Equity release is becoming an increasingly popular option for homeowners aged 55 and over who want to unlock tax-free cash from their property while continuing to live in it. But like any financial product, it comes with both advantages and disadvantages.
In this guide, we’ll break down the key pros and cons of equity release, so you can decide whether it’s the right fit for your circumstances and long-term goals.
✅ Pros of Equity Release
1. Access Tax-Free Cash
Equity release allows you to unlock the value tied up in your home as a tax-free lump sum or drawdown facility. This money can be used however you wish—home improvements, everyday expenses, helping family, or simply enjoying retirement.
🔗 More details: How Equity Release Could Help Fund Your Retirement
2. Stay in Your Home
One of the main benefits of equity release is that you retain full ownership of your property and can continue living there for the rest of your life, or until you move into long-term care.
There’s no requirement to move or downsize—you can remain in familiar surroundings while accessing the value of your home.
3. No Monthly Repayments Required
With a lifetime mortgage, there are no mandatory monthly repayments. Instead, interest is added to the loan and repaid when your home is sold—usually after you pass away or move into care.
✔ The vast majority of plans allow voluntary repayments if you’d prefer to reduce the balance over time.
🔗 Learn more: How Does Equity Release Compound Interest Work?
4. Flexible Drawdown Options
Rather than taking the full amount upfront, the vast majority of plans allow you to release money in smaller chunks over time. This helps reduce interest and gives you more control over how and when you access your equity.
🔗 More details: How Much Equity Can You Release?
5. Inheritance Protection Options
Concerned about leaving something behind? The vast majority of lenders allow you to ringfence a portion of your property’s value for your loved ones, ensuring part of your estate is protected from the growing loan balance.
🔗 Related: Do I Need a Will with Equity Release?
6. No-Negative Equity Guarantee
The vast majority of equity release providers offer a no-negative equity guarantee, meaning you or your estate will never owe more than your home’s eventual sale price—even if house prices fall.
7. Portability
If your circumstances change, the vast majority of plans allow you to transfer your loan to a new property, as long as it meets the lender’s criteria.
🔗 More details: Can You Take Out Equity Release on a Jointly Owned Property?
❌ Cons of Equity Release
1. Interest Can Accumulate Quickly
Because most equity release products use compound interest, the loan can grow significantly over time—especially if you don’t make voluntary repayments.
This can reduce how much is left in your estate.
🔗 Related: What Are the Risks of Equity Release?
2. Reduces the Value of Your Estate
Releasing equity means less money for your beneficiaries when your estate is passed on. Even with inheritance protection, the loan and accrued interest are repaid from the property sale before anything is distributed.
3. May Affect Means-Tested Benefits
Accessing a lump sum could impact eligibility for means-tested benefits such as Pension Credit or Council Tax Support, as the released funds count towards your savings.
This is especially important if you rely on government support.
4. Early Repayment Charges
If you decide to repay your loan early, some providers may apply early repayment charges—although many plans reduce or waive this after a set number of years or in specific situations, such as moving into care.
🔗 More details: Can You Pay Back an Equity Release Mortgage Early?
5. Property Restrictions
Not all homes are eligible for equity release. If your property is of non-standard construction, in poor condition, or located in an excluded area, it may not qualify.
🔗 Related: Properties Not Eligible for Equity Release
FAQs: Equity Release Pros and Cons
Can I still leave an inheritance?
Yes, and the vast majority of lenders allow you to protect a portion of your property’s value for beneficiaries.
What happens if I go into care?
If you’re the sole homeowner, your property is usually sold and the loan repaid. If it’s a joint plan, the plan continues until the second homeowner also enters care or passes away.
🔗 More details: How Does Equity Release Work If You Go Into Care?
Can I move house in the future?
Yes, the vast majority of plans are portable, allowing you to move and take the loan with you—subject to lender approval.
Next Steps
Understanding the pros and cons of equity release helps ensure you’re making the right decision for your future. If you’re ready to take the next step:
✔ Try our Equity Release Calculator for an instant estimate
✔ Speak to an adviser on our Equity Release Adviser page
✔ Continue reading:
- What is an Equity Release Mortgage?
- How Does Equity Release Work?
