Unlocking Your Home's Equity: A Guide to Financial Freedom

Unlocking the equity that’s tied up in your home could provide a welcome boost to your finances and allow you to enjoy your later years. While many people choose to take a lump sum from their home, a drawdown plan might better suit your needs.

According to data released by the Equity Release Council in July 2025, the market grew by 10% in the second quarter of 2025 compared to a year earlier. In those three months, more than 5,300 new customers used equity release, and in total, £636 million of property wealth was unlocked.

Read on to find out how equity release works, including using a drawdown plan.

Understanding Equity Release

Equity release is a type of loan, but you don’t make repayments.

Equity release is a type of loan that’s secured against your home. Unlike a traditional loan, you don’t have to make repayments. Instead, the interest is rolled up, and the total debt is repaid when you pass away or move into long-term care.

Usually, you need to be a homeowner aged 55 or over, and any existing mortgage must be repaid when taking out equity release.

The money accessed through equity release can be used however you wish, and it isn’t subject to Income Tax. So, it could be a tax-efficient way to supplement your income.

You might use the money to repay your mortgage, allowing you to retire without having to worry about repayments. Alternatively, you might use it to cover day-to-day expenses, update your home, or take some incredible holidays.

A July 2025 survey from Legal & General suggests the number of people using equity release to clear debts is falling. In the first half of 2024, 31% of equity release customers used it to repay a mortgage. This figure fell to 19% in the first half of 2025.

With potentially fewer people needing to access a large lump sum immediately, using a drawdown plan could become more attractive.

The Benefits of a Drawdown Plan

Using a drawdown plan could reduce the interest charged compared to withdrawing a lump sum.

If you choose, you can access the full amount available to you through equity release in one withdrawal. However, a drawdown plan could provide greater flexibility.

With a drawdown plan, you take an initial amount upfront and then access the remaining portion in the future to suit your needs.

There are benefits to choosing a drawdown plan, including potentially reducing the amount of interest you pay.

You’re only charged interest on the amount you withdraw, not the full amount available to you. So, the interest added to your loan could be lower when compared to withdrawing a large one-off lump sum.

In addition, drawdown provides flexibility. You don’t have to access additional funds if you don’t need to, but the option is there should your circumstances or plans change.

Of course, there are drawbacks to consider if you opt for a drawdown plan.

Depending on your plan, the interest rate may change. So, you could end up paying a higher rate of interest on later withdrawals than you would if you accessed the money right away.

You might also be offered a higher release amount if you take the money as a lump sum, but this is not always the case.

Considerations Before Choosing Equity Release

Using equity release could affect the value of your estate.

Equity release might sound like a simple way to fund your retirement, but it isn’t the right option for everyone.

As you usually don’t make any repayments towards the loan, the outstanding balance can far surpass the initial amount you borrowed. If leaving a financial inheritance to your loved ones is important, you may want to consider how equity release could reduce the value of your estate and what you leave behind for beneficiaries.

In addition, it’s important to note that equity release may affect your eligibility for means-tested benefits and make it difficult to move in the future.

So, before you start considering how you’d spend property wealth, take some time to consider if it’s the right option for you. You might want to explore other options, such as downsizing or taking out a traditional loan.

How to Get Started with Equity Release

Contact us to discuss if equity release is right for you.

If you have questions about equity release, we’re here to help. We could calculate how much you might be able to borrow and illustrate the cost of borrowing.

Our team is dedicated to guiding you through the process. We understand that navigating financial decisions can feel overwhelming. But remember, you’re not alone. We’re here to provide support and clarity every step of the way.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Equity release will reduce the value of your estate and can affect your eligibility for means-tested benefits.

A lifetime mortgage is a loan secured against your home. To understand the features and risks, ask for a personalised illustration.

The Financial Conduct Authority does not regulate tax planning.