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Summary
Equity release allows homeowners aged 55+ to access cash from their property value without selling. The most common type, a lifetime mortgage, lets you borrow against your home with no monthly repayments required. Interest compounds over time, and the loan (plus accumulated interest) is repaid when you die or move into long-term care. The calculator shows how the debt grows over time and how much equity remains for beneficiaries.
How it works
Lifetime mortgage mechanics
- You borrow a percentage of your property’s value (typically 20-50%, depending on age)
- Interest is fixed for life (typically 5-7% in 2025)
- No monthly repayments are required (though some plans allow voluntary payments)
- The debt grows through compound interest — interest is charged on previous interest
- The loan is repaid from the sale of the property when you die or enter permanent care
How much can you release?
The maximum loan-to-value (LTV) depends on your age:
| Age | Typical maximum LTV |
|---|---|
| 55 | 20-25% |
| 65 | 30-40% |
| 75 | 40-50% |
| 85 | 50-55% |
Older borrowers can release more because the loan has less time to compound.
The compound interest effect
At 6% interest with no repayments, the debt approximately doubles every 12 years:
| Years | £100,000 debt becomes |
|---|---|
| 5 | £133,823 |
| 10 | £179,085 |
| 15 | £239,656 |
| 20 | £320,714 |
| 25 | £429,187 |
No negative equity guarantee
All Equity Release Council-approved plans guarantee you (or your estate) will never owe more than the property’s value, even if the debt exceeds it.
Worked example
Property: £300,000, Age: 70, Release: £90,000 (30%), Interest: 5.5%
- Initial debt: £90,000
- After 10 years: £90,000 x 1.055^10 = £153,854
- After 15 years: £90,000 x 1.055^15 = £203,047
- If property grows at 3%/year for 15 years: £300,000 x 1.03^15 = £467,490
- Remaining equity after 15 years: £467,490 - £203,047 = £264,443
- Without equity release: £467,490 equity
- Cost of releasing £90,000: £264,443 vs £467,490 = £203,047 less inheritance
Inputs explained
- Property value — current market value of your home
- Amount to release — how much cash you want
- Age — determines maximum LTV and life expectancy projections
- Interest rate — the fixed rate offered (typically 5-7%)
- Property growth rate — assumed annual house price appreciation
Outputs explained
- Cash released — the lump sum or drawdown amount
- Debt projection — how the loan balance grows year by year
- Remaining equity — property value minus debt at each point in time
- Inheritance impact — how much less your beneficiaries will receive
- Break-even — when the debt would exceed the property value (mitigated by no negative equity guarantee)
Assumptions & limitations
- Compound interest makes equity release expensive over long periods. A £100,000 release at 6% costs over £320,000 after 20 years.
- Drawdown plans (taking money in stages) reduce interest costs because you only pay interest on what you have drawn.
- Equity release may affect your means-tested benefits eligibility (pension credit, council tax support).
- You must receive independent financial advice before taking out equity release. This is a regulatory requirement.
- Early repayment charges may apply if you repay within the first 10-15 years.
- The calculator assumes a fixed interest rate and constant property growth, neither of which is guaranteed.