How To Release Equity With Or Without A Mortgage

If you’re over 55, you own your home and you’re looking for extra cash – maybe to make home improvements, support a family member financially, get through a period of financial difficulty or even just enjoy your retirement – then you might be thinking about equity release. 

But if you still have an outstanding mortgage on your property, you might also be wondering whether this is a viable option for you.

In this article we’ll look at:

Can you release equity if you have a mortgage?

Depending on your circumstances, it is possible to access equity release if you’re still paying off the mortgage on your property, as long as you’ve paid off enough of the mortgage already to make it worth doing.

In most cases, the cash released will first be used to pay off the mortgage, and then any money left over will be paid out to you. But there are other schemes in which more of the equity goes straight to you. It all depends on which equity release scheme you choose, and how much of your equity you are willing to part with.

Types of equity release available

There are two main equity release schemes:

Lifetime mortgages

A lifetime mortgage (or ‘retirement mortgage’), is the most popular form of equity release, available to people over a certain age (usually 55, although some lenders offer them to people over 50 and some don’t offer them to anyone under 65). Under these schemes, you borrow an amount equivalent to part of the equity in your home. You will still own the property, and you can remain living there.

The equity that is released will be used to pay off your existing mortgage. Then you can either take the remaining cash all at once in a lump sum, or as a number of smaller amounts over time – this is called ‘drawdown’.

Some lifetime mortgage schemes will also allow you to pay off some of the capital during the mortgage term.

Home reversion plans

With home reversion, you sell some or all of your home to a reversion scheme provider, for less than its market value. This is paid to you tax-free, either as a lump sum or a regular income. You can put this towards your monthly mortgage payments, or use the equity release to pay off your existing mortgage altogether.

You can then continue living in the property. The home reversion provider will receive a percentage of the proceeds when the property is sold. Again, there’s an age limit on home reversion – usually 60 or even 65 years.

Equity release on a house with no mortgage

If you have already paid off your mortgage, or never had one, you can still release equity. Both the Lifetime Mortgages and Home Reversion Plans can be used for this purpose, and you can still live in the property for as long as you want.

If you’d like to see how much equity you might be able to release from your own property, simply input an estimated value along with your age into our calculator below:

How a broker can help

Equity release has major financial implications, including the possible impact on any state benefits you might receive, so it’s important to seek expert financial advice before you make any decision – in fact, your lender will require you to do this.

It’s a specialist area, so you will need a broker who specialises in equity release advice, not just mortgages in general. And because equity release has different implications if you still have a mortgage on your home, you’ll need a broker with experience in securing equity release for properties with mortgages.

Alternatives to releasing equity

It might be that none of the equity release options described above seem right for you. Maybe you’re too young to qualify, or you have so little equity that you wouldn’t have much left over after paying off your existing mortgage. In these circumstances, remortgaging could be an option for you.

With remortgaging, you can usually reduce your monthly mortgage repayments – although you’ll be paying it off over a longer period – and, depending on your circumstances, you could get further cash released from your home. Again, seek advice from an expert mortgage broker.

Can you release equity without remortgaging?

Another option is a secured loan, or homeowner loan. You can generally borrow more with this type of loan than with unsecured lending, because your property is used as security. However, this means you risk losing your property if you can’t make the repayments, so it’s important to get expert advice before taking this option.

Get matched with an expert equity release broker

Equity release products can help you unlock the cash tied up in your home. But it’s a complex area, and you need an expert financial adviser to guide you through it. They can then help you decide whether equity release is right for you, and if so, which product will suit your circumstances.

Whether or not you still have a mortgage on your property, our free matching service can connect you to a broker who specialises in equity release. Call Online Mortgage Advisor on 0808 189 2301, or make an enquiry here. We’ll match you with an expert broker for a free, no-obligation chat.