Remortgaging versus Equity Release
Authored by Key Group
The UK housing market continues to thrive and, with UK private property wealth increasing from £4.21trn in H1 2020 to £4.87trn in H1 2021* (pdf 1.8mb), we’re seeing more over-55s considering property wealth as a vital asset in their financial retirement planning. There are many options for homeowners to use some of the equity from their homes to boost their finances, including remortgaging their property or by taking out an equity release plan.
But how do the two compare?
Both equity release and remortgaging can be used to leverage the equity in your clients’ homes to ease their financial burden. Both options are available for over-55s and both are dependent on the value of the home and the amount left on their existing mortgage. While remortgaging is available for over-55s, the options are much more limited. There are fewer products available for older borrowers with stricter requirements. Clients are usually required to make monthly repayments and prove that any income they are receiving (including pension income where applicable) would be more than enough to cover the repayments on the mortgage.
Equity release may be another option for your clients. Like remortgaging, equity release can be used to help pay off an existing mortgage on your clients property, which is something that 45% of Key customers chose to do in H1 2021 (1.7mb pdf)**. Unlike remortgaging, clients aren’t required to make monthly repayments (as the loan, plus accrued interest, is repaid once the home is sold following the client’s death or move into long term care) and plans are varied and can be tailored to the needs of the client, with enhanced options available for those with poor health.
With over 700 equity release products now on the market, and with more flexible options than ever before to suit the individual needs of a wide range of consumer, it’s important that advisers seek the right support to help them deliver a better outcome for their clients.
For members who don’t advise on equity release, working with a referral specialist like Key Partnerships can provide a robust whole of market advice process to help advisers broaden their advice proposition without compliance responsibility. For every case that completes, L&G Mortgage Club members will benefit from an average referral payment of £1,766^ and will be informed throughout the process from referral to completion.
For those who do specialise and advise on equity release themselves, working with lenders like more2life can help broaden your own knowledge and experience in this market. With the help of bespoke online tools, CII-accredited online training material, unique market insights and marketing support, more2life has built a reputation as one of the leading lenders in the equity release market with one of the broadest product ranges available.
*Equity Release Council Autumn Market Report
**Key Market Monitor H1 2021 (1.7mb pdf)
^Average referral payment across the UK in 2020
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