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What questions should you ask about equity release?

5 mins read
by Unbiased Team
Last updated Wednesday, June 12, 2024

We explore the questions you should ask your financial adviser about equity release schemes, including how they work, their pros and cons, regulations and costs.


  • Equity release is the releasing of equity or cash tied up in the property you own so you can use it for retirement or other means.

  • You should ask your financial adviser various questions, such as ‘How does equity release work?’ so you can make an informed decision.

  • Ensure you find out about the pros and cons, costs, ifyou can release more equity in future, and whether you can pay back your equity release early.

  • A mortgage broker can assist with the equity release process.

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What is equity release?

Equity release is a way to tap into the value of your home. It is like a loan that only needs to be repaid when the last homeowner passes away or moves into full-time care.

Some people who want to finance a more comfortable retirement choose to release equity from their homes to fund their lifestyle, maintain their homes, or pay for repairs.

According to UK Care Guide, the average amount of equity released in the UK is 18% of the property value, which can be a substantial amount. 

How do equity release schemes work?

If you meet the requirements of an equity release scheme, you can take cash out of your home tax-free, even if you have not paid off your existing mortgage.

However, you must repay your mortgage from the money you release. It’s important to note that you do not need to move out of your home.

You can choose for equity to be released in smaller amounts over time or as a lump sum. 

Your equity release will be repaid from the proceeds of the sale of your home after you or the last homeowner go into long-term care or pass away. There’s no need to meet monthly repayments.

Am I eligible for equity release?

It’s important to check if you are eligible for equity release, as not all homeowners in the UK meet the eligibility criteria.

Equity release schemes’ main criteria include:

  • You are 55 years old or older.

  • You are a homeowner in the UK.

  • You must clear any existing mortgages using equity release funds or from your savings.

  • Your property is worth at least £70,000.

What are the pros and cons of equity release?

You should ask your adviser about the advantages and disadvantages of equity release.


  • You can stay in your home for the rest of your life.

  • You can use the tax-free equity as you wish.

  • You do not need to make monthly repayments.

  • You will never owe more money than the value of your home if it has a ‘no negative equity guarantee.’


  • If you choose a lifetime mortgage equity release, the interest charges will add to your debt.

  • You might lose some means-tested state benefits.

  • You might be faced with additional fees.

  • You won’t be able to use your home as security for additional loans after releasing equity.

Is equity release regulated?

You should also find out who regulates equity release.

In the UK, all firms who offer advice on or sell equity release schemes must be regulated by the Financial Conduct Authority (FCA). You should choose a scheme from a firm that is a member of the Equity Release Council (ERC).

What are the different equity release schemes available?

There are two different equity release schemes available in the UK.

These schemes are either lifetime mortgages or home reversion plans.

Each equity release scheme has unique terms, conditions, advantages, and disadvantages. You should ask a financial adviser for more information about them to make an informed decision.

How much does getting an equity release plan cost?

Part of knowing how equity release works is understanding the costs involved.

There are various costs from different parties to consider, and you might need to budget approximately £3,000 to cover them all.

The costs include:

  • Your lender’s costs: This includes an upfront valuation fee, arrangement fee and interest.

  • Your solicitor’s costs: These costs are for legal advice.

  • The equity release adviser’s costs: This may include an upfront fee and completion fee.

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Will I lose state benefits with an equity release plan?

The only state benefits you might lose if you get an equity release scheme are means-tested benefits, as they are for people who have low levels of savings and receive a low income. Examples of these benefits include any council tax reductions and pension credit.

The current upper limit for savings is £16,000. If the money you receive from an equity release pushes your savings above this limit, you will lose your entitlement to means-tested benefits. 

Can I pay back equity release?

An important part of understanding how equity release schemes work is knowing whether you can repay your loan. The answer is that, yes, you can pay back equity release. 

If you have an ERC-approved lifetime mortgage, you can pay back all or some of the loan early, although you may need to pay early repayment charges.

Will the interest rate change?

If your equity release scheme meets ERC standards, the interest rate will be fixed for life or variable. If the rate is variable, it will have an upper cap that cannot be exceeded.

Can I release more equity in the future?

Remember to ask your adviser if you can release more equity in the future. If you use an equity release scheme, you may be able to release more money tied up in your home at a later date. 

Your provider might require you to wait for a specified period of time, and an additional release may incur additional costs. Alternatively, your provider might offer you a re-broking service to look for a better scheme with better rates.

What are some alternatives to equity release?

You should ask your adviser about alternatives to equity release.

Your adviser should explain your options, such as:

  • Amending your current mortgage or remortgaging your home

  • Moving to a more affordable property

  • Asking your family members for help

  • Selling or releasing value from other assets

  • Government grants

  • State benefits you’re not currently claiming

  • Revisiting your budget

  • Renting out a room

  • Returning to work or changing jobs

  • Using your pension funds

How do I find equity release advice that’s right for me?

Use the following tips to find equity release scheme advice that’s right for you:

  • Speak to a financial adviser who adheres to FCA and ERC standards.

  • Ensure you understand all the terms and conditions – if you don’t know something, ask about it.

  • Consider your needs and circumstances and explain them to your adviser.

Get expert financial advice

Choosing and applying for equity release is a serious decision, even if you do not need to worry about monthly repayments.

The implications of opting for equity release or one of the alternatives may affect your financial future, retirement plans, and the amount you can pass on to loved ones when you pass away. 

Find an FCA-regulated financial adviser or qualified mortgage broker via Unbiased for expert financial advice tailored to your circumstances.

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Unbiased Team
Our team of writers, who have decades of experience writing about personal finance, including investing, retirement and pensions, are here to help you find out what you must know about life’s biggest financial decisions.