My parents want to release equity, what do I need to know?

With rising living costs and longer retirements, more older homeowners are looking at ways to unlock the cash tied up in the value of their homes. However, your parents may reject the idea of equity release over concerns about eating into your inheritance.

As an adult child your instinct is probably to protect your parents – from scams, poor advice, or anything that feels irreversible. You may also feel skeptical about the security of your parents’ money and whether equity release might impact your own financial situation in the future.

While it’s true that equity release isn’t right for everyone, todays stronger regulations and more flexible options mean it could be worth a closer look before ruling it out. If you were to ask me if I’d be happy for my parents to take out equity release once they’d considered the alternatives, my answer would be ‘yes’ and in this article, I’ll explain why.

Here are some important questions (and answers) to help you make sense of it all:

What is equity release?

Equity release allows homeowners aged 55 or over to access some of the money tied up in the value of their home without needing to move out. The most common form is a lifetime mortgage, where you borrow against the equity in your property (typically up to 60%) and continue living there as the sole owner.

The loan (plus compound interest – interest charged on both the loan and the interest already added) doesn’t need to be repaid until the last borrower dies or moves into long-term care. The loan is usually repaid through the sale of the home.

These articles will help you better understand the benefits and risks of equity release.

• Is equity release safe?
• Pros and cons of equity release

Is equity release expensive?

Even with the rise in interest rates, equity release may not be as expensive as you might think. According to the Equity Release Council (ERC), the average amount released in Q1 2025 was £127,414 and the average customer age was 68. Taking into consideration the average life expectancy for men and women stands at 79 and 83 respectively, we can estimate the interest accumulated throughout the average person's lifetime to see how much equity release really costs.

The following example uses these averages and is based on a 68-year-old releasing £127,414 with a 6.50% interest rate. It highlights how much a man and woman can expect to owe if they live to the average age of 79 and 83.

*If you're viewing this page on a mobile phone, scroll right to see the full table.

To put this amount into perspective, the table also shows the average property value of £435,641, (provided by Over50choices customers in 2024, as the ERC do not provide these figures) and how this could grow using the Government’s Land Registry actuals for the periods before.

You can see that at the outset, the cash amount taken compared to the property value is 29% rising to 58% 14 years later. However, despite this increase, a significant inheritance of £433,025 could remain intact ready to pass on to beneficiaries. (Please note that this is based on a set of assumptions and not guaranteed).

Tip: Use our compound interest calculator to help you understand how compound interest works.

Lifetime mortgages now offer great control allowing customers to make repayments monthly or on an ad hoc basis to lower the cost of the loan.

Your parents could also opt for a drawdown mortgage which would give them the flexibility to only draw money out as and when they need it, while holding the rest in reserve for a later date. This is another way of saving money as interest is only payable on the money that has been released.

Tip: Compare current equity release interest rates

Can we still inherit my parents’ house?

With a lifetime mortgage, the house is usually sold to repay the loan when the homeowner passes away or moves into long term care. In this instance, you won’t inherit the property itself – but that doesn’t necessarily mean you’ll inherit nothing.

Many lifetime mortgages offer optional inheritance protection, which would allow your parents to ring-fence a percentage of their home’s value for their heirs, if they want to.

Your parents could also gift some of the money they release as a “living inheritance”, giving them the opportunity to see their loved ones benefit from their gift. For example, to help with education fees, the cost of a wedding or to get a foot on the property ladder.

Will IHT be payable on money gifted to me from equity release funds?

The straight answer is maybe. Gifts made from equity release funds follow the same inheritance tax rules as any other lifetime gift. If a parent gifts money to you and then lives for seven years or more, there’s usually no inheritance tax to pay.

However, if they pass away within seven years of giving you the money, it may count towards their estate and if that is worth more than £325,000, it could be subject to inheritance tax.

It’s a good idea for your parents to keep records of any financial gifts they make – and to speak to a financial adviser or qualified tax adviser if inheritance tax is a concern.

What if my parents have someone else living with them?

If someone (like a partner, lodger or adult child) lives in your parents’ home, they may need to sign a waiver, waiving any right to remain in the property after the last borrower named on the mortgage has died or moved into long term care.

Is it possible to end up owing more than my parents’ house is worth?

Good question. This was a big concern with equity release in the past, but not anymore. Today, all lifetime mortgage lenders who are members of the Equity Release Council offer a “no negative equity guarantee”. This means the total amount to be repaid will never be more than what their home sells for, even if house prices fall.

Should I be involved in the decision?

It’s only natural to want to protect your parents, but at the end of the day it’s their home, their money and ultimately their decision. The good news is that your parents could not take out equity release without first speaking to a qualified and FCA approved financial adviser, who has a duty to ensure they have considered all possible alternatives. And then should they apply, a solicitor will also provide advice and guidance on the implications of releasing equity.

You may also be reassured to learn that the financial adviser is likely to suggest involving family members in meetings to ensure everyone understands the implications, if they consider it appropriate to do so.

Tip:  Find out what to ask a financial adviser about equity release

Regardless of equity release, having an honest, if perhaps uncomfortable, conversation with your parents around inheritance expectations, care plans, funeral plans or any financial help you may be giving or receiving, can ease worries on both sides and make all the difference when the time comes.

Is equity release a good idea?

Whether equity release is a good idea depends on several factors. But it’s a serious commitment and not something to jump into lightly.

If your parents are thinking about equity release, approach it with an open mind. In the right circumstances, equity release can improve quality of life – funding home improvements, holidays, paying off debts, or simply making their retirement more comfortable.

It’s not a one-size-fits-all solution, but with good advice, it can be a valuable tool in the right circumstances.

It’s important that your parents:

• Speak to a suitably qualified FCA registered financial adviser
• First consider all alternative ways to access extra cash
• Understand all the costs involved including the impact on any benefits they are receiving currently
• Choose a lender who is a member of the Equity Release Council
• Read our expert reviews of leading providers who are also members of the ERC.

Should you or your parents release equity today?

In a perfect world the best time to take equity release is when interest rates are at their lowest – but life’s not perfect.

We work in association with Age Partnership, one of the UK's leading equity release specialists, so if you’d like to find out more, please get in touch by phone, email or arrange a callback.

Or to see how much cash you or your parents could release, try free calculator.

Alternatively, you can find details for other specialist brokers, IFAs and providers using the Equity Release Council’s ‘find a member’ tool.