Home Equity release Equity release or remortgage

Equity release or remortgaging

If you're struggling to decide between equity release or remortgaging your existing residential mortgage, this is something we could help you with. We'll explain the benefits, drawbacks, and costs to help you make an informed decision.

Whether you are swaying more towards remortgaging your current mortgage, or freeing up funds through equity release, both of these routes require careful consideration, and suitability depends on your personal situation.

What is equity release?

Equity release is a way to access some of the tax-free funds locked in your property. There are two types of equity release:

Lifetime mortgages: A loan secured against your home and lets you access some of the tax-free funds tied in the value of your home.

Home reversions: Where you sell all or part of your home to a reversion company for less than market value in exchange for a cash lump sum.

The equity in your home is the amount left over after settling any existing mortgage and any other debts secured against it.

What is remortgaging?

Remortgaging, is taking out a new mortgage deal with a different lender to replace an existing mortgage, the terms of which may be different to your existing mortgage. It's also slightly different to taking out a new mortgage when you buy a property.

Homeowners who have an existing mortgage against their property could have the option to remortgage their existing residential mortgage to receive an additional lump sum, which includes retirement mortgages.

How does remortgaging your existing residential mortgage work to release funds?

If you are a homeowner with an existing mortgage, you may want to know if you can remortgage to release additional funds. To access some of the funds tied up in your home this way, you will have to organise a new mortgage deal that is larger than your current mortgage.

The process of remortgaging your existing residential mortgage to release capital isn’t the same as taking out a completely new mortgage. This is due to the fact that you are already the homeowner, and you’ve more than likely been paying off your mortgage for quite some time – or perhaps even paid it off completely. Any calculation regarding your LTV (loan-to-value) will be based on property value (with any existing secured debts needing to be repaid) and not the remaining equity in the property.

If you’re wondering, ‘can I remortgage to release funds’, it’s important to know that this option isn’t suitable for everyone and if you decide you’d like to go ahead, there are some eligibility criteria you will need to meet. These are explained under the 'things to consider with remortgaging' section below.

There are differences between remortgaging your existing residential mortgage to release funds and freeing up funds through equity release. If you’d like more information on equity release, remortgaging and your other options call us on 0800 188 4812 or request a callback.

Lifetime mortgage benefits

Your specialist equity release adviser will explain:

You can unlock cash from your home, tax-free, to help meet your needs in later life
You’ll always retain full ownership of your home and can stay in it for as long as you wish

You can choose to make reduced or no monthly repayments to suit your circumstances
You’ll never owe more than your home’s worth

You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Potential drawbacks

Your equity release adviser will also outline the following important things to think about:

A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
Equity release will reduce your financial options in the future

Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
Equity release may leave you with limited or no property equity remaining

A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

Things to consider with remortgaging

You'll need to prove affordability before being accepted
You could be refused based on your age, credit history or income
Remember a mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Some of your funds may be used to cover costs and fees
You should always think carefully before securing a loan against your property

Benefits of remortgaging & equity release

You could release a lump sum from your home
You could benefit from your home's increase in value

You could consolidate all existing debts into one monthly repayment (through remortgaging only)
You may be able to borrow more from a new lender

You'll always own your home (through a lifetime mortgage only)
You could switch to a mortgage more suitable to your financial situation and spend your money in a wide variety of ways

Drawbacks of remortgaging & equity release

You'll need to prove affordability before being accepted (through remortgaging only)
You could be refused based on your age, credit history or income (through remortgaging only)

Remember a mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage
Some of your funds may be used to cover costs and fees

You should always carefully consider before securing a loan against your home
It's important to think carefully before using your secured loan to consolidate unsecured debts

Can you release funds without remortgaging your existing residential mortgage?

There are many ways that you can release funds without remortgaging your existing mortgage, one of which is equity release. It’s important to note that a lifetime mortgage is a loan that’s secured against your home that’s usually repaid once you or the last remaining applicant pass away or move into long-term care, it’s one alternative way to release funds tied up in your home other than going down the remortgaging route.

Equity release is available to homeowners aged 55 and over whose properties are worth a minimum of £70,000, by releasing some of the equity from your home, you will be able to access a portion of your property’s value.

When taking out equity release any existing mortgage or secured loans must be cleared. You will be able to use the funds released with equity release to clear any existing mortgage or secured loans and then the remaining tax-free funds will be yours. You should always think carefully before securing a loan against your home to repay existing debt.

This money could be a way to help boost your finances at this stage in your life. You might want to use it to clear existing debts, go on holiday or make improvements to your home.

How much you can release depends on several things such as your age, property value, and in some cases your health and lifestyle. By using our free, no-obligation equity release calculator, you can see how much you could release in no time at all.

Your other options

Before deciding on equity release, it's important you're aware of some of your other later life finance options, which may include:

Retirement interest-only mortgage
Retirement repayment mortgage
Home reversion plans

Equity release costs

Knowing the costs associated with equity release and how to help manage them is important.

Compound interest explained
Lump sum vs drawdown lifetime mortgage
What does equity release cost?

Other options we don't offer

Downsizing
Unsecured lending
Using existing assets
Support from friends or family

Talk to the experts

We have no ties to any providers, so you’re always guaranteed, honest, independent advice that’s straightforward and tailored to you – nothing else. We offer a full range of later life options, so we can see if there is another product more suitable for your needs. Unless you decide to go ahead, our service is completely free of charge as our fixed advice fee of £1,799 is only payable on completion of a plan.

For more advice on equity release or remortgaging, call The Equity Release Experts on 0800 188 4812 or ask us to call you back. We are available from Monday-Friday, 9am-5.30pm.