Equity release: what plan is right for you?

Whether it’s holiday destinations or financial products, we all want choice. More choice, however, can lead to more complexity – especially when you’re making a decision that will impact the rest of your life.

When it comes to equity release, there’s a lot of choice. At the start of 2025, advisers and homeowners could choose from more than 1,200 plans* from dozens of lenders.

Equity release enables people to benefit from the wealth tied up in their home without having to move.

Although there are hundreds of different plans, there are only two main types of equity release, a lifetime mortgage or a home reversion plan, both of which are regulated by the Financial Conduct Authority.

Lifetime mortgage: how it works

This is the most popular form of equity release and is similar to a traditional mortgage, which means the loan is secured against your home. With a lifetime mortgage, you can release a percentage of your property’s value, normally up to 60%, which can either be taken as a lump sum or in multiple payments.

Interest is added to the amount owed, which can accumulate significantly over time, although some lenders allow voluntary payments to minimise interest costs. In the first quarter of 2025, the average APR for new equity release products was around 7%*.

Under a lifetime mortgage, you still own your home, and you or your beneficiaries can still gain financially from any increases in its value. It’s even possible to move to another property if it’s acceptable to the equity release provider.

The loan and any outstanding interest are repaid by your estate when you either die or move to permanent residential care (or in the case of a couple, the last person living in the home).

Lifetime mortgages are usually only available to people aged 55-plus and your property must be worth at least £70,000.

Home reversion plan: how it works

This involves selling all or part of your home to a reversion company in return for a tax-free lump sum, a regular income or a mix of the two.

Unlike a lifetime mortgage, there’s no interest to pay. Instead, you effectively lease your home, usually paying no rent, for the rest of your life or until you need to move into residential care.

As this could be a long-term commitment for the reversion company, it will pay well below the market rate for its share in your property. At the end of the plan, the property is sold and the proceeds shared according to the ownership split.

To take out a home reversion plan, you normally need to be at least 60 years’ old. Your personal circumstances will determine how much equity you can sell to the reversion company. As with lifetime mortgages, there can be an option to move during the plan.

Protect your interests

Regardless of which product or lender you choose, it’s important to seek trusted financial and legal advice (link to blog #4?). Members of the Equity Release Council are subject to certain standards and safeguards, which help to protect borrowers and their interests.

Attwaters Solicitors is a member of the Equity Release Council and has 30-plus years’ experience of helping people make informed decisions about equity release. Get in touch today to learn how we can support your equity release transaction.

* Equity Release Council, 2025