Can You Equity Release Without Remortgaging?

There is a wealth of reasons why you might want to free up capital you hold in your property’s equity. From home improvements to funding your lifestyle in retirement. A misconception is that releasing equity is only for borrowers above a certain age.

While it is true an equity release product specifies a minimum age of fifty-five, you can also free up the cash from your equity using a straightforward remortgage. In this guide we will answer the question “can you release equity without remortgaging” once and for all.

How Does Equity Release and Remortgaging Work?

First and foremost, all financial products that allow you to release equity are mortgage products.

If you have no mortgage on your property, you will not be remortgaging if you take an Equity Release product, it will be a brand new mortgage product. In some cases, you can take an Equity Release product with a small mortgage remaining, although lenders normally stipulate you repay your existing mortgage with the funds.

In the case where you have a small mortgage, you will be technically doing a remortgage to release equity – however you will be moving away from a traditional mortgage product onto a specialist product.

Equity Release products are not the only way to free up cash from your property. Let’s take a closer look at how to release equity from your home.

How Can I Release Equity from My Home?

There are four main ways to release equity you hold in your property, including alternatives to equity release.

  1. Remortgaging for a higher amount.
  2. Taking a second charge mortgage.
  3. Taking an Equity Release product.
  4. Taking a retirement interest only mortgage.

Of course, if you have no mortgage on your property and own it outright, you can always take a standard mortgage product to borrow against the equity you hold.

Strictly speaking, there are plenty of circumstances where you will not need to remortgage to release equity. It will depend entirely on your personal situation.

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Types of Equity Release

For anyone over the age of fifty-five, you have the option to take a Lifetime Mortgage which is one of two Equity Release products available in the UK.

The second is a Home Reversion Plan, normally with a minimum age of sixty-five.

Both products differ from a traditional mortgage as there are no monthly payments.

Is equity release a good idea? Well, Lifetime Mortgages accrue interest that rolls up until you pass away or go into long term care. At the end of the mortgage, the interest and capital of the loan is then due. A lifetime mortgage can be repaid in various ways including your next of kin selling the property or settling the balance from their own funds.

Home Reversion Plans to Release Equity

Home Reversion Plans have no interest payment. The provider buys the equity from you up front and you sign an agreement allowing you to live in the property until you die. It is worth noting, although the lack of interest is a big benefit compared to a Lifetime Mortgage, the amount you will be paid for your equity will be greatly diminished.

Because Home Reversion Plans typically offer very poor value for money, most borrowers taking Equity Release will opt for a Lifetime Mortgage.

Alternatives to Equity Release

You are in many cases able to access other forms of borrowing depending on your age and circumstances. Let’s look at some equity release examples.

Remortgaging

The simplest way to borrow more money against your property is to remortgage to release equity for a higher loan amount. Your mortgage broker will be able to advise how much you can potentially borrow and find you the lender with the best rate for your circumstances.

Second Charge Mortgages

If you already have a mortgage in place and cannot remortgage, a second charge mortgage is a great way to borrow additional money against your equity. Because second charge lenders take on higher risk, the interest rates tend to be much higher than a first charge remortgage.

Retirement Interest Only Mortgages

As you grow older you may find traditional mortgage products unobtainable due to monthly repayment costs or maximum age limits. Retirement Interest Only mortgages allow you to borrow against your property and pay only the interest portion each month.

Is Equity Release a Good Idea?

When deciding on releasing equity through a standard mortgage product or an Equity Release product, you will need to factor in your personal circumstances.

For some borrowers, a standard mortgage is not available and even making an interest payment monthly is out of the question because retirement income is too low. If you find yourself in this situation an Equity Release product could be a fantastic way of freeing up capital and living comfortably.

Equity Release products do have drawbacks, not least that you will be disinheriting your next of kin to some extent. Wherever possible it is worth discussing your financial situation with a mortgage and Equity Release broker to ensure you have covered off all options available to you.

There is no definitive answer about whether Equity Release is a good idea. You will be best placed to know whether you can comfortably afford monthly repayments on traditional mortgage products and your mortgage broker will be able to accurately advise your best route forward.

What Our Clients Have To Say

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All products mentioned in this guide are regulated. Any mortgage is a significant financial commitment, and you should always seek expert advice before deciding which route best suits your circumstances.

In respect of Equity Release, you must have expert advice as there are often aspects of the product borrowers overlook.

Boon Brokers is a Whole of Market Mortgage, Insurance and Equity Release Broker. Boon Brokers is a proud member of the Equity Release Council and commits to maintaining the high standards set out by the council.

Boon Brokers provides fee free mortgage advice on all products mentioned in this guide, so you can ask “can you release equity without remortgaging?” and all your other questions.

Contact Boon Brokers to find out the best route to release equity today.

 

Gerard BoonB.A. (Hons), CeMAP, CeRER

Gerard is a co-founder and partner of Boon Brokers. Having studied many areas of financial services at the University of Leeds, and following completion of his CeMAP and CeRER qualifications, Gerard has acquired a vast knowledge of the mortgage, insurance and equity release industry.