Understanding Equity Release

Lifetime Equity Release Mortgages and Equity Release Mortgages Explained

Our series designed to make legal matters easier to understand.

Equity release allows homeowners over 55 to unlock money tied up in their property without needing to move. For many, it provides a practical way to fund home improvements, cover unexpected costs or enjoy greater financial comfort in retirement. But the options can be confusing and understanding how each type works is essential before making any decisions.

Callum Skinner, Chartered Legal Executive at TMT Legal Services explains the two main equity release products, how they differ, how interest works and what to consider when planning for your future or protecting your family’s inheritance.

What Is Equity Release and How Does It Work?

Equity release lets you access the value of your home while continuing to live in it. You do not need to have paid off your mortgage completely, but the amount available will depend on the equity you hold. As part of the process, an independent surveyor will assess your property’s market value.

There are two main forms of equity release:

• an equity release mortgage

• a lifetime equity release mortgage (also called a Home Reversion Plan)

Both allow you to stay in your home, but they work in fundamentally different ways.

What Is an Equity Release Mortgage?

An equity release mortgage is the most common type of equity‑release product. It is a loan secured against your home that allows you to release cash either as a lump sum or in stages. You remain the legal owner of the property throughout. You generally do not need to make monthly repayments. Instead the loan plus interest is repaid when the property is sold, usually when you pass away or move permanently into long‑term care.

Interest on Equity Release Mortgages

With this type of mortgage, interest is usually fixed, and compound, meaning interest is added to the loan each year and grows over time.

The earlier you take out the mortgage, the longer this compound interest has to build, which can significantly reduce the value of your estate. Some plans allow voluntary repayments to reduce the long‑term interest impact.

What Is a Lifetime Equity Release Mortgage?

A lifetime equity release mortgage works very differently from a standard equity release mortgage. Instead of borrowing money, you sell all or part of your home to a lifetime equity release provider in exchange for a lump sum, a regular income, or a combination of both.

You retain the right to live in your home rent‑free for the rest of your life. Because the provider does not receive its share until the property is ultimately sold, they pay below market value for the portion you sell. When the home is eventually sold, the provider receives the same percentage of the sale proceeds as agreed at the outset.

Key Features of Lifetime Equity Release Mortgages

• No interest is charged, the provider’s return comes from the share of the property they own.

• You reduce the value of your estate immediately, because part of your home has been sold.

• You cannot borrow against the portion of the property you no longer own.

• The proportion you retain will usually increase in value if the housing market rises.

This type of product appeals to people who want certainty, because there is no accumulating debt, but it reduces the percentage of the property that remains part of their estate.

Which Type of Equity Release Is Right for You?

Equity Release Mortgage

Suitable for people who:

• want to retain full ownership of their home

• prefer flexibility around how and when they draw funds

• understand and are comfortable with compound interest

• may wish to make voluntary repayments

However, interest can build significantly over time, affecting the inheritance you leave behind.

Lifetime Equity Release Mortgage

May suit people who:

• want to avoid interest charges entirely

• prefer certainty about how much of their home remains theirs

• are comfortable selling part of their property now

• prioritise controlling future debt over retaining full ownership

This option provides clarity but reduces your estate immediately.

Helpful FAQs

• What is equity release?

A way for homeowners aged 55+ to access the value of their property through either an equity release mortgage or a lifetime equity release mortgage.

• Do I need to own my home outright?

No, but you must have enough equity for the plan to work.

• Will I still own my home?

Equity release mortgage: yes

Lifetime equity release mortgage: only the portion you do not sell

• Does interest apply?

Only equity release mortgages involve interest. Lifetime equity release mortgages do not.

• Is equity release safe?

When arranged through a regulated adviser and reputable provider, both products are designed to be safe. Most include a no‑negative‑equity guarantee.

• Will my children’s inheritance be affected?

Yes. Both products reduce the value of your estate, though in different ways.

• Do I need legal advice?

Yes. Independent legal advice is mandatory. TMT Legal Services will ensure you understand all legal implications clearly before proceeding.

Equity release is a significant financial decision with long‑term consequences for you and your family. At TMT Legal Services, we guide clients through the legal implications of both equity release mortgages and lifetime equity release mortgages, helping you make informed decisions that align with your long‑term goals. Contact our offices in Hythe, Chandlers Ford, Bitterne and Horsham to speak to us today.