Equity release for home improvements: how to fund your renovations

Yes - equity release for home improvements is one of the most common reasons homeowners aged 55 and over choose to unlock cash from their property. Both lifetime mortgages and home reversion plans let you use the funds for renovations, adaptations, extensions or energy upgrades, and lenders place no restriction on how you spend the money once it lands in your account.

If you're new to the concept, our guide to what is equity release explains the basics before you go further. To qualify for equity release, you'll typically need to meet a few core conditions.

Equity release for home improvements works by unlocking some of the value tied up in your home, without you having to sell or move out. There are two main products, and the right one for you depends on your age, health and how much control you want over repayments.

Lifetime mortgage

A lifetime mortgage is the most popular form of equity release. You borrow a percentage of your home's value as a tax-free lump sum, a drawdown facility you can dip into over time, or a combination of both. There are no compulsory monthly repayments - interest simply rolls up and is added to the loan, though many modern plans let you make voluntary repayments to manage how the balance grows. Lifetime mortgage rates and terms vary between lenders, which is why comparing the market matters.

Some homeowners choose a payment-term lifetime mortgage instead, committing to pay some or all of the monthly interest for a set period. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, so it's worth thinking carefully about how a lifetime mortgage fits alongside any other borrowing secured against your property.

Home reversion plan

With a home reversion plan, you sell all or part of your property to a provider in exchange for a cash lump sum or regular income, while retaining the right to live there rent-free for life. These plans are typically only available from age 65 and tend to suit homeowners who want a fixed, certain amount rather than a rolling interest balance.

Whichever route you choose, look for a lender that's a member of the Equity Release Council. Membership means every plan comes with a no-negative-equity guarantee, so you, or your estate, will never owe more than your home sells for, even if property prices fall.

There's no restriction on how you spend money released from your home, but most homeowners use equity release for home improvements that make their property more comfortable, more accessible or more energy efficient. Common projects include:

How much equity release can I get for home improvements? The amount depends on your age, your property's value, and the lender's maximum loan-to-value criteria - broadly speaking, the older you are, the larger the percentage of your home's value you can release. Well-chosen upgrades, particularly energy efficiency improvements, can also help maintain or increase your property's value, which may partially offset the equity used to fund them.

The table below shows approximate maximum amounts available at different ages and property values. Try our equity release calculator for an instant estimate based on your own circumstances.

These figures are illustrative only - your actual maximum will depend on the lender, your health and lifestyle, and your property type. Because we compare a wide range of lenders, we can help you find the highest amount available for your circumstances rather than relying on a single provider's criteria.

If you only need funds for one phase of a project, a drawdown lifetime mortgage lets you release money in stages rather than all at once. Only taking what you need, when you need it, reduces the amount of interest that rolls up over time compared with taking the full lump sum on day one.

What are the costs of equity release? Arranging a lifetime mortgage or home reversion plan involves a handful of set-up costs, on top of the interest that rolls up over the life of the plan. Typical fees include:

Because most lifetime mortgages don't require monthly repayments, unpaid interest is added to the loan and future interest is then charged on that larger balance too - this is known as roll-up interest. It means the amount you owe can grow considerably faster the longer the plan runs, particularly over a 10 to 15-year timeframe. A regulated advisor can provide a personalised illustration showing exactly how your own balance is projected to grow, so you can see the real cost before you decide to fund a renovation this way.

Is equity release or remortgage better for home improvements? For homeowners aged 55 and over, the right choice usually comes down to income, age and how much you want to keep repayments low. Both routes can fund the same renovation - the difference lies in how, and whether, you repay what you borrow.

For homeowners who are retired or on a limited income, equity release is often the only realistic way to fund a large renovation, because it doesn't rely on passing an affordability check. If you're still working and can comfortably manage monthly repayments, a remortgage to release equity or a further advance from your current lender is usually the cheaper option over time. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it, so it's worth confirming affordability with an advisor before a remortgage goes ahead. Speaking to a regulated advisor who can compare both routes side by side is the best way to work out which suits your situation.

Benefits

• Tax-free cash released from your property, with no restriction on how you spend it
• No compulsory monthly repayments on most lifetime mortgages, easing pressure on a retirement income
• You can stay in your home for life, or until you move into long-term care
• Accessibility adaptations can support independent living for longer
• Well-chosen improvements may help maintain or increase your property's value
• Every plan from an Equity Release Council member includes a no-negative-equity guarantee, so you'll never owe more than your home is worth

Things to consider

• Roll-up interest increases the total amount you owe over time, which reduces the inheritance you leave behind
• Releasing equity can affect your entitlement to means-tested benefits, including Pension Credit, Council Tax Reduction and Universal Credit
• Early repayment charges can be significant if you need to repay the plan early, for example if you move home unexpectedly
• Once you've released a large share of your equity, your options for borrowing against the property again are reduced
• It's a long-term, secured commitment, so it's worth exploring every alternative first

For a fuller breakdown of the advantages and drawbacks, see our guide to equity release pros and cons.

Equity release isn't the only way to pay for home improvements, and it's worth ruling out cheaper or non-repayable options first. Alternatives to equity release for home improvements include:

• Remortgage or further advance - borrowing more against your home through a standard mortgage, suited to homeowners who can meet an affordability assessment
• Personal loan - unsecured borrowing over a shorter term, useful for smaller projects that don't need a large lump sum
• Government grants - schemes such as the Disabled Facilities Grant for accessibility work, or the ECO4 scheme for insulation and heating upgrades, don't need to be repaid and should always be explored first
• Savings - using existing savings avoids interest altogether, if you have enough set aside
• Borrowing from family - an informal option some homeowners consider, ideally with the arrangement put in writing

If you're weighing up your options and want impartial guidance, MoneyHelper offers free and independent money guidance backed by the government, at moneyhelper.org.uk or by calling 0800 138 7777.

Applying for equity release for home improvements follows a structured process designed to make sure the plan is right for you before anything is finalised. The Financial Conduct Authority requires you to receive independent legal advice before completing an equity release plan, so you'll always have a solicitor checking the details on your side.