Equity Release Examples
Equity release can be used in different ways, with varying outcomes. Below are examples showing the benefits and challenges, including impacts on inheritance and eligibility for benefits.
Examples of equity release
Lump sum equity release
Example: John and Margaret, a couple in their early 70s, have lived in their family home for 40 years. They own the property outright, and it’s now worth £400,000. With a modest pension, they want to improve their income and make some long-overdue home improvements to enjoy their retirement fully.
They opt for a lump sum equity release through a lifetime mortgage, borrowing £100,000 against their property. This money allows them to renovate their home, go on a few holidays, and keep some aside for unexpected expenses. The loan will be repaid when the property is sold after they pass away or move into long-term care, with compound interest accruing over time.
Why it works for them: They needed a large, upfront sum to cover immediate costs and weren’t concerned about making regular repayments.
They are comfortable knowing the loan will be repaid from the sale of the house in the future, although the growing interest means the final amount owed could be significantly higher.
Some lifetime mortgages offer voluntary repayment options, but John and Margaret prefer to let the loan grow.
Drawdown equity release
Example: Susan, 68, lives alone in a house worth £300,000. She’s enjoying retirement but isn’t sure how much additional income she might need over the next few years. She chooses a drawdown lifetime mortgage rather than taking a large lump sum.
She releases an initial £20,000 but has access to a further £80,000 that she can draw on when needed. This gives her flexibility to take smaller amounts in the future, and she only pays interest on the money she withdraws, not the total £100,000 available to her.
Why it works for her: This product’s flexibility allows Susan to release money gradually, only when she needs it. She likes the security of knowing there’s more available without the immediate interest cost on the total amount.
It’s also worth noting that providers may limit how much and how often she can draw down, depending on their terms.
Enhanced lifetime mortgage
Example: Alan, 72, has a history of heart problems and diabetes. His home is worth £250,000, and he’s interested in equity release to modify his house to allow him to live more comfortably as he ages.
Due to his health conditions, Alan qualifies for an enhanced lifetime mortgage, which allows him to borrow a larger amount than he might otherwise. He can unlock £120,000, more than a standard lifetime mortgage would provide.
He uses this money to future-proof his home, making it more accessible as he ages, and sets aside some funds for future lifestyle needs.
Why it works for him: Alan’s health conditions mean he qualifies for a larger amount. The extra money helps him prepare for the future without worrying about how he will cover necessary home improvements.
Enhanced lifetime mortgages are based on health and lifestyle assessments, and borrowers like Alan could unlock a larger percentage of their home’s value than a standard product.
Second home equity release
Example: Janet and Peter, in their late 60s, have always dreamed of owning a holiday home by the coast. Their primary residence is valued at £500,000, and they want to unlock some of its value to purchase a second home without using their savings.
They take out a lifetime mortgage on their primary residence, releasing £150,000 in equity. This allows them to purchase a coastal holiday home without selling their main property or dipping into retirement funds.
The equity release loan will be repaid when their primary residence is sold after they pass away or move into long-term care.
Why it works for them: Janet and Peter fulfil their dream of owning a holiday home, using equity release to fund the purchase. They continue living in their primary home while enjoying vacations at their new coastal retreat.
However, when purchasing a second property, they should be mindful of the potential tax implications, such as additional Stamp Duty. The loan is repaid from the eventual sale of their primary residence.
Equity release impact on inheritance
Example: Sandra, 75, took out a lump sum equity release 15 years ago. She borrowed £90,000 against her home, valued at £250,000 at the time, to enjoy her retirement and help her daughter with a deposit for her first house.
Over the years, the interest on her lifetime mortgage has increased, and Sandra now owes £200,000.
Sandra has come to terms with the fact that, after the loan and interest are repaid, there will be very little left from her property for her children to inherit.
Why this is important: While equity release provided Sandra with financial freedom during her retirement, the accruing interest means there will be little left for her family after the house is sold.
It’s a reminder that equity release can reduce or eliminate the value of inheritance.
Some plans offer inheritance protection, allowing homeowners to ring-fence a portion of their property’s value for their beneficiaries.
Equity release and benefits
Example: George, 67, owns a home worth £200,000 and receives Pension Credit and Council Tax Reduction. He takes out a drawdown equity release product, withdrawing an initial £30,000 to cover living expenses and home maintenance.
However, the additional money pushes George’s savings above the threshold for means-tested benefits. As a result, his pension credit payments stopped, and he lost part of his Council Tax Reduction.
Why this is important: Taking out equity release can affect eligibility for certain means-tested benefits, such as Pension Credit, Universal Credit, and Council Tax Reduction.
Before proceeding, it’s important to check how any money received from equity release could impact existing entitlements, as only the withdrawn amount affects benefit calculations, not the home’s total value.
Equity release for early retirement
Example: Tim, 60, had no plans for equity release until he was made redundant and found it difficult to secure another job. With an outstanding mortgage and low savings, he decided to take out a drawdown lifetime mortgage.
Tim released £50,000, using part of it to pay off his mortgage, as required. The remaining money provided him with financial support while he looked for work.
Within a year, Tim found a new job, leaving the remaining funds untouched but available for future needs if required.
Why this is important: Tim used equity release to pay off his mortgage and provide a financial safety net during a difficult time.
The flexibility of a drawdown lifetime mortgage allowed him to only access what he needed, with the option to draw more in the future if necessary.
He will still need to repay the loan when the house is sold, but the drawdown nature gives him ongoing financial support.
Key considerations
Equity release can provide flexibility and help unlock the value of your property, but it’s important to understand the long-term implications fully.
Whether it impacts the inheritance left behind, affects eligibility for benefits, or creates a financial buffer in times of need, equity release can offer solutions but also carries potential downsides.
Each option should be carefully considered as part of your overall financial planning, and it’s vital to consult a qualified financial adviser before proceeding.
All equity release plans are regulated by the Financial Conduct Authority (FCA), and members of the Equity Release Council adhere to a strict code of conduct, ensuring consumer protection.
This includes safeguards like the “no negative equity guarantee,” meaning you will never owe more than the value of your home when it’s sold.
Find an adviser
Find a qualified and regulated equity release adviser using the Equity Release Council's register.
How much can you release?
You can usually release a minimum of £10,000, but the maximum amount varies based on several factors, such as your property's value and your age.
Typically, the older you are, the more you can release.
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While we do not provide a quote or call-back service as our website is purely informational, we understand that some people do want an equity release quote.
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