Equity Release and Inheritance Explained (UK)
- Nick Parker
- Jan 17
- 4 min read
Updated: 3 hours ago
How equity release works, how it can affect inheritance, and the alternatives to consider in later life.
Introduction
Equity release is a later-life financial option that allows homeowners aged 55 or over to access money tied up in their property, while continuing to live there. It can provide flexibility in retirement, but it is also a long-term financial commitment that may affect your estate and the amount you leave to beneficiaries.
Understanding how equity release works — and how it may impact inheritance — is an important first step before deciding whether to speak with a regulated financial adviser.
Read our full overview of equity release options in the UK.
What is equity release?
Equity release allows homeowners aged 55 or over to unlock some of the value of their home without needing to sell or move out.
The money released can usually be taken as:
A lump sum
Regular payments
Or a combination of both
The amount available depends on factors such as:
Your age
Property value
Property type
The type of equity release plan used
Types of equity release
There are two main types of equity release in the UK:
Lifetime mortgages
A lifetime mortgage is the most common form of equity release. You borrow money secured against your home while retaining ownership.
Interest is added over time
The loan is usually repaid when you pass away or move into long-term care
Some plans allow voluntary interest or capital repayments
2. Home reversion plans
With a home reversion plan, you sell part (or all) of your property to a provider in exchange for a lump sum or regular income, while retaining the right to live there rent-free.
Home reversion plans are now much less common than lifetime mortgages.
How equity release can affect inheritance
One of the most important considerations is how equity release may affect the value of your estate.
Reduced estate value
Interest can compound over time, increasing the amount owed
This may significantly reduce the remaining value of your property
Impact on beneficiaries
Less property value may be passed on to family or beneficiaries
In some cases, the property may need to be sold to repay the loan
No negative equity guarantee
Most modern plans approved by the Equity Release Council include a no negative equity guarantee, meaning your estate will never owe more than the value of your home.
Can inheritance be protected?
Some equity release plans offer features designed to protect inheritance, including:
Inheritance protection guarantees. A portion of your property value is ring-fenced for beneficiaries.
Voluntary repayments. Some plans allow you to repay interest or capital over time, reducing the loan balance.
Availability depends on provider criteria and personal circumstances.
Alternatives to equity release
Equity release is not right for everyone. Depending on your situation, alternatives may be more suitable.
Downsizing
Selling your current home and moving to a smaller or less expensive property can release money without borrowing.
Retirement interest-only (RIO) mortgages
A RIO mortgage allows you to pay monthly interest, with the loan repaid when you pass away or move into long-term care.
Using savings or pension income
In some cases, using existing savings or pension income may reduce the need to borrow.
Family support
Some families explore financial support arrangements to avoid borrowing altogether.
Is equity release right for you?
Equity release may be suitable if:
You need access to money in retirement
You want to remain in your home
You understand the long-term impact on your estate
It may not be suitable if:
Leaving inheritance is a priority
Your income can support alternative options
You may want to move home in the near future
Everyone’s circumstances are different, and understanding your options first can help you decide whether speaking to a regulated adviser is the right next step.
Not sure where to start?
If you’re unsure whether equity release is suitable, it can help to explore all later-life financial options side-by-side before making any decisions.
Free to use. No obligation. We do not provide financial advice.
Frequently asked questions
Does equity release always reduce inheritance?
Not always, but it often reduces the value of the estate over time. The impact depends on interest rates, loan size, and whether repayments are made.
Can I protect some inheritance with equity release?
Some plans offer inheritance protection, but this may reduce the amount you can borrow.
Will my children have to repay the loan?
The loan is usually repaid from the sale of the property when you pass away or move into long-term care.
Is equity release regulated in the UK?
Yes. Equity release products are regulated by the FCA, and advice must be provided by an FCA-authorised adviser.
Are there alternatives I should consider?
Yes. Downsizing, RIO mortgages, savings, pensions, or family support may be suitable alternatives depending on your circumstances.
This guide provides general information only and should not be considered financial advice. Equity release products are regulated in the UK, and advice from an FCA-regulated adviser is required before proceeding.
