Equity Release Costs
By Mustafa Bilgic · Updated 24 August 2026
Equity release lets you access cash locked in your home without selling it, but the cost is compound interest that rolls up over years or decades. A loan taken at 65 can more than double by 85 if no repayments are made. Before you speak to an adviser, run the projections through our equity release calculator to understand exactly how the debt grows on your property value.
Compound interest is the hidden engine behind equity release costs. Use the calculator to see the 10, 20, and 30-year projections before your adviser meeting.
The Compound Interest Reality
With a lifetime mortgage -- the most common type of equity release -- you borrow a lump sum or draw down in stages, and interest is added to the balance each month. Because you make no monthly payments, next month's interest is charged on last month's interest too. That compounding effect is what makes equity release expensive over time, and it accelerates the longer the plan runs.
A no-negative-equity guarantee, standard on plans approved by the Equity Release Council, means you will never owe more than your home is worth. That protects you, but it does not slow the compounding. Our equity release calculator shows year-by-year how the debt stacks up against projected property values, so you can see whether your estate is likely to retain any equity after the plan is repaid.
Upfront Fees You Will Pay
Before a penny of equity reaches your bank account, expect to cover a property valuation, solicitor's fees (your own and sometimes the lender's), a financial adviser fee, and potentially an application or arrangement fee. The valuation is needed even if you had one recently -- lenders require their own panel surveyor. Solicitor's fees for equity release tend to be higher than a standard remortgage because the legal work is more complex.
Financial advice is mandatory for equity release in the UK. The adviser fee may be a flat charge or a percentage of the amount released. Some advisers take commission from the lender instead of charging you directly, which can create a conflict of interest. Ask upfront how they are paid. All of these costs reduce the net cash you receive, so factor them into the amount you request rather than discovering after the fact that you are short.
Early Repayment and Flexibility
Most lifetime mortgages carry an early repayment charge (ERC) if you repay within a set period, often the first 8 to 15 years. The charge is typically a percentage of the amount repaid and decreases over time. If you think your circumstances might change -- downsizing, inheritance, a partner moving into care -- choose a plan with a low or reducing ERC.
Some modern plans allow voluntary partial repayments of up to 10% of the original loan each year without penalty. Making even small repayments dramatically reduces the compound interest bill over the life of the plan. Drawdown plans, where you take money in stages rather than one lump sum, also limit the interest because you only pay interest on what you have actually withdrawn. Both features cost nothing extra but save thousands.
Is Equity Release Right for You?
Equity release suits homeowners who need capital, want to stay in their home, and have no cheaper alternative. Downsizing is almost always less expensive if it is practical. A standard retirement interest-only mortgage may also be cheaper if you can afford the monthly interest payments from pension income.
The decision affects your inheritance, your entitlement to means-tested benefits, and your long-term housing options. Releasing equity could push your total assets above benefit thresholds, or it could provide the cash that keeps you independent for longer. There is no universal answer -- it depends on your property value, your health, your family situation, and the interest rate you are offered. This page explains costs, not suitability. Speak to a qualified equity release adviser before proceeding.
Not tax advice -- speak to your accountant.
Frequently asked questions
Can the debt ever exceed my home's value?
Not if the plan includes a no-negative-equity guarantee, which is standard on all Equity Release Council-approved products. When the home is sold, any shortfall is written off by the lender.
Do I still own my home with equity release?
Yes. With a lifetime mortgage you retain full ownership and the right to live in the property for life. The lender holds a charge against the property, similar to a standard mortgage, but you remain the legal owner.
What happens if I want to move house?
Most plans are portable, meaning you can transfer the lifetime mortgage to a new property provided it meets the lender's criteria. If the new property is worth less, you may need to repay part of the loan, which could trigger an early repayment charge.
Does equity release affect my state pension?
The State Pension is not means-tested, so receiving a lump sum from equity release will not reduce it. Means-tested benefits such as Pension Credit or Council Tax Reduction could be affected if the released cash increases your savings above the relevant thresholds.