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Home Equity Schemes in the UK: Lifetime Mortgages and Property Reversion Explained

Home Equity Schemes: A Guide to Lifetime Mortgages and Property Reversion Plans

At Friends Capital, we often speak with homeowners who are asset-rich but cash-poor. You may have built up significant equity in your home over the years, but if you’re over 55 and on a limited income, it can be challenging to access that wealth—especially if affordability checks or age limits prevent you from taking out a traditional mortgage.

This is where Home Equity Schemes come into play. These financial products are designed to help you unlock the value tied up in your property, giving you access to cash without having to sell your home and move out.

In this article, we’ll explain what Home Equity Schemes are, how they work, who they’re suitable for, and what to consider before deciding if one is right for you.

What Are Home Equity Schemes?

Home equity schemes allow homeowners—typically aged 55 and above—to release money from their property without having to make regular repayments or meet standard income requirements. These schemes fall under the umbrella of equity release, and the two main types in the UK are:

  • Lifetime Mortgages

  • Home Reversion Plans

Both options enable you to stay in your home for the rest of your life or until you move into long-term care, but they work in different ways.

Lifetime Mortgages

A lifetime mortgage is the most common type of equity release in the UK. It allows you to borrow money secured against your home while retaining full ownership of the property.

Key features:

  • Available to homeowners aged 55 or over

  • You remain the legal owner of your property

  • You receive a tax-free lump sum, a regular income, or both

  • No repayments are required during your lifetime (unless you choose to pay interest)

  • The loan is repaid when the property is sold—usually when you die or move into long-term care

Optional interest payments:

Some plans allow you to pay off the interest monthly to prevent it from compounding. Others let the interest roll up, meaning it’s added to the loan balance each year.

Benefits:

  • You stay in your home

  • No monthly affordability checks if you choose interest roll-up

  • Flexibility in how you receive the funds (lump sum, drawdown, or income)

  • You can ring-fence a portion of the property’s value to leave as inheritance

Things to be aware of:

  • The loan and accumulated interest reduce the value of your estate

  • Compound interest can significantly increase the amount owed

  • Early repayment charges may apply if you decide to pay the loan off early

  • A lifetime mortgage may affect your entitlement to means-tested benefits

Home Reversion Plans

With a home reversion plan, you sell a share of your property (or the full property) to a provider in exchange for a lump sum or regular payments. In return, you get to live in your home rent-free for the rest of your life.

Key features:

  • Typically available to homeowners aged 60 and above

  • You sell part or all of your home to a provider

  • You receive a tax-free lump sum or income

  • You live in your home for life, usually rent-free

  • No interest is charged because it’s not a loan

At the end of the plan, when the property is sold, the provider receives their agreed share of the proceeds. For example, if you sell 50% of your home, they’ll receive 50% of the sale price, regardless of how property values have changed.

Benefits:

  • You know exactly how much of your home you’re giving up

  • You can live in your home for life without paying rent

  • No interest to repay

  • Can be a good option if you are older and want a fixed cash amount

Things to be aware of:

  • You no longer fully own your home

  • The amount you receive is significantly less than the market value of the share you sell

  • May impact your eligibility for benefits

  • Not suitable if you want your property to remain in the family or as inheritance

Key Differences Between Lifetime Mortgages and Home Reversion

Feature

Lifetime Mortgage

Home Reversion Plan

Ownership

You keep full ownership

You sell part or all of your home

Age requirement

55+

60+

Repayment

From property sale after death or care

Provider takes share of sale value

Interest

Charged and compounds if unpaid

No interest charged

Inheritance impact

Reduces estate due to loan and interest

Reduces estate due to ownership share sold

Flexibility

More flexible

Less flexible

Who Can Apply for a Home Equity Scheme?

These schemes are designed for homeowners who meet specific criteria. While each provider has its own policies, general eligibility includes:

  • Being aged 55 or over (60+ for home reversion)

  • Owning a property in the UK, usually with a minimum value of £70,000

  • Wanting to stay in your home without selling it outright

  • Looking for a way to access funds without meeting traditional mortgage criteria

It’s important to note that lenders and equity release providers will assess your property’s condition, location, and construction type when deciding whether to approve your application.

Reasons People Choose Home Equity Schemes

There are a variety of reasons why someone might consider equity release:

  • Supplementing retirement income

  • Paying off an existing mortgage or debts

  • Funding home improvements or adaptations

  • Helping children or grandchildren financially

  • Covering care costs

  • Enjoying travel or experiences in later life

These schemes offer a way to access capital without the upheaval of selling or downsizing.

What Are the Risks and Considerations?

As with any major financial decision, there are risks and trade-offs involved.

Points to think about:

  • Compound interest: For lifetime mortgages, if you don’t pay the interest, the loan can grow quickly

  • Impact on inheritance: Home equity schemes will reduce the amount you leave behind

  • Effect on benefits: Receiving a lump sum could affect eligibility for pension credit or council tax support

  • Loss of property value growth: With home reversion, if your property appreciates, the provider benefits from that growth

  • Long-term affordability: With some flexible repayment options, be honest about your ability to manage costs

How Much Can You Release?

The amount you can access depends on a few factors:

  • Your age

  • The value of your home

  • The type of scheme you choose

  • Your health (some providers offer enhanced terms for health conditions)

Typically, the older you are, the more you can release. Some providers offer up to 50% of your home’s value if you’re over 80.

Example:

  • Home value: £250,000

  • Lifetime mortgage (at age 65): You may be able to release £60,000 to £90,000

  • Home reversion (selling 50%): You may receive £40,000 to £60,000 depending on age and provider

Safe Equity Release Practices

At Friends Capital, we only recommend equity release schemes from providers that are members of the Equity Release Council. This means you’ll benefit from key protections:

  • You will never owe more than the value of your home (no negative equity guarantee)

  • You have the right to stay in your home for life or until you go into care

  • You can move to another property, as long as it meets the provider’s criteria

  • All plans are regulated by the Financial Conduct Authority (FCA)

Is Equity Release the Right Option for You?

Equity release is not for everyone. It can be a useful tool for the right circumstances, but it’s essential to explore all your options before committing.

Alternatives to consider:

  • Downsizing to a smaller or cheaper home

  • Remortgaging to a later-life interest-only mortgage

  • Borrowing from family

  • Using savings or investments

Our role as advisers is to help you understand the pros and cons of each route and recommend a product that aligns with your goals, lifestyle, and financial future.

How Friends Capital Can Help

We offer a friendly, no-obligation conversation to explore your needs and help you understand whether a home equity scheme might work for you. Our advisers are fully regulated, and we work with a range of trusted equity release providers.

What we offer:

  • Personalised advice tailored to your financial goals

  • Access to both lifetime mortgage and home reversion products

  • Guidance through the application and legal process

  • Honest, jargon-free conversations to ensure clarity

Ready to explore your options?
 Get in touch with Friends Capital today to book your free consultation and find out if a Home Equity Scheme could support your future.

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