As we get older, financial priorities and goals naturally begin to shift. You might be approaching retirement, dealing with rising living costs, looking to make the most of the years ahead, or supporting a growing family.
After many years of paying into your home via your mortgage, the idea of unlocking some of that value and using it while you can enjoy doing so can be very appealing. Whatever your goals and priorities, equity release can be the perfect way to do exactly that and access some of the wealth tied up in your property.
However, it’s also increasingly common to still have a mortgage in place in the years leading up to and in retirement. With regular monthly payments still going out, you might think it’s not possible to release funds from your home just yet. This raises an important question: can you get equity release if you still have a mortgage?
In short, yes, you can get equity release if you have an existing mortgage. However, there are some important details to understand about how this process works and what will happen to your current mortgage when you release equity. Read on to learn more.
How Equity Release Works
The most popular form of equity release is a product called a lifetime mortgage, which allows you to borrow against the value of your home while retaining full ownership of it. The funds released can be used for a wide variety of purposes, including gifting money to family, supporting your lifestyle, or improving your home.
One of the key features of this kind of equity release is that, unlike a traditional mortgage, there are no required monthly payments. Instead, interest is added to the amount borrowed over time. The total amount borrowed plus interest is then repaid when the last homeowner passes away or moves into long-term care and the property is sold.
What Happens To My Existing Mortgage?
You cannot have a lifetime mortgage and a standard residential mortgage at the same time. Crucially, however, a lifetime mortgage can be used to pay off your current mortgage. When releasing equity in these circumstances, the outstanding balance on your existing mortgage must be cleared before any released funds can be used for other purposes. This is usually done using the equity you release, after which any extra funds can be spent as you wish.
In simple terms, this means that you can get equity release if you have an existing mortgage, but you must be able to release enough funds to clear your current mortgage to be able to do so.
For many homeowners, wanting to clear an existing mortgage can actually be one of the main reasons for considering equity release in the first place. If your mortgage is approaching the end of its term, becoming difficult to manage, or you simply want to enjoy your later years free from the burden of required repayments, equity release could give you the financial freedom you need.
Interest-Only Mortgages & Equity Release
The burden of an interest-only mortgage can be a particular motivator for considering equity release. If you have an interest-only mortgage, you may hold some uncertainty about how you will repay the full loan amount at the end of the term.
Equity release can offer a potential solution if you are approaching the end of an interest-only mortgage and do not have separate provisions for repayment. By taking out a lifetime mortgage, you might be able to repay your interest-only mortgage and remain in your home free of required repayments during your lifetime. Doing so won’t be right for everyone, particularly as equity release can reduce the value of your estate and affect your means-tested benefits entitlement. However, it can provide a valuable lifeline when your current mortgage no longer suits your financial needs.
Find Out If Equity Release Is Right For You
At Mewstone Equity Release, we’re on hand to help you determine if equity release is right for you and how it might function in relation to any current mortgage you might have. Through our tailored and local equity release advice service, we’ll help you to understand all of your options and which might be best for you in the long-term. We have access to plans from the whole of market, allowing us to find you a solution that works for you and your plans in the future.
Call us on 01752 922549 or book a call with our award-winning later life mortgage adviser to discuss your situation and find out what’s possible.
Mike Jones
Later Life Lending Specialist
Mike Jones is a dedicated later life lending specialist, leading the “Mewstone Equity Release” service with a focus on providing personalised financial solutions for those navigating the complexities of retirement and home ownership. With years of experience in retail banking and a deep understanding of later life lending, Mike is well-equipped to guide you through critical decisions such as equity release, retirement interest-only mortgages, and more.
Releasing money from your home is a significant choice, and Mike understands the importance of ensuring you are fully informed about your options. His approach is rooted in offering unbiased, expert advice tailored to your unique circumstances. Whether you’re looking to improve your retirement lifestyle or need help planning your financial future, Mike is committed to finding the right solution for you—without any preference for particular lenders or products. His ultimate goal is to help you make informed, confident decisions that suit your long-term needs and give you peace of mind.
At Mewstone, Mike believes it’s not about “selling” a product but about finding the right fit for each individual. You can trust that, when working with Mike, the focus is always on what’s best for you and your financial future.