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By Pete Mugleston | Mortgage Advisor

Pete has been a mortgage advisor for over 10 years, and is regularly cited in both trade and national press.

Updated: 4th December 2020*

If you own your own home but would like to enjoy getting some money for its value while still hanging on to your property, equity release could be the solution for you. Whether you have a mortgage or own your property outright, you may be able to release funds through an equity release product.

This article will cover the specific options available to you for releasing equity from your home, with or without a mortgage.

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Can I get equity release if I have a mortgage?

Yes, you can get an equity release if you have a mortgage on your property, and there are a range of options available.

If you are a homeowner with a mortgage, are over 55 years old, and would like to release some of the cash tied up in your home, you could get an equity release loan. This would allow you flexible options for withdrawing cash, such as releasing money in a lump sum, in a series of smaller amounts, or through a combination of both.

How do I get an equity release with an existing mortgage?

If you have a mortgage, generally the cash released through an equity release will first be used to pay off the mortgage, and then any money left over will be paid out to you.

Whether you choose just to reduce your mortgage payments, eliminate them entirely, or get extra income from your equity release will depend on which equity release scheme you choose and how much of your property value you are willing to part with.

With equity release, you borrow money against the value of your property and would usually make minimal or no repayments. The loan can be repaid when you choose to sell your property, if you die, or go into care.

An equity release loan could be the right option for you if you need to free up some of the cash value in your property while living in it. However, there are serious financial implications involved in getting an equity release with an existing mortgage, so it’s important you make the decision with the help of an expert.

Paying more than you should to borrow money could mean losing a greater share of your property than you are willing to part with. Make an enquiry and we’ll connect you to an expert equity release broker who can give you tailor-made advice and help you get the best deal on the market.

There are two types of equity release you can get If you have a house with a mortgage:

  • lifetime mortgages
  • home reversion

Lifetime mortgages

A lifetime mortgage, also known as a retirement mortgage, allows you to borrow cash against the value of your home while keeping and living in your property. The interest on the loan is generally paid back along with the debt after you pass away or sell your home.

Home reversion plans

A home reversion releases cash value by allowing you to sell all or part of your property for a bit less than what its’ market value is to a reversion scheme provider. This will give you immediate cash while guaranteeing you can keep living in your home. The provider will take out their share when your property is sold or you pass away. However, you need to be at least 65 to take out a home reversion.

Which option should I choose?

Taking equity release could a viable option for helping you to slash your monthly mortgage payments as well as access a lump sum or get regular cash withdrawals.

Deciding whether or not to take out an equity release scheme, and which option may be best for you, depends on your circumstances, needs, and financial goals. It will also impact how much inheritance you leave for the next generation, so it’s best to get specialist advice for further information and guidance on providers, schemes, and potential fees. Make an enquiry and we’ll connect you, free of charge,  to an experienced equity release broker.

Can I get equity release without a mortgage?

If you own your house outright and don’t have a mortgage, you can take out cash with an equity release lifetime mortgage.

This means you take out a mortgage on your home which lasts until you die or your home is sold. Your mortgage will accrue interest, but you’ll only pay it off along with the debt after you sell the house or pass away.

A home reversion scheme will enable you to sell a portion of your home to a reversion company. The scheme provider will only collect their share of the property when you sell your home or pass away. Make sure you speak to an expert equity release advisor to get the best deal for an equity release if you’re a homeowner without a mortgage.

Alternative options to equity release

If there isn’t enough equity to refinance to pay off the current mortgage and release the funds you want, you may want to consider the alternatives.

Retirement interest only

Retirement interest only mortgages (RIOs) allow you to borrow against your property while only paying back the interest, and not the loan, on a monthly basis.

Standard retirement mortgage

A retirement mortgage is a lifetime mortgage which can provide you with a flexible way to borrow in your later years. The amount you borrow is repaid when you die or move into care and your home is sold.

Secured loan

A secured loan, or homeowner loan, will use your property as a security against the money you borrow. If you have a poor credit rating, but need to borrow a significant amount of money, this option could work for you. However, any failure to keep up with repayments could result in losing your property.

Equity release for a debt free retirement

An equity release can be used to help you pay off an existing debt. You could use an equity release to help pay off debt if you still have a mortgage, or if you are mortgage free but could benefit from a debt free retirement.

Speak to an expert advisor

There are many options for getting an equity release,  and you can have one if you have a mortgage or own the property outright. It’s essential that you carefully consider your long-term needs and manage your finances well for peace of mind. Anyone interested in getting an equity release for property with or without a mortgage, should seek specialist financial advice.

Call Online Mortgage Advisor on 0808 189 2301 or make an enquiry here and we’ll connect you to an expert equity release broker – we don’t charge a fee and there’s absolutely no obligation or marks on your credit rating.

Updated: 4th December 2020
OnlineMortgageAdvisor 2021 ©

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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