options rather than rushing into a potentially life-altering decision. The advice process should take into account:

• Your age
• Your health, including any care needs
• Whether you have anyone who relies on you financially
• The value of your home
• Your wishes in respect of passing assets on to your family
• Your other assets and income, including any State Benefits
• How much do you spend
• Whether the proposed plan is affordable

Equity Release: this is a home reversion or a lifetime mortgage. To understand the features and risks, ask for a personalised illustration

Please do not hesitate to contact a member of the team, and we will be happy to discuss the various options with you

The content in this article was correct on 17 February 2026.

You should not rely on this article to make important financial decisions.

Teachers Financial Planning offers independent financial advice on savings, pensions, investments, protection and mortgages for teachers and non-teachers. 

Your home is at risk if you do not keep up the payments on your mortgage. 

Please use the get advice button below to arrange an informal chat with an adviser and see how we can help you.