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1Repair Windows errors before they cause bigger problems2Fix the driver behind crashes, sound loss and screen glitches3Clear out junk files and repair common Windows errorsEquity release lets eligible homeowners access some of the value in their home while continuing to live there. It does not pay out the whole property value: if you still have a mortgage, your equity is broadly the property’s value minus the amount you owe. The two main forms work differently: a lifetime mortgage is a loan secured on your home, while home reversion involves selling a share of it. How you receive money, whether interest builds up and when the arrangement ends depend on the product and its contract.
What are the two main types of equity release?
MoneyHelper describes two broad forms of equity release: lifetime mortgages and home reversion plans. They can both provide access to housing wealth, but one creates a loan and the other transfers ownership of a share of the property. The comparison below describes their general structures, not the terms of any individual offer.
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| Feature | Lifetime mortgage | Home reversion |
|---|---|---|
| What happens at the start | You borrow money secured against your home. | You sell all or part of your home to a provider, usually for less than its open-market value. |
| Ownership | You retain ownership, subject to the mortgage. | The provider owns the share sold; you retain the remainder. |
| Interest | Interest may be paid as it accrues or added to the loan, depending on the plan. | The sold share is not a loan, so interest is not charged on it. |
| How it is settled | The loan and any accrued interest are normally repaid from the sale of the home when the plan ends. | The provider receives the agreed share of the proceeds when the home is sold. |
| Terms to examine | Interest rate, roll-up, permitted voluntary payments, fees and early repayment terms. | The share being sold, the price compared with market value, your right to live there and the sale terms. |
With home reversion, the provider’s share of a later sale is based on the agreed ownership share, not on a loan balance that grows with interest. The value of that share can rise or fall with the property’s sale price. Consider how that differs from a lifetime mortgage, where the debt can increase as interest accumulates.
How can you receive the money?
Depending on the product, money may be paid as one lump sum, taken in later drawdowns, paid as regular income, or provided through a combination. These are payment patterns, not different names for the two types of equity release: a drawdown option, for example, may be part of a lifetime mortgage.
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- Initial lump sum: You receive the agreed amount at the outset. Interest on a lifetime mortgage applies according to the plan’s terms.
- Drawdown: A lifetime mortgage may set aside a reserve from which you request further amounts later. The reserve’s limits, withdrawal conditions and minimum amounts are product-specific. Check when interest starts on each withdrawal in the illustration and offer; do not assume all the reserved money is treated as borrowed from day one.
- Regular income: Some arrangements pay agreed amounts periodically. Check the payment period, conditions and how the payments affect the amount owed or the share sold.
- Combination: A plan may provide an initial lump sum and allow later withdrawals. Confirm the terms for both parts rather than assuming later access is automatic.
For a lifetime mortgage, the money borrowed and the interest charged are separate components of the eventual balance. Taking only what you need initially, or drawing less later, can reduce the amount on which interest accrues compared with borrowing more at the outset, subject to the product’s terms.
How does interest build up on a lifetime mortgage?
Some lifetime mortgages require interest payments; others allow interest to be added to the loan. When unpaid interest is added to the balance, later interest may be calculated on that larger amount. This is compounding. Over a long period, the balance can grow substantially even if you do not borrow any more.
There is no single rate or projected balance that applies to every plan. Read the current Key Facts Illustration and offer for the applicable rate, how it is charged, and projections of the balance over time. FCA product-disclosure rules require information including the interest rate applying to a lifetime mortgage. A projection is based on its stated assumptions; it is not a guarantee of a future property value or final settlement amount.
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When does equity release have to be repaid?
A lifetime mortgage is normally repaid when the plan ends, commonly after the borrower dies or moves permanently into long-term care, with the home then sold to repay the balance. For a joint plan, the triggering event may be the death or qualifying care move of the last borrower, but the exact terms must be checked in the offer. If there is an existing conventional mortgage, it may have to be cleared as part of the transaction; ask the adviser and solicitor how it will be dealt with.
Home reversion is not a loan on the share sold. When the home is sold, the provider receives the agreed portion of the proceeds, and you or your estate receive the remainder after any other amounts due are settled. The contract sets out occupancy rights and how a sale is handled.
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Some plans that meet Equity Release Council standards include a no-negative-equity guarantee. Subject to the scheme’s conditions, this means repayment from the home sale cannot exceed the sale value of the property. Do not assume every product includes this protection: confirm whether it applies, and read the contract. The Council’s standards also cover features such as fixed or capped interest and tenure, but these are standards-related protections rather than universal statutory features.
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Equity release can affect more than the amount eventually repaid. The consequences depend on your finances, household, property and the specific contract.
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- Inheritance: A growing lifetime-mortgage balance can leave less equity for beneficiaries. With home reversion, the provider owns the share sold, so you do not receive that share’s future sale proceeds.
- Benefits and tax: Accessing money can affect eligibility for means-tested benefits. Tax treatment depends on your circumstances; do not assume that every payment is tax-free or has no effect on your tax position. Ask a qualified adviser about your situation.
- Future care and housing choices: A plan can restrict flexibility if you later want to move, repay early or make a different care arrangement. Check what happens if you move home or need long-term care.
- Costs and advice: Possible costs include advice, legal, valuation and arrangement fees. They vary by plan and case. Ask for the costs in writing, what products the adviser can advise on, and what part of the market they search. MoneyHelper describes a process involving a personalised recommendation, a Key Facts Illustration, offer documents and independent solicitor review. Check that the adviser is registered with the FCA.
- Contract terms: Compare rates and projected balances, drawdown conditions, permitted repayments, early repayment charges, occupancy rights and any applicable guarantee. Product availability, fees, eligibility and contract terms can change; the information here reflects guidance current on 4 October 2026.
What alternatives should you compare?
Equity Release Council guidance encourages homeowners to consider other ways to meet their needs, including a mainstream mortgage, a retirement interest-only mortgage, a personal loan, help from family or taking a lodger. Each has different eligibility, affordability and housing implications; what is viable depends on income, age, health, property and household needs. Compare the likely costs and consequences over time, rather than focusing only on the cash available at the start.
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Product prices and availability are accurate as of the date/time indicated and are subject to change. Any price and availability information displayed on Amazon at the time of purchase will apply.
