Equity Release Calculator — Which Route, and Should You At All?

You're 55 or over, you own your home, and most of your wealth is in the walls rather than the bank. Equity release turns some of it into tax-free cash without selling and without moving.

There are two families of product. The lifetime mortgage — a loan secured on your home, where interest rolls up rather than being billed to you — accounts for the overwhelming majority. And the home reversion, where you sell a share of the property outright for a discounted lump sum.

With a lifetime mortgage you keep 100% ownership and you have the right to remain in your home for life. Nothing is repaid until you die or move into long-term care. That is genuinely attractive, and for a lot of households it's the only realistic route to the money.

The price is compounding. Interest is charged on the loan and on the interest already added. At 6.5%, the debt doubles roughly every eleven years. Which is why how you structure the plan matters far more than shaving 0.2% off the rate.

The property normally has to be worth at least £70,000–£100,000 depending on type, and any existing mortgage must be cleared from the proceeds.

Here's the part that matters more than the maximum: you should almost never take the maximum. Borrowing less usually gets you a better interest rate, and every pound you don't take is a pound that doesn't compound for twenty years. Take what you need, not what you're offered.

Most people are shown the first one and sign it. It is, in almost every case, the worst of the four.

The calculator runs all four against your actual numbers and ranks them by the only measure that matters at the end: what's left for your family.

This is the most important paragraph on the page, and it is missing from essentially every equity release calculator on the internet.

Most modern lifetime mortgages allow voluntary repayments of up to 10% of the loan each year, penalty-free. You are not obliged to pay anything. But if you choose to pay just the monthly interest, the balance never compounds at all. It sits exactly where it started, forever.

£60,000 at 6.5% = £325 a month. Pay it, and in twenty years you still owe £60,000 — not £211,000.

That is a £151,000 difference in your children's inheritance, bought for £325 a month — roughly what many people are already paying for a car.

And you don't have to be all-or-nothing about it. Pay half the interest and the debt still grows far more slowly. Pay it for ten years while you're well, then stop when your income drops. The flexibility is built into the product and almost nobody uses it, because almost nobody is told about it.

Ask your adviser directly: "what are the voluntary repayment terms, and what happens to the balance if I service the interest?" If they can't answer clearly, find another adviser.

If you take nothing else from this page, take this. At 6.5% rolled up, an equity release debt doubles roughly every eleven years.

A £100,000 release becomes:

£137,000 after five years · £188,000 after ten · £264,000 after fifteen · £352,000 after twenty.

Meanwhile your house, growing at a hopeful 2.5%, goes from £350,000 to about £574,000 over the same twenty years. So the debt grew by £252,000 and the house grew by £224,000. The loan ate all of your home's growth and started on the equity underneath.

This isn't a scandal or a scam — it's exactly what a rolled-up loan does, and the product is clearly labelled. But it's the reason the structure matters so enormously, and the reason "just take the lump sum, it's easiest" is such expensive advice.

Your State Pension is safe — it isn't means-tested and equity release doesn't touch it.

But Pension Credit, Council Tax Reduction and Universal Credit absolutely are. And they look at your savings.

Savings over £10,000 → benefits reduced. Savings over £16,000 → benefits usually stop entirely.

So picture it. You release £60,000 as a lump sum. It lands in your current account. Overnight your savings go from £4,000 to £64,000, and your Pension Credit — and everything that comes with it, including Council Tax Reduction, free NHS dental treatment, and the Warm Home Discount — stops.

You have borrowed money at 6.5%, compounding against your house, in order to lose benefits you were entitled to. That is a genuinely terrible outcome and it happens to people.

The fix is simple, and it's why drawdown exists

Take a drawdown plan. Release only what you need right now — perhaps £5,000 — and leave the rest in the reserve facility with the lender. Money in the reserve is not your savings. It doesn't count. Your benefits are untouched, and the undrawn money isn't accruing interest either.

Then draw more as and when you actually need it, keeping your bank balance below the thresholds. This is the standard, sensible way to do it — and the calculator above flags it the moment your numbers put you over the line.

If you receive any means-tested benefit, say so to your adviser on the first phone call. It should change the entire shape of the plan.

Some plans offer an inheritance protection guarantee — you ringfence a fixed percentage of the property that the loan can never touch. It costs you a lower maximum release, and if leaving something matters to you, it's worth asking about.

Downsizing. Sell the £350,000 house, buy a £230,000 flat, pay 4% in moving costs. You walk away with roughly £106,000, no debt, no interest, and your estate keeps the entire flat. That is usually more cash than equity release gives you and it costs you nothing per year. The reason people don't is not financial — it's the garden, the neighbours, the grandchildren's room. Those reasons are legitimate. But price them before you dismiss the option.

A retirement interest-only (RIO) mortgage. You pay the interest monthly, the capital is repaid when you die or move. Rates are usually lower than equity release, and the balance never grows. The catch: you must pass an affordability assessment on your retirement income. If you can, a RIO is generally cheaper than an interest-served lifetime mortgage.

Family. Uncomfortable, and often better. Your children may prefer to lend or gift you £20,000 now than watch £151,000 of their inheritance disappear into compound interest. Have the conversation before you sign, not after.

Just borrowing less. Do you need £60,000, or do you need £15,000 and a plan? The single biggest lever on the final cost is the size of the loan, and it's entirely in your control.

None of this means equity release is wrong. For plenty of people it's the right answer and a genuinely good product. But rule the alternatives out on purpose, rather than never being shown them — which is what happens when your only source of information is a company that earns a commission on the sale.

You're 68. Your home is worth £350,000, mortgage-free. You need £60,000 — a new roof, a car, and something to help the grandchildren. The rate is 6.5%, fixed for life. Realistically the plan runs 20 years.

Route 1 — lump sum (what most people take)

£60,000 on day one. After 20 years you owe £211,400. Your home is worth about £574,000. Estate left: £362,600.

Route 2 — drawdown

Take £20,000 now, keep £40,000 in reserve and draw it over the next eight years as you need it. Interest only rolls up on what you've drawn. After 20 years you owe roughly £150,000. Estate left: £424,000. That's £61,000 more for doing nothing but taking the money slower.

Route 3 — interest-served

Take the full £60,000, then pay £325 a month. The balance never moves. After 20 years you owe £60,000. Estate left: £514,000.

You'll have paid £78,000 in interest over those twenty years — but you'd have paid £151,400 in rolled-up interest anyway, and it would have come out of your children's pockets instead of yours. You are £151,400 better off for £325 a month.

Route 4 — home reversion

To raise £60,000 at 68, you'd sell roughly a 50% share (reversions pay well below market value). No interest, ever. Your remaining 50% grows with the market and is guaranteed: about £287,000 at year 20. Worse than interest-served, but it can never blow up.

And the benefits trap

You have £4,000 in savings and you receive Pension Credit. Take the £60,000 lump sum and your savings hit £64,000 — Pension Credit stops, and so does your Council Tax Reduction. The drawdown route, taking £5,000 at a time, keeps you under £10,000 and protects every penny of it.

Same house. Same £60,000. A £151,000 spread in what your family inherits — plus your benefits, kept or lost, depending on a choice nobody explained to you.

Official sources & further reading: get free impartial guidance from MoneyHelper, check the standards and find an adviser at the Equity Release Council, verify any firm on the FCA register, and check Pension Credit thresholds on GOV.UK. Browse every tool on the mortgage calculators homepage.