The Pros and Cons of Equity Release as More Over 55s Boost Their Retirement Pots

In 2021, equity release funded £3 billion of spending by those over the age of fifty-five. They used the value in their homes to top up their income, make big purchases or to help cover day-to-day costs.

Recent market analysis by mortgage broker, Henry Dannell reveals that people taking equity release in their properties has grown by 21.4% in the first quarter of this year alone. Figures are forecasted to hit £5.6 billion by the end of the year. That is an increase to over 50,000 homeowners opting to use equity release to boost their income through products such as life mortgages.

What reasons are driving this increased trend in equity release for those over the age of fifty-five?

Within the housing market, homeowners are making the most of increases in the value of their property, which have shown strong growth over the past two years. Releasing equity is providing homeowners with the opportunity to enjoy, or prepare for, retirement by providing additional disposable income to enhance their lifestyles.

Some homeowners over fifty-five are releasing equity as an insurance to boost their income against the highest inflation rates for forty years and the cost-of-living crisis that continues to grip the UK. This can support them and help them stay in their cherished home rather than having to consider downsizing in later life to save the pennies for retirement.

For many, however, it is a tax efficient way for homeowners to share their wealth with loved ones now, rather than waiting until they have passed away. Releasing equity provides tax free cash to spend on whatever you wish. For example, homeowners could use the money to help their children or grandchildren get onto the property ladder or support them in making the leap to a perfect family home.

The most ordinary form of equity release is through what is known as a Lifetime Mortgage. Before choosing to take out equity on your home it is worth weighing up the advantages and disadvantages of equity release. To help you out, we have listed some pros and cons below.

Five Advantages of Equity Release

  1. You can use the tax-free funds from equity release for anything you wish. Home improvements, a dream holiday, supporting family members financially or simply increasing pension income all are popular uses of equity release cash.

  2. Unless you decide you want them to, your monthly outgoings won’t increase as you don’t have to repay the money released by equity until you pass away or go into long term-care.

  3. Providing you take out a lifetime mortgage with a ‘no negative equity’ guarantee then your estate will never owe more money than the value of your home when you pass away or go into long-term care.

  4. Some equity release plans have what is called a ‘drawdown’ option where you can set a total amount of equity to release, but only take smaller amounts as you need it. This not only helps to manage your core cash flow, but you only get charged interest on the equity as and when it is released, reducing overall interest.

  5. No one should have to downsize to ensure they can afford to live. Taking equity out of your home can provide the necessary income required to comfortably stay in your cherished family home.

Five Disadvantages of Equity Release

  1. When you take out equity release it is probable that this will leave a smaller inheritance for your loved ones. This is because some of value of your home will need to be used to repay the lender of the equity release plan.

  2. Just like other mortgages, ‘Lifetime Mortgages’ accrue interest on the value borrowed, so this increases the repayable amount at the end of the plan – when you pass away or go into long-term care. In extreme cases this could mean your estate or family could end up owing a substantial proportion of the value of your home to the provider.

  3. When setting up an equity release plan you will need to pay some initial set up fees which can vary between lenders. Should you decide to close the plan earlier than agreed, you will likely to be faced with early repayment charges.

  4. If you take out a Lifetime Mortgage or equity release plan, you are unable to use your home to secure against any future loans.

  5. Depending on personal circumstances, taking out money as a lump sum though equity release can affect your rights to claim benefits such as pension credit, council tax benefit or savings credit.  


Regardless of whether you are looking to improve your lifestyle in later life, support your family financially, or boost your income to cover the costs after retirement, then freeing up cash through equity release can be an appealing idea.

We recommend taking professional advice to make sure you are fully aware of all the advantages and disadvantages Equity Release can bring and what the best solution is in your circumstances.

Here at Face to Face Finance, we’ve been helping people release equity from their property for years. Our financial consultants, Ralph and Bob are also members of the Equity Release Council so you can trust that they are giving the very best advice and guidance. Find out more about our Equity Release service or get in touch to arrange an appointment.

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