If you’ve owned your home for a long time, you’ll probably have seen its price rise by quite a lot. You might have paid off some or all of your mortgage too, so you’ll have a fair bit of equity tied up in your home. Now you may be looking to release some of it by remortgaging.
In this article, we’re going to tell you how to remortgage to release equity, by either:
- Moving to a new standard mortgage or increasing your existing one, or
- Taking out a lifetime mortgage.
You probably already know about standard mortgages, which are repayment or interest-only fixed-term residential mortgages. But you might not be aware of lifetime mortgages. They’re designed for homeowners aged 55 (or 50 for our Payment Term Lifetime Mortgage) or older who might find standard mortgages harder to get.
Another option is to downsize. But that might not be right for you, as you may not want to move away from loved ones or your local community. There’s more on the pros and cons of this in our downsizing article.
Why release equity from your home?
Many people release equity to pay for home improvements. Other common reasons include helping a family member get on the housing ladder, paying for a dream holiday, or even just covering some day-to-day expenses.
One key benefit is that releasing equity lets you pass an inheritance on to loved ones, while you’re still around to see them enjoying it. That’s called a living inheritance. But don’t forget that whoever receives it, might have to pay inheritance tax on it.
How to remortgage to release equity
Remortgage with a standard mortgage
Remortgaging is a common way of releasing money from your home. It means taking out a loan with your current or a new provider to pay off any existing mortgage, before borrowing more money. You might even be able to get a lower interest rate.
Remortgage with equity release
But getting a new standard mortgage isn’t always simple as you get older. If you’re retired or nearing retirement, it can be hard to prove that you’ll be able to cover its repayment costs over the longer term. Lenders may also look at any debts you hold. Unlike a standard mortgage, equity release is a way of releasing cash from your home without having to move or pay anything back until you die or move into long-term care.
If you’d like to remortgage, we recommend speaking to your current provider or a financial adviser.
How to take out a lifetime mortgage
Lifetime mortgages are a popular type of equity release. Like any other mortgage, they’re a loan secured on your home.
But unlike other mortgage you can make all, some or none of the monthly interest payments, depending on which product you choose. So you won’t need to prove you can cover any repayments costs. The amount you can borrow is based on your age and the value of your home. You do need to be aged 55 or older to get one (or over 50 for our Payment Term Lifetime Mortgage).
Lifetime mortgages are only available through a qualified financial adviser, who will make sure that:
- It’s the right choice for you
- You choose the right product
- You fully understand the product you’ve chosen
A lifetime mortgage will reduce the inheritance you can leave, and may affect your entitlement to means-tested benefits. There may be cheaper ways to borrow money. Your adviser will tell you more about that.
“The way we’ve done the lifetime mortgage means that we’ve got all the benefits of living here, and yet all the benefits of being able to help ourselves, our children, our grandchildren – and having a lot more fun.”
John, Oxfordshire
Standard mortgages vs lifetime mortgages
We’ve listed the main pros and cons of standard and lifetime mortgages below. That should help you think through which one you’d like to go for.
| Standard mortgages | Lifetime mortgages |
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Pros
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Pros
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Cons
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Cons
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FAQs
Can I remortgage to release equity?
Can you remortgage and take out equity release?
How easy is it to remortgage to release equity?
How long does it take to remortgage and release equity?
What’s next?
Whatever kind of mortgage you go for, taking on more debt in later life is a big decision. So it’s important to think carefully before you remortgage. There are other ways you can use your home to pay for the things that matter to you, like downsizing. It’s not the right decision for everyone.
You can find out more on our Equity Release product page, and our Equity Release Calculator will help you work out how much you could release from your home. The Money Helper website also has an equity release guide.
If you decide to take out equity release, you’ll need to speak to a qualified financial adviser. If you don’t already have one, you can find one at the Unbiased website. You’ll usually have to pay for their advice.
And we’d be very happy to answer any questions you have ourselves. We can explain our products, and our later life mortgage advisers will help you understand if they’re right for you.
