If you’re a homeowner looking to release some of the value in your property, you might be considering an equity release arrangement, but may be unsure about whether or not you qualify if you still have a mortgage outstanding.
In this article we’ll look at the equity release options with or without a mortgage, how it works in each case, and how a broker can help.
Can you take equity release if you still have a mortgage?
Yes, having a mortgage outstanding on your home doesn’t automatically discount you from being able to take an equity release loan. It will depend on your circumstances, but as long as you are over 55 years old then you could be eligible.
How it works when there’s still a mortgage to pay off
In most cases, the equity you release is used to pay off your mortgage, and anything left over comes to you. You might want just to release enough to pay off the mortgage and free up some monthly income, or you might want to borrow an additional amount as a cash lump sum after the mortgage has been paid.
Paying off your mortgage with equity release might seem like an attractive proposition, but there can be a potential impact on your future finances and your estate, so it’s important to get advice from a specialist broker.
Speak to an expert on equity release
Types of scheme available
The most popular equity release option is a lifetime mortgage, normally available to anyone over the age of 55. With a lifetime mortgage, you borrow an amount of money against the value of your home, which is paid either as a lump sum or regular payment.
The money you release must be used to pay off any outstanding mortgage so that the equity release scheme provider takes sole first charge on your property. The complication here is that the amount of equity you are eligible to release varies with your age and circumstances, and may not always be enough to cover your outstanding loan. Interest rates can also increase with the amount you borrow, and this will impact overall cost.
Home reversion plans
A home reversion plan, sometimes known as a lifetime lease, is the less common of the two options, but differs in that you’re not required to use the cash you receive to pay off your mortgage and the amount repayable is fixed as a percentage of your home, with no interest accruing.
The terms of a home reversion plan are relatively simple – you sell a portion of your home to a provider at less than market value and in return get either a cash lump sum or regular payments, which you can use towards your monthly mortgage payments or to pay the mortgage off in part or completely.
The main disadvantage of the home reversion plan is that you sell your share for way under the market value of the property, making it far less popular than the lifetime mortgage.
How a broker can help if you still have a mortgage
Equity release can be complex and difficult to plan for. Having a mortgage outstanding on your home only makes it more complicated, limiting your options when it comes to how much you can borrow and potential lenders.
The best thing to do if you’re considering this type of loan with a mortgage is to speak to an equity release broker who has experience in securing these types of loans.
The brokers we work with will be able to help you decide which type of equity release loan is right for you, how much to borrow and how to take the money. They will also be able to guide you directly to the lenders with best rates, which could save you potentially thousands of pounds in the long term.
If you get in touch we’ll arrange for an equity release specialist to contact you directly for a free, no obligation chat.
Absolute Fab: I got a mortgage as an ex-bankrupt !!!
As an ex-bankrupt with a qualified Annulment I had to take several bridging loans to cover my debt. I found Online Mortgage Advisor who offered fantastic but specific insight to my issues. Within 6 weeks we exchanged contracts and I am now debt-free, and my house is safe.
They pulled out all the stops
Great staff and good communication. Helped us understand the process and gone over and above to help in a difficult situation. Other companies couldn't even be bothered but Thank you so much!
Anneke Woolley, 12 days ago
Our advisor was amazing from the start!
Aaron went above and beyond. He worked late and kept in contact with me and worked tirelessly to find me the best mortgage he could
James, 10 days ago
Rated 4.8 out of 5 stars across Trustpilot, Feefo and Google
Equity release without a mortgage
If you’re thinking about an equity release loan and have already paid off your mortgage, the process is similar, but it may give you a little more flexibility when it comes to your borrowing options.
Without a mortgage, the same lifetime mortgage and home reversion plan options apply, but any money you release will come directly to you and doesn’t need to go towards paying off your existing home loan.
This means you may need to borrow less, and so give away a smaller proportion of your home, and you won’t have to worry about whether you’re eligible to borrow enough to cover your outstanding mortgage.
You can get a rough idea of how much capital you could release from your property if you own it outright by using our equity release calculator below.
Equity Release Calculator
You can use our equity release calculator to work out how much capital you can release from your home. Simply enter your age and the property’s value and the tool will do the rest.
Maximum Equity you could release:
The amount is of your homes value, the maximum most borrowers your age can release.
Get Started with an Equity Release Specialist and find out exactly how much you could release.
Which lenders will allow this?
You’ll need to go to a specialist company for an equity release loan, or to the sort of people you’d normally associate with insurance and pensions, such as Aviva and L&G. Equity release loans are not typically offered by the sort of high street banks you’d go to for a traditional mortgage.
When it comes to getting an equity release loan while you still have a mortgage, you may find you’re restricted to certain lenders based on their minimum age or maximum borrowing requirements. Using a broker can save you huge amounts of time and effort here.
Other ways to release equity
If you’re keen to release some of the equity from your home but don’t think either of these specific schemes are right for you, then there may be other options, depending on your circumstances.
Retirement interest only mortgage
A retirement interest only mortgage is similar to a lifetime mortgage in that you borrow an amount of capital against the value of your home, but is significantly different in that you pay the interest on the loan every month rather than letting it roll up over the term of the loan. This can make it much cheaper overall than a lifetime mortgage.
A personal loan
Depending on what you want the money for, a personal loan could be another option. With a personal loan, you are repaying the interest and capital every month and depending on the size of the loan it may or may not be secured against your property.
One relatively obvious solution financially is to downsize to a smaller property. This way you don’t take on any extra debt and instead simply get the difference between the buying and selling price as a cash lump sum. The downside of course is that you have to move house, which can be a difficult thing to do both physically and emotionally.
We're so confident in our service, we guarantee it.
We know it's important for you to have complete confidence in our service, and trust that you're getting the best chance of mortgage approval at the best available rate. We guarantee to get your mortgage approved where others can't - or we'll give you £100*
Get matched with a broker who specialises in equity release mortgages
Equity release, with or without a mortgage, is not straightforward, and so talking to an expert broker who has experience in the industry is invaluable. Not only can they advise you on the best option for you, they’ll also shop around and negotiate on your behalf to make sure you don’t end up paying over the odds.
Call us on 0808 189 2301 or make an enquiry and we’ll assess your circumstances and match you with an advisor who has the right experience and skills to help you. We hand-pick all of the advisors we work with and vet them on your behalf so you’ll know you’re getting the best advice possible.
Ask a quick question
We can help!
We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in equity release
Ask us a question and we'll get the best expert to help.
Get in touch today
Make an enquiry and we'll arrange for an experienced mortgage broker we work with to contact you straight away.