Two-fifths of equity released in the first half of the year was used to pay off debts, according to Key.
The findings show older homeowners are using their property wealth to retirement-proof their finances, the equity release advise firm said.
Around £588m was used to clear some form of borrowing, with mortgages followed by credit cards and loans the most common debts repaid from the equity.
Borrowers typically owed £53,388 on their mortgages, £11,640 on credit cards and £12,728 on loans, Key found.
However, repaying debt isn’t always possible for some over-55s who need to repay large sums, such as an interest-only mortgage, or are unable to pay much more than the interest on other borrowing.
The research found older homeowners in Yorkshire, London and Wales used the largest proportion of released equity to repay debt, while over-55s in the North East and Scotland used the least.
Will Hale chief executive at Key (pictured), said: “While most people want to reach retirement debt free, this is simply not the case for everyone – especially those who have taken out interest-only mortgages and now often face finding a substantial lump sum to repay the balance.
“In H1, over £500m worth of borrowing was repaid using housing equity – allowing people to retire with confidence, without the burden of needing to make regular monthly payments or facing the prospect of having to sell their home
“With equity release rates starting from under 2.5 per cent and many products allowing ad hoc capital repayments or ongoing interest repayments, these flexible plans allow people to proactively manage their borrowing and shore up their finances.
“Something that is arguably more important than ever given the current economic uncertainty.”