Planning for long-term care is one of the most pressing financial challenges facing families in the UK today. With an ageing population and rising life expectancy, more households are grappling with how to pay for care, whether that’s residential nursing support, live-in carers, or adaptations to the home to make later life more comfortable. Traditional savings and pensions can fall short, leaving many homeowners turning to their greatest asset: their property.
Equity release has emerged as a viable solution for funding care, offering homeowners over 55 the chance to unlock wealth from their home without having to sell up. Lifetime mortgages, the most common form of equity release, allow individuals to stay in their property while accessing tax-free funds to pay for care needs. But how does this really work in practice? What risks need to be understood? And how do families balance the need for financial support now with the desire to protect inheritance later?
This article explores the role of equity release in funding long-term care in 2025, the safeguards that protect borrowers, and the considerations every family must weigh before proceeding.
The UK care system is under enormous strain. According to recent reports, the average cost of residential care now exceeds £40,000 per year, while specialist nursing care can surpass £55,000 annually. Live-in care, often preferred by those who wish to stay in familiar surroundings, can cost significantly more.
For many retirees, pensions and savings simply cannot meet these costs without depleting wealth entirely. Families are often faced with difficult choices: sell the family home, draw down investments, or rely on children for financial support. Equity release presents another path, offering the ability to convert property wealth into accessible funds while retaining ownership and security of tenure.
A lifetime mortgage works by securing a loan against the property, releasing a tax-free lump sum or providing a drawdown facility that can be used flexibly over time. For care funding, both options can be valuable.
This flexibility makes equity release particularly well-suited to care planning, where expenses may vary from year to year and families often need both certainty and adaptability.
One of the first questions families face is whether the homeowner will remain in the property or move into residential care. This distinction is crucial, because it affects how equity release works.
If the homeowner stays in their property, a lifetime mortgage allows them to unlock funds to pay for in-home care. They remain secure in their home for life, with no repayments required until the property is eventually sold. This can be an empowering option, allowing individuals to age in place while maintaining dignity and independence.
If the homeowner moves into permanent residential care, however, most lifetime mortgages require repayment, since the borrower is no longer living in the property. Families must therefore plan carefully: equity release can cover the transition, but repayment will be triggered when the home is vacated.
Equity release in 2025 comes with significant safeguards, largely thanks to the Equity Release Council (ERC). For care-related planning, three protections are especially important:
These safeguards have helped transform equity release from a risky last resort into a credible care funding option.
One of the most common concerns families raise is the impact on inheritance. Using equity release to fund care inevitably reduces the value of the estate left behind. The extent of this impact depends on how much is borrowed, how long the plan runs, and whether voluntary repayments are made along the way.
Some families view this trade-off as acceptable, particularly if equity release allows the homeowner to enjoy a better quality of life in their later years or avoid selling the family home. Others choose to combine equity release with inheritance tax planning, using strategies such as whole-of-life insurance to protect estate value.
The key is transparency. Advisers help families understand exactly how borrowing will affect estate distribution and whether partial protections, such as inheritance guarantees built into certain products, should be used.
Care funding is often tied to means-tested benefits provided by local authorities. Releasing equity can affect eligibility for this support, particularly if funds are taken as a lump sum and held as cash. Borrowers and families must consider carefully how equity release interacts with the broader financial picture, ensuring they do not inadvertently lose valuable benefits.
Advisers assess this during the advice process, modelling how different borrowing strategies will impact entitlement and whether alternative solutions may be preferable.
While equity release is powerful, it is not the only option for funding care. Downsizing remains a common strategy, allowing families to release funds by selling the home and moving into a smaller property. Our downsizing guide explores this in more detail.
Other alternatives include retirement interest-only mortgages, using pensions or annuities, or relying on investment portfolios. For some, a blended approach, using equity release alongside other resources, provides the best balance of flexibility, inheritance protection, and care coverage.
Because of the complexity of care planning, regulated advice is not just mandatory, it is indispensable. Advisers play a central role in helping families evaluate whether equity release is the right tool, how much to release, and how to structure borrowing to match anticipated care costs. Solicitors also provide an additional safeguard, ensuring legal clarity and borrower understanding.
Equity release for care funding is rarely just a financial decision; it is a deeply personal one, tied to questions of dignity, independence, and legacy. Professional advice ensures those decisions are made with clarity, compassion, and foresight.
The integration of equity release into care funding is expected to grow significantly. Policymakers are already discussing ways to link lifetime mortgages more directly with social care provision, creating structured pathways for homeowners to access care without exhausting savings. Lenders, too, are innovating — offering products specifically designed for care funding, with features such as staged drawdowns or lower-cost facilities earmarked for medical expenses.
The future points toward greater flexibility, tighter integration with retirement planning, and an even stronger role for equity release in solving the UK’s care funding challenge.
Equity release is not the answer to every care funding challenge, but in 2025 it is a safe, flexible, and credible option for many families. Lifetime mortgages can provide the funds needed to cover home adaptations, in-home carers, or the transition into residential care, all while safeguarding the homeowner’s right to remain in their property and protecting families from negative equity.
The trade-off is reduced inheritance, potential impacts on benefits, and the need for careful long-term planning. But with professional advice, ERC safeguards, and modern product flexibility, equity release can play a vital role in giving families choice, dignity, and financial security in later life.
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About the Author
Wesley Ranger is the Founder and Director of Willow Private Finance, where he also serves as a senior mortgage and protection specialist. With over 20 years of experience, Wesley has helped countless clients plan for later life with confidence. His expertise in equity release and long-term care funding allows families to balance immediate needs with the desire to protect inheritance and financial stability.
Important Notice
Equity release and lifetime mortgages are regulated financial products. They may not be suitable for all borrowers and will reduce the value of your estate. Taking out a plan may affect your entitlement to means-tested benefits. Interest can accumulate significantly unless payments are made, which may increase the balance owed. Independent legal advice is mandatory, and products must be considered in line with FCA regulation and ERC safeguards. This article is for information purposes only and does not constitute personalised financial advice.
