What Happens to Equity When You Sell Your House?

Many people are aware of the term ‘equity release,’ but not everyone knows what it is and how it works.

If you’ve got a property and you think you may be able to get some of the value out of it, whatever the reason, we’re here to help you demystify equity release so you can make a more informed decision about what to do next.

Table of Contents

• What is equity in a house?

• How does equity release work on a house?

• The pros and cons of equity release

• What are the alternatives to equity release?

What is equity in a house?

Equity release is a means of unlocking some of the stored value in your home. It’s a significant commitment to make if you do, indeed, have equity to release, and it can only be carried out with the help of a financial advisor, so be sure to seek professional advice if you think it might be an option.

Essentially, releasing equity is a way of borrowing money that’s ‘locked’ in your house, so it’s another form of mortgage that people can take out later in life. The main types of equity release are a lifetime mortgage and a home reversion: 

• Lifetime mortgage: You take a mortgage loan out that’s secured on your property

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

Whichever route you choose, the loan (the equity that’s released) needs to be paid back from the proceeds of the sale of your house when you die or go into care, so it needs to be considered carefully, as Martin Lewis expresses:

How does equity release work on a house?

Naturally, there are some risks involved in releasing equity from a property—it’s a loan that needs to be paid back, so it’s advisable to tread carefully and seek professional advice to help you make a decision. 

It works by releasing funds from the portion of the house you own as a lump sum or as a form of regular income (a ‘drawdown’), based on the difference between the value of your home and what you have left to pay on your mortgage.

If you have nothing left to pay on your mortgage and you own your home outright, you can take out a lifetime mortgage to release a percentage of its value. For example, if your house is worth £300,000, you can take, say, 20% of it (£60,000) to pay for the likes of home improvements, as long as you are comfortable with the compounding interest on the loan over time. 

Read more: How Much is Your House Worth?

For most lenders, taking the equity as a lump sum usually has to be a loan of at least £10,000, which you’ll pay back with interest. You can also use your equity for both of the options above—a lump sum and a drawdown—but it can be an expensive way to access money.

How long does equity release take?

The reality will be different from lender to lender, with Aviva stating a timeline of over two months: 

“It usually takes around 8 to 10 weeks from when we get your lifetime mortgage application…to you having the money.”

Your actual timeline will depend on the type of product you go for from your lender—if you speak to a financial advisor about your options, you’ll be able to determine, firstly, whether or not equity release is a good choice for you and, secondly, how long it will take for you to access the money for your specific needs.

Bear in mind the fact that paying back a release of equity comes with interest, so the earlier you take it out, the more you’ll have to pay back, even if you do need the cash quite quickly.

The pros and cons of equity release

As with any financial commitment, it’s important to understand the advantages and disadvantages before you go ahead. Here’s a breakdown of the pros and cons of equity release to help inform your decision:

One of the main benefits of equity release is that you don’t have to pay the interest to your lender immediately—you can arrange for it to be added to your loan amount, but remember it’ll only increase in the long term if you don’t start making regular repayments. 

Most lenders will base their interest rates on the Bank of England base rate, which sat at 4% in October 2025. It’s so important to shop around, compare your options and bear these pros and cons in mind before committing to equity release, as it might not make the most financial sense for your particular circumstances.

Try Legal & General’s equity release calculator to see if it might be a sensible route for you and check out the other options available to you below if not.

What are the alternatives to equity release?

Whether you want the cash to fund a large purchase, support later-life care needs or something else, you should never rush into the expensive option of equity release.

Here are some of the other ways you can access cash quickly to suit your needs: 

1. Downsizing your home

You can look for a smaller property and use the profits from the sale of your existing house to buy it. This can be a good way to avoid the interest payments associated with equity release.

Read more: Can You Part-Exchange When Downsizing Your House?

2. Remortgaging your home

If you can afford to keep up with monthly repayments, another option could be to remortgage your home and stay in your current home without getting tied into an expensive equity release plan. Shop around to find a good deal and ask a mortgage advisor for help to decide on your best course of action.

3. Selling to a cash buyer

You can sell quicker than you might realise to cash house buyers, who will have the reserves ready to make the purchase within days or weeks. In fact, at The Property Buying Company, we’ve been known to complete in as little as seven days, with many sellers going on to use the funds to pay for a smaller rental property instead.

Read more: How to Sell Your House and Rent Instead

Selling to a cash buyer takes the pressure off finding a buyer on the open market and gives you access to the cash locked away in your home without having to take out another expensive mortgage in the form of equity release.

Simply enter your postcode below to get started and we’ll be in touch with a free cash offer within 24 hours.