How Much Can You Borrow From Equity Release | December 2023

Equity release provides homeowners with access to the value tied up in their property. But how much can you borrow from equity release? This guide outlines the key factors which determine the amount of equity that can be released.

This guide will delve into the key elements which influence how much equity you can borrow, such as:

  • Understanding equity release basics
  • The equity release process
  • Factors affecting the amount you can borrow
  • Types of equity release schemes
  • Benefits and risks

Table of Contents

Understanding Equity Release Basics

A variety of tools that let you access the equity locked up in your house are referred to as equity release. Equity is the market value of a homeowner’s unencumbered interest in their property. 

The equity release lender provides a maximum amount of capital in the form of a lump sum, regular income, or both, depending on the type of plan.

Plans for equity release are intended for senior homeowners, usually those over the age of 55. The two main types are lifetime mortgages and home reversion plans. 

Whilst lifetime mortgage is a loan secured against your home, a home reversion plan involves selling part or all of your home.

How much equity release you can receive is contingent on the value of your property and the equity release product you opt for. However, other factors also come into play, such as your age and health condition. 

Most equity release providers use these factors when deciding how much equity you can release from your property.

The Equity Release Council, a trade body for the equity release sector, sets out standards for equity release products. No matter how much money you borrow, you’ll never owe more than the value of your property. 

This is thanks to their guarantee against negative equity, a crucial aspect to consider when thinking about how much equity you can release.

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The Process of Equity Release

The process of releasing equity starts with an initial consultation with a professional adviser. They will talk to you about your requirements, explaining the various equity release options. 

A personalised illustration of potential plans will be provided, detailing the maximum equity release you could receive.

After you have settled on the most suitable choice for you, your property will be properly valued to estimate its current value. This valuation is integral to calculating the maximum percentage of equity you can release. 

It’s worth noting that the value of your property can be influenced by various factors, including its location, size, and condition.

Once the valuation is complete and the amount of equity you can release is determined, the equity release provider will make a formal offer. The amount of money you can release, the interest rate, and any fees are all included in this. 

Furthermore, you will be informed about the terms and conditions of the plan, including any early repayment charges.

Finally, the legal work is the last step. Your solicitor will check all the details, making sure all outstanding debts secured against your home are cleared and arranging for the money to be paid to you. 

The time it takes from the initial consulation to receiving the money can vary, but generally, it takes roughly 8-12 weeks.

Factors Influencing Equity Release Amount

Several factors influence the amount of equity you can release from your home. The worth of your property comes first.

The higher the property value, the more equity you can release. Alternatively, the exact amount also depends on the equity release lender’s loan-to-value ratio.

Your age is another significant factor. The older you are, the more equity you can release. This is because life expectancy plays a role in determining the amount of equity you can release. 

For equity release, the youngest applicant is required to be at least 55 years old, but some providers may want a higher rate.

How much equity you can get may also depend on your health. If you have certain health issues, some equity release lenders may allow you to release a higher percentage of the value of your home. This is referred to as enhanced equity release.

Finally, whether it’s a single or joint application can affect the amount. With a joint application, the amount of equity you can release is based on the youngest applicant’s age. Therefore, the younger you are, the less equity you’ll be able to release.

Understanding Equity Release Basics

Calculating How Much You Can Borrow

Calculating how much you can borrow on a lifetime mortgage or other equity release scheme involves several steps. 

You should begin by determining the value of your home, typically carried out by a professional valuation. More money may be released from your property, depending on whether it’s worth more.

The next step is to consider the age of the youngest homeowner. 

Equity release providers use this information, along with health conditions and life expectancy, to calculate the maximum loan available In general, the more equity you can release depends on your age and your life expectancy.

Remember that equity release calculators are useful tools in this process. Based on the age and value of your property, they can offer you a clear idea of how much equity you can release. 

However, they should be used as a guide only, as the actual amount you can release will be determined by the equity release provider.

It’s also important to consider any outstanding mortgage or other debt secured against your home. This will need to be paid off with the proceeds of the equity release. This means that if you have a high mortgage balance, you will be able to release less equity.

"Plans for equity release are intended for senior homeowners, usually those over the age of 55."

Equity Release Interest Rates and Charges

Interest rates and charges play a significant role in equity release, the amount paid throughout the course of the loan depending on the interest rate. Generally, equity release interest rates are fixed or, if they are variable, there is a ‘cap’ or upper limit.

The compounding of interest is a critical aspect of equity release. Interest is added to the loan amount each year, and future interest is charged on this increased amount. This could result in your debt increasing quickly, reducing the equity you still have in your home.

There are also several charges associated with equity release. Some examples of this are the possible arrangement costs, valuation fees, attorney’s fees, and perhaps early repayment penalties. It is advisable that these charges are factored into your decision-making process.

The combination of interest rates and charges can significantly impact how much equity you can release. Therefore, it’s crucial to understand these aspects before deciding on an equity release plan.

The Process of Equity Release

Types of Equity Release Schemes

The two main types of equity release schemes are lifetime mortgages and home reversion plans.The scheme you choose will affect how much equity you can release.

A lifetime mortgage is the most common type of equity release, allowing you to borrow a proportion of your home’s value. Interest is charged on the amount borrowed, which can be repaid or added to the total loan amount. 

Until you die or require long-term care, you are still the legal owner of your house and are free to stay there. The loan is then repaid from the sale of your property.

Alternatively, a home reversion plan involves selling a part or all of your home to a reversion company. In return, you receive a lump sum or regular payments. Until you pass away or enter long-term care, you are permitted to remain rent-free in your home. 

The proportion of your property sold to the reversion company will always remain the same, regardless of changes in property prices.

Risks and Benefits of Equity Release

Equity release comes with both benefits and risks. On the positive side, it allows you to access the valued house without having to move out or relocate.

This can provide a significant boost to your finances, particularly if you have no other means of increasing your income.

However, it is important to consider drawbacks as the cost of equity release may be high.

The compounding of interest on a lifetime mortgage can quickly escalate, leaving less inheritance for your family. It may also affect your tax position and entitlement to state benefits.

There’s also a risk of negative equity, although the no negative equity guarantee provided by members of the Equity Release Council means you won’t have to repay more than your home’s value. 

Remember that equity release can lower the value of your estate and leave your heirs with less, so it’s crucial to keep this in mind.

Tax Implications of Equity Release

The tax implications of equity release are another critical factor to consider. Although the money you release is tax-free, it could affect your tax position in other ways. If you use the money to make money, for instance, that money can be taxable.

Additionally, equity release may affect your ability to get means-tested benefits. If the money you release, combined with your other savings, exceeds £10,000, it could affect your entitlement to benefits such as Pension Credit and Housing Benefit.

Furthermore, it’s necessary to take into account any potential effects on inheritance tax. If you use equity release to reduce the value of your estate, it could potentially reduce the amount of inheritance tax that might be due when you die.

Factors Influencing Equity Release Amount

Legal Considerations for Equity Release

When releasing equity, there are often legal issues to address. Therefore, you should use a solicitor who specialises in equity release to ensure you understand the legal implications. 

For example, you still own your home if you have a lifetime mortgage, whilst the reversion company owns all or part of it if you have a home reversion plan.

You need to understand what happens if you want to move or sell your home, or if you want to pay off the loan early. For instance, some plans may have early repayment charges. 

If you’d like someone else to move into your house, you ought to make sure that doing it is allowed under the terms of your plan.

Seeking Professional Advice on Equity Release

Given the complexities and potential pitfalls of equity release, getting professional advice is crucial. You can better grasp the benefits and dangers of equity release with the aid of an equity release adviser. 

They can provide a personalised illustration of how much money you could release, explaining the impact on your estate and potential inheritance.

An adviser will also consider your individual circumstances, including your health and lifestyle factors, to recommend the best suited plan for you. They should be regulated by the Financial Conduct Authority and, ideally, a member of the Equity Release Council.

While equity release can provide a much-needed cash boost, it’s not right for everyone. It’s a complex product with many variables, so professional advice is essential.

Getting to Grips with Equity Release Mortgages

One of the most popular ways for homeowners to release equity from their houses is through an equity release mortgage. This is a type of lifetime mortgage which allows you to borrow money against the value of your property, whilst also still retaining ownership. 

The loan and the accrued interest are then repaid when the last borrower dies or moves into long-term care.

The value of your property and your age have an impact on the amount you’re eligible to borrow through an equity release mortgage. As a rule, the older you are, the more equity you can release. 

However, the exact amount can also be influenced by other factors such as your health and lifestyle, the property’s construction, and the terms set by the equity release lender.

Unlike traditional mortgages, with an equity release mortgage, you do not need to make monthly payments. Instead, the interest is added to the loan, which can substantially increase the amount you owe over time. 

However, some programmes give you the option to make payments, lessening the impact of interest roll-up voluntarily.

Using an Equity Release Calculator

To get an idea of how much equity you can release from your house, you can use an equity release calculator.

This online tool uses information about your age and property value to provide an estimate of the maximum amount of equity you could potentially release.

Although an equity release calculator can provide a useful initial lump sum estimate, it’s important to remember that it only provides an approximation. A specialist assessment of your home will be used to figure out the exact amount you can release.

Calculating How Much You Can Borrow

Understanding the Impact of Monthly Payments and Early Repayment Charges

Although an equity release plan might not ask you to make monthly payments, some programmes do. 

This can help to manage the loan size, particularly if you’re concerned about eroding the value of your estate and leaving less for your heirs. It’s also possible to pay off the interest, maintaining a steady loan amount.

However, if you decide to repay the loan early, you may be hit with an early repayment charge. Some lenders charge this fee if you repay the loan before the repayment plan finishes. 

The charge can be a significant amount, so it’s crucial to factor this into your decision-making process.

The Importance of Free Advice and Professional Guidance 

Equity release is a significant financial decision with long-term implications, making it necessary to get confidential and professional advice.

Several organisations in the UK offer free advice on equity release, providing impartial information to help you understand the pros and cons.

Professional advice from a financial adviser specialising in equity release also provides invaluable insight. They can offer a personalised illustration, explaining the features, risks, and benefits based on your individual circumstances. 

They may also give you advice on how to optimise the value of your property, whether you own it outright or have a mortgage on it.

Understanding how much equity you can release from your home involves grappling with multiple factors. However, with consideration and expert advice, you can make an informed decision that’ll help with your financial needs in later life.


Q1: What is equity release and how much can I borrow?

Equity release is a financial solution which allows homeowners, typically over the age of 55, to access the value tied up in their property. The amount you can borrow depends on several main factors. These include your age, property value, and the type of equity release scheme you choose.

A lifetime mortgage is the most common type of equity release and allows you to borrow a percentage of your home value, whilst also maintaining ownership. 

How much you can borrow on a lifetime mortgage largely depends on the lender’s terms and conditions, your age, and the value of your property. An equity release calculator will provide you with a rough estimate.

Q2: How can I calculate the equity I have in my home?

The equity you have in your home is the difference between the market value of your property and any outstanding mortgage or other debt secured against it. 

You will only have 100% equity in the property if you have paid off your mortgage and own the property outright. To calculate equity release or how much equity you have, it is necessary to know your home’s current value. This can be done through a professional valuation.

Once you have the current market value, subtract any existing mortgages or loans secured against your property. The remaining amount is the equity you have. It is vital to recognise that your home’s value can be informed by many factors. These include its size, location, and property construction.

Q3: What is the minimum amount I can release with equity release?

Although the minimum amount you can release with an equity release plan varies among different lenders, it typically starts from as low as £10,000. The exact amount is dependent on the value of your home, your age, and the specific terms set by the equity release provider.

Conversely, taking the minimum amount might not always be the most cost-effective option. The costs associated with equity release, such as arrangement fees and valuation fees, can make small loans relatively expensive. 

It is important to carefully contemplate your needs, seeking professional advice.

Q4: How are the sale proceeds from my home used in an equity release scheme?

In an equity release scheme, particularly a home reversion plan, you sell part or all of your home in exchange for a lump sum or regular income. Then, you are able to spend your sale proceeds in whatever way you choose. 

However, if you have an existing mortgage on your property, it must be paid off first, either with these proceeds or with other funds.

When the property is sold, typically when you die or move into long-term care, the equity release provider will take their share from the sale proceeds. 

If there’s any money left, it will go to your estate. The specific left-over amount will be dependent upon the terms of your plan and the property’s current market value. 

Q5: Can younger customers release equity from their homes?

The minimum age to release equity from your home is normally 55. Nevertheless, it’s important to remember that the older you are, the more equity can be released. 

As life expectancy plays a notable role in determining how much cash you can release, younger customers may find that they can release less than older homeowners.

However, remember that rules can vary among providers, with some setting a higher minimum age. It’s also worth bearing in mind that your health can influence how much you can release.

Alternatively, some providers offer enhanced plans for those with certain health conditions, allowing them to release more from their equity release plans.

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William Jackson

William is a leading writer for our site, specialising in both finance and health sectors.

With a keen analytical mind and an ability to break down complex topics, William delivers content that is both deeply informative and accessible. His dual expertise in finance and health allows him to provide a holistic perspective on topics, bridging the gap between numbers and wellbeing. As a trusted voice on the UK Care Guide site, William’s articles not only educate but inspire readers to make informed decisions in both their financial and health journeys.