How to unlock home equity without remortgaging

Your home’s value, released the smart way

For many UK homeowners, most wealth sits in bricks and mortar. When costs rise or retirement plans crystallise, the instinct is to remortgage. Yet there are credible paths to access cash without taking on a larger loan or paying early repayment charges. The right route depends on your age, income, risk appetite, and how attached you are to your current home. This guide sets out the main options and the trade-offs so you can act with confidence.

Downsizing is the headline alternative. With house prices still historically high in many regions, selling and buying a smaller property can free a substantial lump sum in one step. Data highlighted by the Equity Release Council shows that older owners increasingly choose this path to fund retirement. There are costs to factor in - estate agent fees, legal work, moving costs and potentially Stamp Duty Land Tax on the new purchase - but against a large equity release it can still net a significant gain. Crucially, it involves no ongoing debt.

A second route gaining traction is the Retirement Interest-Only mortgage. RIOs let eligible borrowers pay interest each month while leaving the capital untouched. The loan is repaid when the property is sold, typically on death or moving into long-term care. Because interest is serviced monthly, there is no compounding as you see with lifetime mortgages. For homeowners who want to stay put and keep control of the balance, RIOs offer a measured middle ground under FCA regulation.

Not all solutions involve borrowing or selling. The Rent a Room Scheme allows up to £7,500 a year tax-free if you let a furnished room in your main home. For many, that is a simple, low-risk way to bolster income without touching the mortgage. Others prefer to sell unused assets - a second car, collectibles, premium electronics, or investments - to raise a quick lump sum. In a strong second-hand market, this can be faster and cheaper than any form of secured lending.

Government support should not be overlooked. Depending on circumstances, Support for Mortgage Interest, Council Tax Reduction, and energy cost schemes can cut monthly outgoings and preserve cash. For some, home reversion plans - selling a share of your property while retaining the right to live there - strike the right balance of no monthly repayments but with a clear cost to future value. Budgeting and financial planning round out the picture, helping you reduce outgoings and improve resilience without taking on risk.

Understanding APR is important, but it is not the whole story. The real question is what you will pay or give up over time, and how each option affects your lifestyle. As a UK-based retail finance broker, Kandoo works with regulated providers and can help you compare solutions, check eligibility, and model long-term outcomes before you commit.

The best option is the one that solves today’s need without creating tomorrow’s problem.

Who benefits most

These approaches suit homeowners who want control and clarity over costs. If you are over 55 with substantial equity, downsizing or a RIO mortgage may offer a sensible balance of access and stability. If you prefer to avoid debt altogether, the Rent a Room Scheme, selling assets, or targeted budgeting changes can produce immediate, low-risk results. Those on fixed or lower incomes should explore grants and benefits before touching housing wealth.

If you plan to stay in your home long term, consider solutions that preserve ownership and manage monthly cash flow. If you are open to moving for lifestyle reasons - a single-storey home, lower running costs, nearer family - downsizing can combine financial and practical gains. Whatever your position, the aim is to safeguard your standard of living while protecting future options for yourself and your family.

Jargon made simple

• Equity - The market value of your home minus any mortgage or secured loans.

• LTV (loan to value) - The mortgage balance as a percentage of your property value.

• Early repayment charge - A fee some lenders apply if you repay or switch during a fixed period.

• RIO mortgage - Retirement Interest-Only mortgage where you pay monthly interest and repay capital on sale.

• Home reversion - Selling a portion of your home to a provider in exchange for cash, while staying in the property.

• Rent a Room allowance - Up to £7,500 per tax year tax-free from renting a furnished room in your main home.

• Stamp Duty Land Tax - Tax potentially payable when buying a new property after selling to downsize.

• SMI (Support for Mortgage Interest) - Government help with mortgage interest for eligible claimants.

Your main routes to release value

1. Downsize to a cheaper home - Sell, buy smaller, bank the difference. One-time costs apply but no ongoing debt.

2. Retirement Interest-Only mortgage - Keep your home, pay monthly interest, repay the balance when you sell.

3. Take a lodger under Rent a Room - Earn up to £7,500 per year tax-free from a furnished room.

4. Sell assets you no longer need - Vehicles, antiques, premium tech, or investments to raise a fast lump sum.

5. Claim grants and benefits - SMI, Council Tax Reduction, and energy support to reduce outgoings.

6. Home reversion plan - Sell a share of your home for cash and stay put without monthly repayments.

7. Tighten the budget - Cut discretionary costs, renegotiate bills, and optimise income to free cash.

8. Extend your mortgage term - Lower monthly repayments to ease cash flow, with higher total interest over time.

What it costs and what you get

Who qualifies and when

Eligibility varies by option. Downsizing is open to anyone who can sell and repurchase, but timing and local markets matter. RIO mortgages are generally aimed at older borrowers, typically 55 or over, with sufficient income to cover monthly interest payments. Lenders will assess affordability, property type, and your long-term plans. For the Rent a Room Scheme, you must let a furnished room in your main residence and follow tenancy and safety rules. Selling assets has minimal barriers, though proof of ownership and valuations are important.

Government support such as SMI and Council Tax Reduction depends on your income, benefits status, and personal circumstances. Applications are assessed by the DWP or local authority. Home reversion plans are available through specialist providers, usually to older homeowners with significant equity who wish to remain in the property for life. Extending a mortgage term depends on lender criteria and your age at term end. Solid budgeting requires no permission, only a clear view of your spending and the willingness to act.

From idea to cash - a simple path

1. Map your need - income gap, lump sum, or both.

2. Check benefits and tax implications first.

3. Compare options by cost, risk, and flexibility.

4. Test affordability with realistic stress rates.

5. Get independent advice from a regulated adviser.

6. Gather documents - ID, income, statements, valuations.

7. Apply, progress legal checks, and confirm timelines.

8. Review annually to keep plans on track.

Upsides and trade-offs

Red flags and fine print

Before committing, interrogate the total cost over time, not just the headline rate or lump sum. If you are considering a RIO mortgage, model payments at higher interest rates to check resilience. With downsizing, budget for SDLT, legal fees, removals, potential renovations, and a realistic marketing timetable. Renting a room requires proper agreements, safety checks, and clear house rules. If family helps with a loan or gift, document it to avoid disputes and protect future mortgage applications. Home reversion is long term and affects inheritance, so ensure your family understands the implications and that you receive independent legal advice.

If plan A is not right

1. Family support - structured loan or gift with a written agreement.

2. Part-time work or side income - flexible roles, consulting, or skills sharing.

3. Draw from savings or investments - review tax and sequence risk first.

4. Local authority schemes - home improvement grants or deferred payment arrangements.

Frequently asked questions

Q: Is downsizing still attractive in 2025 if prices soften? A: Yes, provided the price gap between your current home and target property is wide enough to release meaningful equity after costs. Focus on net proceeds, not headline prices.

Q: How is a RIO mortgage different from equity release? A: With a RIO you pay monthly interest and keep the capital static until sale. With lifetime mortgages, interest usually rolls up, which can increase the debt via compounding.

Q: Do I need to declare Rent a Room income on my tax return? A: If earnings stay within the £7,500 allowance you may not need to, but keep records. Check HMRC guidance if you split the allowance or exceed the threshold.

Q: Can I take a lodger if I still have a mortgage? A: Usually yes, but check your lender and buildings insurer for consent. Ensure compliance with safety and HMO rules where applicable.

Q: Are home reversion plans safe? A: They are regulated and can be appropriate, but you give up a share of future value. Independent legal and financial advice is essential before signing.

Q: What documents will lenders ask for on a RIO? A: Expect ID, proof of income, pension statements, bank statements, and evidence of outgoings. Some lenders may require a property valuation and proof of insurance.

Make a confident move

Start by clarifying how much you need and why. Check your eligibility for grants and benefits, then compare downsizing, RIOs, and income options like Rent a Room against total lifetime cost. If you want tailored comparisons across regulated products, Kandoo can introduce you to trusted lenders and advisers so you can proceed with clarity.

Important information

This guide provides general information for UK readers and is not financial advice. Mortgage and tax rules change, and eligibility varies. Seek regulated advice and consult HMRC or GOV.UK before making decisions.