Funding home improvements with equity release

Many homeowners over the age of 55 are considering how to fund home improvement projects, whether it’s upgrading a kitchen, installing energy-efficient windows, or creating an accessible living space to prepare for later years. Equity release has become an increasingly popular option, allowing homeowners to unlock the value tied up in their property to achieve these goals.

If you’re considering equity release, this guide will help you explore your options, understand the most up-to-date trends, and decide if it’s the right path for your home improvement plans.

Equity release allows you to access money tied up in your home without having to sell or move. For homeowners aged 55 and older, this can be an effective way to fund home improvements while maintaining ownership of the property.

The two main types of equity release are:
1. Lifetime Mortgages:
With a lifetime mortgage, you borrow a portion of your home’s value. Interest accrues on the loan, but repayment typically doesn’t occur until you pass away or move into long-term care. Many schemes now allow partial repayments to prevent interest from compounding too significantly.

2. Home Reversion Plans:
In a home reversion plan, you sell a portion or all of your home to a provider in exchange for a lump sum or regular payments and the right to live in your home rent-free until you pass away or move into care. At this point, the provider sells the property to recover their share.

Home improvements are increasingly essential for both personal comfort and financial security. Key motivations include:

• Increasing Energy Efficiency: With rising energy costs, many retirees are funding projects like solar panel installation or enhanced insulation to reduce bills and make homes more environmentally friendly.

• Future-Proofing Homes: Adding stairlifts, widening doorways, or installing walk-in showers to ensure accessibility as homeowners age.

• Boosting Property Value: Renovations such as modern kitchens, bathrooms, or landscaping can increase a home’s market value, which may help offset the equity released.

Equity release has grown rapidly in popularity in recent years, with updated statistics reflecting this trend. Here are some key figures:

• Record Growth: According to the Equity Release Council (2024 report), total equity release lending in 2024 reached £6.2 billion, up from £4.8 billion in 2022, showing sustained growth.

• Popular Use of Funds: A study by Legal & General found that nearly 34% of equity release customers in 2024 used the funds for home improvements, making it the second-most-common use after supplementing household income.

• Rising Property Values: The average UK house price as of early 2025 is £290,000 (Nationwide), providing homeowners with rising equity to tap into.

These trends demonstrate that more homeowners are leveraging the value of their property for meaningful purposes like home renovations.

Beyond lifetime mortgages and home reversion plans, retirement interest-only (RIO) mortgages are another potential avenue for funding home improvements. With a RIO mortgage, you repay monthly interest on the loan, ensuring the debt won’t grow over time. The loan is repaid when the property is sold, typically after you pass away or move into long-term care. This option can suit homeowners who have enough income to cover monthly payments.

Equity release isn’t right for everyone, so it’s important to understand the potential downsides:
• Costs: While interest rates on lifetime mortgages have fallen in recent years, they can still result in a significant debt if left unpaid for many years. As of 2025, average rates range from 6% to 8%, depending on the provider and plan features.
• Impact on Inheritance: Using equity release reduces the value of your estate, so it’s worth discussing your plans with family members and considering inheritance implications.
• Eligibility: Lifetime mortgages and home reversion plans are generally only available to those aged 55 or older, and your home must meet certain criteria (e.g., minimum value).

Consulting with a qualified financial advisor or equity release specialist is key to making an informed decision.

If you decide equity release is a good fit, follow these steps to ensure you get the best deal:

1. Use an FCA-Approved Adviser: Only work with providers and advisors regulated by the Financial Conduct Authority (FCA).
2. Compare Offers: Look for plans with flexibility, such as the ability to make payments or draw down funds in stages rather than taking a lump sum.
3. Review Fee Structures: Carefully consider arrangement fees, valuation fees, and early repayment charges.
4. Check the Equity Release Council Accreditation: This ensures the provider adheres to industry safeguards, including the no-negative-equity guarantee.

Equity release is a powerful tool that can help homeowners aged 55+ fund significant home improvements while staying in their homes. With careful planning and advice, it can provide the financial freedom to enhance your living space, make your home more energy-efficient, or prepare for future needs.

If you’re considering equity release, start by speaking to an equity release specialist who can provide tailored advice based on your circumstances and goals. With rising demand and greater product innovation, 2025 is an excellent time to explore your options and unlock the value in your property for a better quality of life.