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Using equity release to pay off your existing mortgage

Paying off your existing mortgage in or approaching retirement could help you free up your finances.

A trusted financial solution to combat a common problem

The number of people entering retirement with an outstanding mortgage is on the rise.
 
One in five homeowners over 55 expect to still be making monthly mortgage repayments in their 70s. That’s up from one in six in 2019.*
 
Also on the rise is the average age for homeowners to become mortgage free, up from 58 to 60 in just 12 months.*
 
But that’s not the case for everyone – with 5% of over-55 UK homeowners claiming they’ll never be able to pay off their mortgage.*  
 
So, if you find yourself in a similar position, know you’re certainly not alone. However, equity release may be able to provide the financial support you need to give you the later life you deserve.

 

Equity release vs downsizing

Not so long ago, if you wanted or needed to pay off your existing mortgage in retirement but didn’t have the funds to do so, there would be very few other options than to sell your home and look for something cheaper.
 
That could mean leaving the property you love, moving away from family or breaking up friendships you’ve cherished for many years.
 
Thankfully, that’s no longer the case.
 
Through equity release, you can stay in your home for as long as you like and potentially still unlock the money you need to clear your existing mortgage.
 
All of the cash you release is tax-free, and whether you choose a lifetime mortgage – which is the most popular form of equity release – or a home reversion plan, you can use the money to free yourself of existing monthly mortgage repayments and spend your disposable income on something more meaningful to you.
 
Or, even if you find yourself with a looming interest-only mortgage payment, equity release could give you the money you need to free yourself from your existing mortgage payments.

 

Using a lifetime mortgage to pay off your existing mortgage

A lifetime mortgage is similar to a standard mortgage in that it’s a loan secured against your home.
 
However, with a lifetime mortgage, you don’t have to make any monthly repayments unless you choose to. That’s because the loan, plus roll-up interest, is repaid when your plan ends – which is usually when you or the last remaining applicant passes away or moves into long term care.
 
With a lifetime mortgage, you also retain full ownership of your home and can stay there for as long as you like. That means you can pay off your existing mortgage and still live in the property you’ve worked so hard to make your own.
 
As well, with a drawdown lifetime mortgage, you don’t have to take all your money in one go. So, if you only need some of the cash that’s available, take a smaller initial release and then keep the rest for a later date. And you only ever pay interest on the funds you release. The other lifetime mortgage is a lump sum lifetime mortgage, this is where you unlock some of the equity in your home as a single, one-off amount that you can use in a variety of ways.

 

Benefits of a lifetime mortgage

  • You could unlock some of your home’s value to pay off your existing mortgage
  • All of the money you release is tax-free
  • You don’t have to make monthly repayments unless you choose to
  • You retain full ownership of your home and can stay in it for as long as you like
  • You don’t have to take all your money in one go – you can save some for a later date following an initial lump sum release
  • You’ll never owe more than the value of your home
  • You can still leave a percentage of your home’s future value as part of an inheritance with some plans
 
See how much tax-free cash you could unlock from your home’s value through a lifetime mortgage today with our quick and easy online calculator.
 
Calculate Now

 

Using a home reversion plan to pay off your existing mortgage

Unlike a lifetime mortgage, a home reversion plan isn’t a loan secured against your home.
 
Instead, you can sell all or part of your home in return for a cash lump sum. You can still live in your home for as long as you wish, although you’ll no longer be the owner.
 
However, you can then use that tax-free cash raised from selling all or part of your home to pay off your existing mortgage, leaving you completely mortgage-free.
 
Although, it’s worth noting that a home reversion company will not give you the market value of your home.

 

Benefits of a home reversion plan

  • You can sell some or all of your home’s value to pay off your existing mortgage
  • All of the money you receive is tax-free
  • There are no monthly repayments, as it’s not a loan
  • Once you’ve paid off your existing mortgage, you’ll be completely mortgage-free
  • You can stay in your home for as long as you like
  • You may be able to sell another portion of your home to raise more funds in the future if you didn't sell all of your property's value initially
  • You can still leave a percentage of your home’s value as part of an inheritance if you didn't sell all of your property's value initially

 

We’re here to help you make the right decision

We understand that using some of your home’s value to pay off your existing mortgage can be daunting. And you’ll likely have many questions.
 
That’s why we’re here to help you make the right decision for your needs and circumstances. And as industry experts, we know what’s best for you isn’t always equity release. Which is why we’ll never tell you it’s right for you unless we’re certain.
 
We also won’t charge you for our services unless you decide to go ahead. There’s no pressure to proceed; you’re in complete control and can take as long as you want to make your decision. But remember, we’re always here if you need some advice.

 

See how much you could release

Take the first step towards paying off your existing mortgage by seeing how much tax-free cash you could unlock from your home’s value with our equity release calculator. There’s no obligation to proceed, but it could tell you whether equity release is suitable for your circumstances.
 
Calculate Now


 

Things to consider

  • With a lifetime mortgage, there are typically no monthly repayments to make, as the loan plus roll up interest is repaid when the plan comes to an end.
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
  • Unless you decide to go ahead, our service is completely free of charge as our usual advice fee of 1.5% of the amount released would only be payable on completion of a plan, subject to a minimum advice fee of £695.
  • Mortgage Advice Bureau Later Life offer lifetime mortgages only, which is a loan secured against your home.
  • Mortgage Advice Bureau Later Life offer lifetime mortgage products from a carefuly selected panel of providers.