Selling Your House to Release Equity

For many homeowners in England and Wales, the family home is their single largest asset. According to the Office for National Statistics, the average UK house price was approximately £270,000 in late 2025, and many long-standing homeowners have seen their property values grow significantly over the decades. If you are retired, approaching retirement, or simply need a large sum of money, accessing the equity tied up in your home can be a practical solution — but the way you do it matters enormously.

This guide explains the main ways to release equity from your property, compares selling and downsizing with equity release products, and covers the financial, tax, and benefits implications you need to understand before making a decision.

Understanding your equity

Your home equity is the portion of your property that you truly own — the difference between its current market value and any outstanding mortgage or secured loans against it. If your home is worth £350,000 and you have a £50,000 mortgage remaining, your equity is £300,000.

Many older homeowners have little or no mortgage remaining and therefore hold substantial equity. However, that wealth is illiquid — you cannot spend bricks and mortar. Releasing some or all of that equity requires either selling the property, borrowing against it, or selling a share of it to a third party.

Before exploring your options, get an accurate picture of your property's value. A RICS-registered surveyor can provide a formal valuation, or you can request market appraisals from two or three local estate agents. For a breakdown of the costs involved in selling, see our guide on conveyancing costs.

Option 1: Selling and downsizing

The most straightforward way to release equity is to sell your current property and buy something smaller or less expensive. The difference between your sale proceeds and the cost of your new home becomes available cash.

For example, if you sell a four-bedroom house for £400,000 (with no mortgage remaining) and buy a two-bedroom flat for £220,000, you release approximately £180,000 minus your selling and buying costs. Those costs typically include estate agent fees (1% to 3% plus VAT), solicitor fees for both transactions, Stamp Duty Land Tax on the purchase, and removal costs. For a detailed look at the selling side, our conveyancing costs breakdown covers what to expect.

Advantages of downsizing

• You release equity outright with no ongoing debt, no interest accruing, and no lender involved.
• The released funds are yours to use however you wish — supplementing your pension, gifting to family, funding home improvements, or paying for care.
• You may also reduce your ongoing housing costs, including council tax, energy bills, maintenance, and insurance.
• There is no impact on your inheritance beyond the change in property value, and the remaining cash forms part of your estate.

Disadvantages of downsizing

• Selling and buying simultaneously is logistically challenging. Our guide on selling and buying at the same time explains how to manage the chain.
• There are significant transaction costs on both the sale and the purchase, which reduce the net equity you release.
• Moving home is emotionally and physically demanding, particularly for older homeowners who may have lived in the same property for decades.
• If you need to sell quickly, you may not achieve the best price. See our guide on how to sell your house fast for strategies that balance speed with value.

For a more detailed look at how downsizing works in practice, see our guide on selling to downsize.

Option 2: Equity release

Equity release allows you to access the value tied up in your home without selling it or moving out. It is available to homeowners typically aged 55 and over (the exact minimum age varies by provider) and comes in two main forms: lifetime mortgages and home reversion plans.

Lifetime mortgages

A lifetime mortgage is a loan secured against your home. You retain full ownership of the property, and the loan plus accumulated interest is repaid when you die or move into permanent long-term care. No monthly repayments are required on a standard lifetime mortgage, although many modern plans allow voluntary partial repayments (typically up to 10% of the original loan per year) to manage the growth of the debt.

The amount you can borrow depends on your age and property value. As a rough guide, a 65-year-old might be able to borrow 20% to 35% of their property's value, while a 75-year-old might access 30% to 45%. Older borrowers can typically release more because the lender expects a shorter repayment period.

The critical factor with lifetime mortgages is compound interest. Because interest is added to the loan balance rather than paid off each month, the debt grows exponentially. At a fixed rate of 6%, a £50,000 loan would grow to approximately £89,500 after 10 years, £160,000 after 20 years, and £287,000 after 30 years. This is why the Equity Release Council and financial advisers stress the importance of understanding the long-term cost before committing.

Home reversion plans

A home reversion plan involves selling all or a percentage of your property to a provider in exchange for a tax-free lump sum, regular payments, or both. You retain the right to live in the property rent-free (or for a nominal rent) for the rest of your life. When you die or move into care, the provider receives their share of the sale proceeds.

The main drawback is that the provider buys your property (or share of it) at a significant discount to market value — typically 20% to 60% below what it would fetch on the open market. This discount reflects the fact that the provider cannot sell the property until you vacate it, which could be many years away. Home reversion plans are far less common than lifetime mortgages and account for under 1% of equity release plans sold in the UK, according to the Equity Release Council.

Regulation and consumer protection

Equity release is regulated by the Financial Conduct Authority (FCA). All advisers recommending equity release must be FCA-authorised, hold an appropriate qualification (such as the CeRER — Certificate in Regulated Equity Release), and follow FCA rules on suitability, disclosure, and treating customers fairly.

The Equity Release Council is the industry body representing equity release providers and advisers. Plans from Council members come with important safeguards:

• No-negative-equity guarantee. You will never owe more than your home is worth, regardless of how much the debt has grown or how property values have moved.
• Right to remain. You have a guaranteed right to live in your property for life, provided you maintain it and comply with the terms of the plan.
• Freedom to move. You can transfer the plan to another suitable property if you decide to move.
• Independent legal advice. You must receive independent legal advice from a solicitor before completing the plan, ensuring you understand the terms and implications.

The FCA requires equity release advisers to explore whether the product is suitable for your circumstances, including whether alternatives such as downsizing, benefits entitlements, or remortgaging might be more appropriate.

The cost of equity release

Beyond the compound interest on a lifetime mortgage, equity release involves several upfront costs that you should factor into your decision:

In total, setting up an equity release plan typically costs £2,000 to £4,000 upfront. If the arrangement fee and adviser fee are added to the loan rather than paid in cash, they will accrue compound interest along with the rest of the debt.

Impact on means-tested benefits

One of the most overlooked consequences of releasing equity is the effect on means-tested benefits. Whether you sell and downsize or take out an equity release plan, the money you receive counts as capital for benefits purposes.

Key benefits that may be affected include:

• Pension Credit — capital above £10,000 generates assumed income (£1 per week for every £500 above the threshold), which can reduce your entitlement.
• Council Tax Reduction — capital above £16,000 typically disqualifies you entirely.
• Housing Benefit — affected by capital in the same way as Council Tax Reduction.
• Universal Credit — capital above £16,000 generally means you are not eligible.
• NHS-funded care — the upper capital limit for local authority-funded care in England is £23,250 (as of 2025/26).

MoneyHelper (the government-backed guidance service) advises that you should always check your benefits position before releasing equity. If you deliberately dispose of assets to preserve benefits entitlement, the Department for Work and Pensions can apply deprivation of capital rules, treating you as though you still hold the funds. Age UK offers free benefits checks for older people and can help you understand the implications before you proceed.

Inheritance implications

How you release equity has a direct impact on what you leave to your family. With downsizing, the remaining cash after purchasing your new home is part of your estate and passes to your beneficiaries under your will or intestacy rules. Your estate may still be liable for Inheritance Tax if it exceeds the nil-rate band (£325,000) and the residence nil-rate band (£175,000 where applicable).

With a lifetime mortgage, the loan plus accumulated interest is repaid from the sale proceeds when your property is sold after your death. The longer you live, the more the debt grows, and the less is left for your beneficiaries. Some lifetime mortgage plans allow you to ring-fence a percentage of your property's value (for example, 25% or 50%) as a guaranteed inheritance protection, but this reduces the amount you can borrow.

With a home reversion plan, the provider already owns a share of your property, so only your remaining share passes to your estate. The Equity Release Council recommends that you involve your family in discussions about equity release wherever possible, and any reputable adviser will encourage this too.

Selling to fund care costs

A common reason for releasing equity is to pay for residential care. In England, the local authority means test includes the value of your property if it is unoccupied (or not occupied by a qualifying person). If your total assets, including your home, exceed £23,250, you are expected to fund your own care in full.

If you need to enter a care home but are not ready to sell, your local authority may offer a deferred payment agreement (DPA). Under a DPA, the council places a legal charge on your property and pays your care fees in the meantime. The debt, plus an administration charge and interest, is repaid when the property is eventually sold or from your estate. This can give you or your family time to sell the property at a fair market price rather than accepting a below-value offer under time pressure.

An alternative is to use a lifetime mortgage to pay for care while remaining in your home (for example, to fund home adaptations or a live-in carer). However, this only works if you do not need to move into a residential care setting. For guidance on the tax implications of selling a property, particularly if it is a second home or has been let, see our guide on Capital Gains Tax when selling a second home.

Alternatives to equity release

Before committing to an equity release plan, it is worth considering whether one of these alternatives might meet your needs at a lower cost:

• Remortgaging. If you have income from a pension, investments, or part-time work, you may be able to remortgage to a standard residential mortgage with much lower interest rates than equity release. Lenders assess affordability based on your income, and some now offer mortgages to borrowers into their 70s and beyond.
• Retirement interest-only (RIO) mortgage. Introduced following FCA rule changes in 2018, a RIO mortgage lets you borrow against your home and pay only the monthly interest. The capital is repaid when you die, move into care, or sell. Because you service the interest each month, the debt does not grow — a major advantage over a lifetime mortgage. You must demonstrate sufficient retirement income to cover the payments.
• Downsizing. As discussed above, selling and moving to a less expensive property releases equity outright. See our guide on selling to downsize for practical advice.
• Letting out a room. Under the government's Rent a Room scheme, you can earn up to £7,500 per year tax-free by letting a furnished room in your home. This provides regular income without reducing your equity or taking on debt.
• Local authority grants and support. If you need money for essential home repairs or adaptations, your local authority may offer grants such as the Disabled Facilities Grant. Age UK can help you identify what support is available in your area.
• Benefits check. Many older homeowners are not claiming all the benefits they are entitled to. A free benefits check from Age UK, Citizens Advice, or your local council could reveal additional income that reduces or eliminates the need to release equity.

Making the decision: a comparison

The right approach depends on your circumstances, your age, your health, and what you want the money for. Here is a summary to help you compare:

Steps to take before releasing equity

Whichever route you are considering, the following steps will help you make an informed decision:

1. Get a property valuation. Know what your home is worth before you explore any option. Request appraisals from at least two estate agents and consider a formal RICS valuation.
2. Check your mortgage position. Confirm your outstanding balance and any early repayment charges on your existing mortgage.
3. Review your benefits entitlement. Contact Age UK, Citizens Advice, or your local council for a free benefits check before taking any action that changes your capital position.
4. Speak to a whole-of-market financial adviser. If considering equity release, use an adviser who covers the whole market rather than a tied agent representing a single provider. MoneyHelper offers free guidance and can point you to vetted advisers.
5. Involve your family. Discuss your plans with those who may be affected, particularly if inheritance is a concern.
6. Consider the long-term. Think about where you want to be living in 10, 15, or 20 years. If you are likely to need residential care eventually, factor that into your planning.
7. Get independent legal advice. This is mandatory for equity release and strongly recommended for any major property decision. A solicitor can explain the implications of each option in your specific circumstances.

Sources

• Financial Conduct Authority (FCA) — Equity release guidance for consumers — fca.org.uk
• Equity Release Council — Equity release market statistics and standards — equityreleasecouncil.com
• MoneyHelper — Equity release, lifetime mortgages, and home reversion plans — moneyhelper.org.uk
• Age UK — Equity release, using your home to get money, and paying for care — ageuk.org.uk
• Gov.uk — Deferred payment agreements for adult social care — gov.uk
• Office for National Statistics — UK House Price Index — ons.gov.uk
• HM Revenue & Customs — Rent a Room scheme — gov.uk
• Gov.uk — Care and support means test and charging for residential care — gov.uk

Frequently asked questions