Equity Release in 2026: A Plain English Guide
Do you own your home? Are you 55 or over? You may have heard of equity release. It is a way to take some money out of your home — without selling it and without moving.
This guide is here to help. We will look at what it is, how it works, what it costs, and the risks. We will also look at other choices you may want to think about first.
We are Retirement Solutions UK. We give equity release advice. We are members of the Equity Release Council.
What is equity release?
Most people buy their home with a mortgage. Over time, you pay some of that mortgage off. You may also have seen the value of your home go up. The part of your home you own — not the part the bank owns — is called your equity.
Equity release lets you turn some of that equity into cash. The cash can be used for a range of purposes. You stay in your home. You stay the legal owner.
The most common type is a lifetime mortgage. It is a loan that uses your home as the security. You do not have to make any monthly payments. The interest gets added to the loan each year. The loan, plus all the interest, is paid back when your home is sold. That is usually when you die or move into long-term care.
A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly.
You can take out a standard lifetime mortgage from age 55. A new type — called a Payment Term Lifetime Mortgage — is now open from age 50. More on that below.
What has changed in equity release in 2026?
A few things are different from a year or two ago.
A new plan from age 50: the Payment Term Lifetime Mortgage
The Payment Term Lifetime Mortgage (or PTLM) is a mix of a normal mortgage and a lifetime mortgage. You make monthly payments for a set time. That time is usually until you are 75, or until you retire. After that, it works like a standard lifetime mortgage.
To get a PTLM, you need to:
- Show that your income each month is enough to cover the payments — now and in the future.
- Have a home that meets the lender’s rules.
Important: if you stop making the monthly payments, your home may be repossessed. This is why your income has to be checked first.
Some guidance is easier to get — but advice is still needed
From April 2026, advisers can give you some general guidance under a new set of rules. These rules are called Targeted Support. It is part of work by the Financial Conduct Authority (the FCA) to make later-life lending clearer.
Targeted Support does not replace the advice meeting. If you want to actually take out an equity release plan, you still need to have a full advice meeting with a qualified adviser. Targeted Support is extra help on top — not a short cut.
How the market has grown
The Equity Release Council shared its 2025 numbers in January 2026.¹ Here are the headlines:
- Total UK lending was £2.57 billion. That was up 11% on the year before.
- The average amount people took out was £123,174 in the last three months of 2025. That was up 5.7% on a year earlier.
- These figures show the whole market. They do not say whether equity release is right for any one person.
Today’s interest rates
In May 2026, lifetime mortgage interest rates are between about 6.36% and 9.50% a year.² This rate is called the Monthly Equivalent Rate, or MER. It is fixed for the life of the plan.
The rate you get depends on things like:
- How much you want to borrow compared to your home’s value.
- Whether you add extra features to the plan.
- Your age and your health.
People who borrow the most against their home usually get the highest rates, not the lowest. The more you borrow, the more you should expect to pay in interest. Equity release will reduce your financial options in the future and may leave you with limited or no property equity remaining.
The rates shown here are a guide only. They can change at any time. To know the rate you would actually get, you need a personal quote from an adviser.
What do people use equity release for?
The Equity Release Council asked advisers what their customers used the money for in 2025.¹ Here is what they said:
- Pay off a mortgage — 26%. (The most common reason.)
- Home improvements — 21%.
- Help family — 13%.
- A holiday — 6%.
- A big buy, like a car — 4%.
These are advisers’ views of what customers do. They are not whole-market lending data. Let us look at the three biggest reasons in turn.
Reason 1: Paying off a mortgage
Many people still have a mortgage when they reach retirement age. With bills going up, the monthly mortgage payment can be hard to manage on a pension.
Some homeowners use equity release to pay off the rest of their mortgage. That stops the monthly payments. It frees up money each month.
The trade-off: the interest on the new lifetime mortgage still adds up. It just adds to the loan instead of being paid each month. So the amount you owe grows over time. The amount left for your family when the home is sold will be smaller. Releasing funds will reduce the value of your estate and there may be little or no inheritance remaining for any beneficiaries.
Reason 2: Helping family
Some people use equity release to help children or grandchildren during their lifetime. Common reasons include:
- A deposit on a first home.
- Tuition fees or paying off student debt.
- A wedding.
- Helping a family member with a home extension or renovation.
The trade-off: a lifetime mortgage is not a tax-planning tool and should not be used as one. Gifts may have inheritance tax rules that apply. If you gift the money, the recipient may need to pay inheritance tax in the future. You should talk to a solicitor or qualified tax adviser as well as us.
Because interest compounds on the lifetime mortgage, the real cost of the gift, over time, will be more than the gift itself. There will be less left in your estate when your home is sold.
Reason 3: Home improvements
Some homeowners use equity release to:
- Make their home warmer (loft insulation, double glazing, modern heating).
- Make their home work without stairs (a single-storey extension or a ground-floor bedroom or bathroom).
- Make the home easier to use as you get older (walk-in showers, lever taps, better lighting).
- Repair or improve the driveway, garden or outside spaces.
Other ways to fund this kind of work — worth checking first:
- Local councils and the government run schemes that may help pay for some of this work. This includes energy efficiency upgrades and changes for people with disabilities or limited mobility. Eligibility and limits vary by area and change over time. Citizens Advice, the Energy Saving Trust, and your local council can help you check what is on offer.
- Your own savings, help from family, or downsizing to a home that already suits your future needs may be a better fit for some people.
The trade-off: any savings on bills are not certain. The work may not add to the value of your home by as much as it costs. Over the life of the loan, the cost of borrowing can be more than the savings made or the value added.
The risks of equity release
Equity release suits some people. It is not right for everyone. Here are the main risks to weigh up.
Interest grows quickly over time
The interest on a lifetime mortgage is added to the loan each year. The next year, even more interest is added — on top of the bigger amount. This is called compound interest. Over time, the amount you owe grows fast.
A loan of £50,000 at 7% becomes about £100,000 after 10 years. After 20 years, it can be about £200,000. The longer the plan runs, the bigger the impact.
Less money for your family
Equity release means there will be less left in your home when it is finally sold. That means less inheritance for your family or anyone else you wanted to leave money to.
It can change the benefits you get
Some benefits depend on how much money or savings you have. These are called means-tested benefits. Pension Credit is one. Council Tax Reduction is another. If you take out equity release, you may get less from these benefits. You may stop getting them at all.
Borrowing more usually means a higher rate
The more you borrow against your home, the higher the interest rate is likely to be. That means the amount you owe grows even faster. The equity in your home goes down quicker.
Other choices may be better for you
Equity release is one option, not the only one. Other choices to think about include:
- Downsizing — selling your home and buying a smaller, cheaper one.
- A Retirement Interest-Only (RIO) mortgage — a mortgage where you pay the interest each month but never the loan itself.
- Help from family or using your own savings.
- Standard borrowing — a normal loan or mortgage, if you have enough income to make the payments.
- Grants or local schemes — for some home improvements or changes for disability.
Sometimes none of these is right either. Sometimes the best choice is to stay as you are for now and look again later.
What happens if you talk to us?
Here is what to expect if you get in touch.
Step 1: A short first call
You call us, or we call you back. We ask about your situation. We answer your questions. There is no charge for this call. There is no need to go any further if you do not want to.
Step 2: A full advice meeting (only if you want it)
This meeting takes about 90 minutes. A qualified adviser goes through your options with you. We look at equity release. We also look at the other choices listed above. There is no charge for this meeting.
Step 3: Our recommendation
After the advice meeting, we tell you what we think.
- If equity release is right for you, we will say so. We will show you the plan that fits.
- If a different choice is better, we will tell you that.
- If nothing is right for you at the moment, we will tell you that too.
We do not push anyone into a plan. The best decisions in later life are made with a clear head.
You can bring a family member, a solicitor, or someone you trust to the meeting. We think this is a very good idea.
What our advisers do
Our advisers specialise in equity release. They will also discuss other options with you, so you can fully think through what is right. We will only recommend equity release if it suits you better than the other choices.
Frequently asked questions
How old do I have to be?
For most lifetime mortgages, you need to be 55 or over. For a Payment Term Lifetime Mortgage, you can be from age 50.
Will I still own my home?
Yes. With a lifetime mortgage, you stay the legal owner of your home. You can live in it for the rest of your life if you want to. The lifetime mortgage is subject to compound interest, which will reduce the equity you have in your property.
Do I have to make monthly payments?
With a standard lifetime mortgage, no. You can choose to make voluntary payments, but you do not have to. With a Payment Term Lifetime Mortgage, yes — you have to make payments for a set time. If you stop, your home may be repossessed.
Could I owe more than my home is worth?
If your plan meets Equity Release Council standards, no. There is a ‘no negative equity guarantee’. That means you (or your family) will never owe more than the home is sold for.
How much can I release?
It depends on your age, the value of your home, and the lender’s rules. As a rough guide, older homeowners can release a higher share of the value of their home.
Can I move house if I take out equity release?
Most plans let you move, as long as the new home fits the lender’s rules. If you wanted to repay the loan early — for example, if you change your mind and downsize without taking the loan with you — an early repayment charge would usually apply.
How long does the whole process take?
From the first call to the money being in your bank, it usually takes 6 to 8 weeks. It can be quicker or slower.
Is the advice free?
Our advice fee is only payable if your case completes. Other lender and solicitor fees may apply. Your adviser will explain all the costs before you make any choice.
Can I change my mind?
You have a ‘cooling-off period’ after you sign the plan. You can pull out during that time without penalty. After that, you can still pay the loan back early, but there may be charges.
What if my home is leasehold or non-standard?
Some lenders accept leasehold or non-standard homes. Others do not. Lending criteria change over time. The only way to know if your home fits is to have a fresh look with an adviser. We cannot promise you will qualify.
Ready to talk?
Call us on 0800 652 3480. Or just drop us an email and we will call you back – [email protected]
