Release Equity From Your Home, Remortgage and Equity Release

What does releasing equity from your home mean?

Equity is the part of your home's value that is not owed to a lender, and releasing equity means turning some of it into cash, either by borrowing more secured on the home or, through home reversion, by selling part of it. A home worth £300,000 with £120,000 left on the mortgage has £180,000 of equity. How much of that can be released, and on what terms, depends on the route. The choice of route turns mainly on your age and on whether you can afford monthly repayments. For borrowing repaid monthly, a lender's loan to value limit and your income set the figure, while for a later-life plan with no monthly payments the provider looks mainly at your age and the property.

Homeowners with income usually release equity by borrowing more on the same basis as any mortgage: a remortgage to a new lender for more than they owe, a further advance from their current lender, or a second charge loan secured behind the existing mortgage, each repaid monthly. Homeowners in later life have two more routes, together called equity release: a lifetime mortgage, on which interest usually rolls up and is repaid from the sale of the home when the last borrower dies or moves into long-term care, and a home reversion plan, which sells part of the home to a provider. A retirement interest-only mortgage falls between borrowing repaid monthly and equity release: only the interest is paid each month, and the loan is repaid when the home is sold. The routes differ in cost and in how much they leave in your estate, so start with what the money is for and whether a cheaper way would meet that need.

Every route in this guide is regulated when it is secured on your home, with one narrow exception for some second charges taken for a business. A remortgage, further advance, second charge or retirement interest-only mortgage on a home you or a close relative live in is a regulated mortgage contract, because at least 40% of the property is used as a dwelling (legislation.gov.uk: Regulated Activities Order, article 61). The exception is a second charge of more than £25,000, ranking behind the existing mortgage and taken wholly or mainly for a business you run or plan to run, which article 61A of the same order takes outside regulation (legislation.gov.uk: Regulated Activities Order, article 61A). The lender must check that it is affordable under the Financial Conduct Authority's conduct rules for mortgages, MCOB (FCA Handbook: MCOB 11.6). Lifetime mortgages are regulated mortgage contracts with additional advice and disclosure rules for equity release (FCA Handbook: MCOB 8), and entering into a home reversion plan is a separately regulated activity (legislation.gov.uk: Regulated Activities Order, article 63B). Advising on either needs an adviser who holds an appropriate qualification in equity release (FCA Handbook: TC Appendix 1). The Equity Release Council, which describes itself as the UK's trade body for equity release and later life lending, sets product standards that its members agree to follow (Equity Release Council: about us); it is not a regulator, and its standards cover only the plans that meet them.

Mortgage Lane helps homeowners release equity for home improvements, debt consolidation, helping family, buying another property, business purposes and retirement income. We compare remortgage, further advance and second charge options, and retirement interest-only mortgages where income in retirement supports the interest. Lifetime mortgages and home reversion plans are advised on under their own rules by an adviser qualified in equity release. This page sets out how they work so that you can weigh them against borrowing on monthly payments. Our residential mortgages page covers buying and remortgaging a home more generally.

Equity release rates

Each route to release equity is priced differently, so compare them on the total cost over the time the money will be borrowed, which the headline rate alone does not show. A remortgage or further advance is priced like any residential mortgage, by product and loan to value band, so releasing more equity can push the whole loan into a higher band, at a higher rate. A further advance may carry its own rate alongside the existing deal, depending on how the lender sets it up. A second charge loan is priced by a second charge lender on its own criteria, and the rate can be higher than on a first mortgage at a similar loan to value. Product fees, valuation fees and legal costs vary in the same way. Leaving a fixed rate early to remortgage can bring an early repayment charge, which should be counted in the comparison.

Lifetime mortgages are priced on different lines. Under the Equity Release Council's standards the interest rate is fixed for the life of the loan, or variable with a cap that is fixed for life (Equity Release Council: standards). Each provider sets how much it will lend, and at what rate, under its own criteria, and both can depend on your age and the share of the home's value released. Unpaid interest compounds, so the cost depends heavily on how long the loan runs, and the same rate can cost very different amounts over five years and over twenty. A retirement interest-only mortgage is priced as a mortgage, with the interest paid every month, so its cost over time is the interest paid rather than a growing balance. The worked example further down this page shows how the length of the loan and the choice to pay interest change what is owed. Our fixed term mortgages page explains how fixed rates on standard mortgages are priced.

Want to release money from your home? Get in touch with your home's value, your mortgage, your age and what the money is for. We compare remortgage, further advance and second charge options, and check whether you need to borrow at all, before recommending one.

Equity release criteria by route

The route decides what a lender or provider checks: income and affordability for borrowing repaid monthly, and mainly age and the property for equity release. The regulation and lifetime mortgage rows in the table rest on the Regulated Activities Order, the FCA Handbook and the Equity Release Council's standards, checked in October 2026. Age limits, the maximum loan to value for capital raising and the treatment of credit history vary by lender and provider, and each one's criteria decide a case.

For borrowing repaid monthly, the lender assesses the new total, including the extra money. The FCA's rules let a lender skip a fresh affordability assessment on a new deal or a variation only where there is no additional borrowing beyond the amount outstanding, other than fees (FCA Handbook: MCOB 11.6.3R), so capital raising is always assessed. In our experience lenders lend up to 5 times gross income less outgoings, and up to 6 times for professionals and on specialist products. Each lender sets its own limit on how much of the home's value it will lend when the purpose is capital raising. Lenders also ask what the money is for, and some restrict business or investment purposes. For a lifetime mortgage on which the interest rolls up, the FCA's affordability rule does not apply (FCA Handbook: MCOB 11.6.57R), because no payments are due; the provider decides how much to lend against the home under its own criteria.

Ways to release equity, and how each is assessed

How to release equity from your home while you have income is a choice between three forms of borrowing, which turns on your current deal, your current lender and how much you need. All three are repaid monthly, assessed on your income and normally regulated as mortgages on your home, and the last two let you release equity without remortgaging.

Remortgage to release equity

A remortgage moves the whole mortgage to a new lender and borrows more than you owe, with the extra paid to you when it completes. It usually suits a homeowner whose current deal is ending, because leaving a fixed or discounted rate early can bring an early repayment charge. It also opens the whole market rather than one lender's range. The new lender underwrites the full loan, values the home and instructs a conveyancer to repay the old lender and register its own charge. A product transfer to a new deal with the current lender is the like-for-like alternative when no extra money is needed; adding borrowing to it is assessed like any capital raising. Our page on mortgages with no early repayment charge covers deals that can be left without a charge, and remortgage with bad credit covers cases with missed payments or other adverse credit.

Get in touch three to six months before your deal ends.

Further advance

A further advance is extra borrowing from your existing lender, secured on the home it already lends against. A lender may set it up as a separate part of the mortgage, with its own rate and term, leaving the current deal untouched, so it can avoid an early repayment charge while a fixed rate still has time to run. The lender still assesses affordability on the total, values the home where it needs to and asks what the money is for. The choice is limited to that lender's products and limits. If it will not lend more, or its rate on the extra is high, the alternatives are a second charge or a remortgage when the deal ends. Our guide to further advances for refurbishment finance applies the same route to building work.

Get in touch with your current lender details and the date your deal ends.

Second charge loan

A second charge loan is a separate loan from a different lender, secured behind your existing mortgage, which stays as it is. Because the first mortgage is not repaid, there is no early repayment charge on it, and the route suits a borrower whose lender will not lend more or whose current rate is worth keeping. The second charge lender assesses affordability across both loans and the combined loan to value, and on a sale the first lender is repaid before the second, which is what charge priority means. A second charge on your home is normally a regulated mortgage contract in the same way as a first mortgage. The exception is a second charge business loan of more than £25,000, taken wholly or mainly for a business you run, which is not regulated; our remortgage for business purposes page covers it. Our second charge mortgages page and the guide to residential second charge mortgages cover the route in full.

Get in touch with your current mortgage terms and the balance outstanding.

Releasing equity by purpose

Lenders look at what the money is for as well as whether you can afford it, and some purposes have their own rules. Home improvements can add to the home's value, and our page on remortgage for home improvements covers how lenders treat the works. Paying off credit cards and loans by adding them to the mortgage spreads short-term debt over a longer term, which can cost more in total even at a lower rate; our page on debt consolidation mortgages sets out how it is assessed. A deposit for a buy to let or a second home is covered on remortgage to buy a second property, and money for a business you run on remortgage for business purposes. Money released to help a child buy a home can be given as a gifted deposit, covered on our gifted deposit mortgages page, and our family help mortgages page sets out other ways family can support a purchase. A homeowner moving and keeping the current home to let can raise the deposit through let to buy instead. Retirement income is the purpose where the later-life routes below come in.

Get in touch with what the money is for and how much you need.

Later-life options: lifetime mortgage, home reversion and retirement interest-only

In later life, equity can be released without monthly repayments, at the cost of a debt that grows or a share of the home that is sold. Lifetime mortgages and home reversion plans are the two forms of equity release. An adviser recommending one must consider whether the benefits outweigh any effect on means-tested benefits and tax, your wishes for your estate, and other ways of raising the money, such as a further advance on an existing mortgage or a local authority grant (FCA Handbook: MCOB 8.5A.6R). The Equity Release Council suggests talking the decision over with family where that is possible and appropriate, while the decision stays yours (Equity Release Council: getting started).

Lifetime mortgage

A lifetime mortgage is a loan secured on your home, open to homeowners above a minimum age set by the provider, on which the lender does not seek full repayment until a specified life event, usually when the last borrower dies or moves permanently into long-term care (FCA Handbook glossary: lifetime mortgage). The Equity Release Council says the youngest applicant needs to be at least 55 to qualify (Equity Release Council: getting started). Interest can roll up and be added to the loan, be partly paid or be paid in full. A drawdown plan pays the money in instalments over the life of the mortgage, so interest runs only on what has been taken (FCA Handbook glossary: drawdown mortgage).

Plans that meet the Council's product standards include these protections: an interest rate fixed for life, or variable with a cap fixed for life; the right to live in the home for life, or until you move permanently into long-term care, while it stays your main residence and you keep to the terms; the option to move to a suitable property and take the plan with you, subject to the provider's lending criteria at the time; a no negative equity guarantee, so that you or your estate never owes more than the home sells for, after reasonable sale costs; and the ability to make repayments without a charge, subject to the provider's criteria (Equity Release Council: standards). The right to repay without a charge has applied to new lifetime mortgages meeting the standards since 28 March 2022 (Equity Release Council: right to make repayments, 31 January 2022).

Home reversion

A home reversion plan sells part or all of your home to a provider for a lump sum or regular payments, and you keep the right to live there for life. The provider takes your age and health into account when it buys the share (Equity Release Council: what is equity release?), and the illustration you are given shows the payment as a percentage of the full market value of the share sold. You stop owning that share, so you do not benefit from any rise in its value and cannot leave it to anyone (FCA Handbook: MCOB 9.4). The provider receives its share of the proceeds when the home is eventually sold. The plan is regulated where you, or a related person such as a spouse or close relative, are entitled to live in at least 40% of the property as a home. Each provider sets its own minimum age, which can be higher than 55.

Retirement interest-only mortgage

A retirement interest-only mortgage is an interest-only mortgage for older borrowers on which the interest is paid every month, and the lender cannot ask for the loan to be repaid until a specified life event, such as the last borrower dying or moving into long-term care, unless the terms are broken (FCA Handbook glossary: retirement interest-only mortgage). It is a regulated mortgage contract assessed under the standard mortgage rules rather than the equity release rules, a change the FCA made from 23 March 2018 (FCA: Handbook Notice 53), so the lender checks that your income, including pensions, covers the interest. Minimum ages vary by lender. Because the interest is paid, the debt does not grow, which leaves more of the home's value for later. Our interest only residential mortgages page compares it with other interest-only arrangements, and the later-life section of our 85% LTV mortgages page covers lending into retirement and lender age limits.

Downsizing

Selling and moving somewhere cheaper releases equity without borrowing at all, so there is no interest and nothing to repay, and the running costs of a smaller home can be lower. Against that, you leave the home and pay the costs of moving and the property tax on the new home: Stamp Duty Land Tax in England and Northern Ireland, Land and Buildings Transaction Tax in Scotland and Land Transaction Tax in Wales (GOV.UK: Stamp Duty Land Tax). Compare downsizing with each borrowing route over the years you expect to stay before deciding.

What releasing equity affects: inheritance, benefits and your home

Every route leaves less equity for later, and the effects reach your estate, any means-tested benefits and the security of your home.

Equity release and inheritance

Borrowing reduces what you leave, because the loan is repaid from the sale of the home or from the estate. A lifetime mortgage on which the interest rolls up can reduce it substantially over time, as the worked example below shows, and a home reversion plan passes the share sold to the provider outright. A remortgage or second charge repaid over its term leaves the estate clear of that debt once the term ends, but anything still owed at death is repaid first. Whether a release changes any Inheritance Tax on the estate is a tax question: the published rules are on GOV.UK (GOV.UK: how Inheritance Tax works), and a solicitor or tax adviser can advise on your own estate. Mortgage Lane does not give tax or legal advice.

Equity release and benefits

Cash released and held as savings can reduce entitlement to means-tested benefits. For Pension Credit, savings and investments of £10,000 or less do not count, and every £500 above that is treated as £1 a week of income (GOV.UK: Pension Credit eligibility). Council Tax Reduction looks at household income and savings and differs by nation: councils run it in England (GOV.UK: apply for Council Tax Reduction), Welsh councils assess it on weekly income and capital (gov.wales: Council Tax Reduction for low-income households), and in Scotland councils manage the Scottish Government's scheme (mygov.scot: Council Tax discounts, exemptions and reductions). Northern Ireland has domestic rates rather than council tax, and pensioners there may get help through Housing Benefit and Rate Relief or the Lone Pensioner Allowance (nidirect: help with rates for pensioners). Releasing smaller amounts over time through a drawdown plan can limit the effect. The Pension Service, Citizens Advice or MoneyHelper can check your own entitlement; Mortgage Lane does not give benefits advice.

Future borrowing and care

Less equity remains for later needs, including the cost of care, adapting the home or a move. Drawing down in stages, or borrowing only what is needed now, keeps more choices open, because a large sum released early leaves less to draw on later. A later move with a lifetime mortgage depends on the new home meeting the provider's criteria, and if it is worth less, part of the loan may need repaying.

Your home's security

A remortgage, further advance, second charge or retirement interest-only mortgage must be paid every month, and falling behind puts the home at risk, as with any mortgage. A lifetime mortgage with no payments due has no payments to fall behind on, but the right to stay in the home for life still depends on keeping to the terms of the plan. Debts that were unsecured, such as credit cards, become secured on the home once they are consolidated into any of these loans.

How releasing equity is arranged

1. Purpose and amount. What the money is for, the least that is needed and when, because borrowing less, or drawing it in stages, costs less over time.
2. Routes compared. Not borrowing at all, through savings, downsizing or help from family, then a remortgage, further advance or second charge set against the cost of keeping the current deal, with early repayment charges and fees counted in.
3. Age-appropriate options. For later-life borrowers, a retirement interest-only mortgage where income covers the interest and, through an adviser qualified in equity release, lifetime mortgages and home reversion plans, with family involved where you want them to be.
4. Application. An agreement in principle, then underwriting on income and credit for borrowing repaid monthly, or the provider's later-life criteria, and the lender's valuation of the home.
5. Completion. The legal work to register the new charge and, on a remortgage, to repay the old lender. Equity release plans that meet the Equity Release Council's standards need independent legal advice from a solicitor before completion, and you can choose your own. The money is released when the loan completes.

How a lifetime mortgage grows: the arithmetic

Interest on a lifetime mortgage that is not paid compounds, so the balance grows faster each year, and that growth is the main thing to understand before choosing roll-up.

Step 1. Interest rolled up over 20 years

An illustrative case, not a product or an offer: a £50,000 lifetime mortgage taken as one lump sum, with no payments made and interest added monthly at 5.2% a year, the illustrative rate used across our guides, which is not a product rate. The Equity Release Council describes the interest on a lifetime mortgage as rolled up, or compounded; providers set their own rates and the way interest is added, so the figures show the shape of the growth rather than any plan's cost.

Step 2. Paying the interest, partial repayments or drawdown

On those figures the balance is about 2.8 times the amount borrowed after 20 years, and the £57,136 of interest added in the second ten years is well over the £34,007 added in the first ten. Paying the interest each month stops the growth, and repayments without a charge, which plans meeting the Council's standards allow within the provider's criteria, slow it. A drawdown plan reduces the interest from the start, because interest runs only on money already taken. The table compares three ways of using the same £50,000 over 20 years at the same illustrative rate.

Paying the interest costs £216.67 a month and leaves £50,000 owed after 20 years, against £141,143 if nothing is paid. Taking £25,000 now and £25,000 after ten years leaves £112,575 owed, £28,568 less than taking the full amount on day one, because the second £25,000 rolls up for ten years rather than twenty. Interest that is paid is never added to the balance, so even part-payments reduce the compounding over a long period. The no negative equity guarantee caps what is repaid from the sale at what the home sells for, after reasonable sale costs, and the estate keeps only what is left once the balance is repaid.

Step 3. The same £50,000 on a remortgage or further advance

A homeowner with income could raise the same £50,000 on monthly payments instead. In this illustration the home is worth £300,000, £120,000 is left on the mortgage and the homeowner earns £40,000 a year with no other credit commitments. The lender's limit for capital raising is taken as 75% of the value, an illustrative figure and not a lender term, and the income multiple as 5 times, the standard in Mortgage Lane's experience.

Both limits leave room for the £50,000. The income supports £200,000 in total, the lower of the two limits, so up to £80,000 more could be borrowed, and the loan to value after releasing £50,000 is 56.7%. Repaid over 20 years at the same illustrative 5.2%, the extra £50,000 costs £335.53 a month on top of the £805.26 that the existing £120,000 costs over the same term, and nothing is owed on it at the end. On a lifetime mortgage at the same rate, the same £50,000 would have grown to £141,143. Rates differ between these products in practice, so the comparison is illustrative and not a quote.

What decides the case

The purpose of the money, your age and what you can repay each month narrow the choice of route, and the length of time the money stays borrowed decides what it costs. Borrow only what is needed and use routes with monthly payments while income allows them. Where a lifetime mortgage fits, consider paying some of the interest or drawing down in stages, and involve the family in the decision if you want them to be.