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Your UK Mortgage Equity Withdrawal Options Explained

No impact on credit score

Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: August 25, 2021

One of the best things about being a homeowner is knowing that the equity you hold is growing as you pay off your mortgage and the property’s market value can potentially increase over time. Should the need ever arise, there are ways to unlock this capital to use as and when you like.

What is mortgage equity withdrawal?

Mortgage equity withdrawal (MEW) is an American product which allows homeowners in the US to release equity from their property by securing a loan against its market value. The real value of the property reduces in line with the new liabilities secured against it.

Is mortgage equity withdrawal available in the UK?

Yes. Although MEW is a US term, there is a UK equivalent in the form of remortgaging to release equity, or equity release mortgages available borrowers over 55.

If you’re a property owner who’s looking for information about withdrawing equity from your home, you’ve come to the right place. Equity release and remortgaging for additional borrowing is not a decision to be taken lightly, and we offer a free broker-matching service that can introduce you to the right expert for either scenario.

Not all mortgage brokers are the same, and if you’re considering releasing equity from your home, you’ll need to find one with the right expertise. If you’re retired, we can match you with a later-life lending expert, and if you simply want to remortgage to access some of the capital in your home, we can find you an advisor who specialises in refinancing.

An expert equity release broker can lay out all of your options, offer you bespoke advice and make sure you get the best possible deal. An initial consultation with one of the advisors we work with won’t cost you a penny, but it could save you time and money in the long run.

How to withdraw money from your mortgage

There are several ways to do this in the UK. If you’re under the age of 55, one of the most popular options would be to remortgage to borrow against the equity you’ve built up in your home over the years. For those over 55, there’s a specific product category called equity release which allows you to release the capital tied up in your property, tax free.

Remortgaging to release equity

Equity is basically the percentage of your property that you actually own. If you were to buy a £200,000 house with a £20,000 deposit, you would hold 10% equity. The amount of equity you have increases as you pay off your mortgage and when the property’s value increases.

This gives homeowners the opportunity to refinance their mortgage to borrow against this accumulated equity, and the majority of mortgage lenders will allow you to do this for all kinds of legal purposes, from debt consolidation to buying a shiny new car.

The exact amount of additional borrowing you could get and the terms under which a lender will offer it will vary depending on a number of factors.

Equity release

Equity release is a category of retirement mortgage products that allow homeowners over the age of 55 to release the capital they’ve built up in their property as a tax-free equity withdrawal loan. Although this is popular among retirees who own their home outright, it’s still possible to take equity release with an outstanding mortgage balance to pay off in your retirement years.

One of the biggest draws of equity release is that the capital you release is paid to you as a tax-free loan which doesn’t need to be settled until the end of the term, and that will only be when the last surviving person named on the contact dies or enters long-term care.

There are several different types of equity release available, including lifetime mortgages and home reversion plans. An equity release broker can bring you up to speed on the pros and cons of each type and help you make an informed decision on which one to consider.

You can find in-depth information about equity release mortgages in our standalone guide.

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Possible alternatives consider

If you want to raise extra funds through a property you own, withdrawing the equity from it isn’t your only option.

There are viable alternatives to remortgaging and equity release, such as…

  • Secured loans: Homeowners who aren’t eligible for a remortgage or don’t wish to refinance often consider second charge mortgages as a way to borrow a large amount against the equity in their property. This is essentially a secondary mortgage on top of your primary one, and some secured loan providers can be generous when it comes to affordability.
  • Personal loans: Personal loans usually come with higher interest rates and the amount you can borrow will likely be more limited, but the plus side to consider is that they aren’t secured against your property, so your home would not be at immediate risk.
  • retirement interest-only (RIO) mortgageA RIO mortgage is an interest-only mortgage for retired people with no end date for the term. By remortgaging to one of these agreements, you could release some equity and reduce your monthly payments, with the mortgage debt itself only due when you die or going into long-term care.
  • Bridging loansThis form of borrowing can be an alternative to remortgaging for additional borrowing, under certain circumstances. For example, if you were considering borrowing against your equity to fund home improvements, bridging finance could be a viable fallback option, especially if time is of the essence or you don’t qualify for refinancing. A bridging loan could provide quick funds for the renovations and you could remortgage against the increased value of your property to serve as the exit strategy.

These are just a few of the possible alternatives to releasing equity from your home. You can find more information in our guide to equity release alternatives or speak to a mortgage broker to go through each option and discuss whether they’re the right fit for you.

Thinking of withdrawing equity from your home? Speak to an expert first!

Withdrawing equity from your property isn’t something you should do lightly and it’s highly recommended that you seek professional advice first. But you don’t want advice from any old broker, you need to speak to a specialist with the right expertise for your circumstances.

This is where we come in. We offer a free broker-matching service that will take your situation into account before pairing you up with the perfect advisor. If you’re retired and looking to withdraw equity, we’ll find you a retirement mortgage specialist. If you simply want to refinance to borrow extra, we’ll introduce you to a broker whose bread and butter is remortgages.

Call 0808 189 2301 or make an enquiry online and we’ll match you with your ideal broker today – our service is simple, fast and free, and using it could save you money in the long run.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the 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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