If you want to boost your income in later life, releasing equity is a good option for many people. You can unlock the equity tied up in your home by remortgaging or by taking out an equity release scheme.

Homeowners with an existing mortgage could go with the remortgage option to unlock some of the capital that’s tied up in the value of their home. The process involves applying for a new mortgage deal that is larger than your current one.

An equity release scheme, on the other hand, is a loan that is secured against the value of your property. The cash you get is completely tax-free and doesn’t have to be repaid until you either pass away or move into permanent residential care.

There are some other options to explore too. On this page, we’ll focus on releasing equity by remortgaging or by equity release, taking out an lifetime mortgage. If you have any questions, please don’t hesitate to contact Think Plutus and speak to one of our experts.

Why would you be thinking about remortgaging or equity release?

For most homeowners, your house is your biggest asset. As you approach later life, you may be thinking about boosting your income, and accessing some of the value of your home without selling it can be an attractive option.

Chances are when you bought your house you had to take out a mortgage. It will have been a big investment, and the longer you have owned the property, the more it is likely to have increased in value. Unless your mortgage has been completely paid off, you won’t own your home fully, but the value of the share you do own will probably have increased in value.

This value is what we call equity, and it is tied up in the bricks and mortar that make up your home. If you want to access this money without selling the house, a remortgage or an equity release plan could be the answer.

What is equity?

Simply put, equity is your property’s market value minus the outstanding mortgage balance. So if your home is worth £300,000 and you have £250,000 of outstanding mortgage to pay, you have £50,000 of equity.

Equity increases in two ways:

  • The market value of your property increases from when you purchased it
  • Your outstanding mortgage balance goes down as you make repayments over time

If you have equity in your home, there are a few ways you can access it. One way is to downsize, meaning you sell your home and move into a smaller, cheaper property. This enables you to pay off your remaining mortgage and any amount left over, minus fees and solicitor costs, is yours to keep.

If you don’t want to move out of your home, you could take out a new loan against the equity instead. You could consider doing this by either remortgaging or arranging an equity release scheme – it depends largely on your age and your circumstances.

People often do this to supplement their income in retirement or to fund home improvements.

How does remortgaging work?

Remortgaging is a good option for some people to release equity, but it is a little different from taking out an entirely new mortgage to purchase a property. This is because you already own your home and have either been paying off the mortgage for some time or have finished paying it off altogether. In either case, you have accumulated equity in your home over time, and this is the value you will be borrowing against.

Generally speaking, the more equity you have, the stronger your position. This is because the amount of money you owe in comparison to the property’s value will be lower. If you are approaching the end of your initial fixed-term mortgage then remortgaging can be a good option. In essence, you’ll be transferring the remaining debt from your current lender over to a new one.

Most people remortgage to take advantage of a better interest rate for their monthly payments. But releasing equity is another way to take advantage of remortgaging. However, if you are an older borrower, there are some important considerations to take into account with remortgaging to release equity.

Can you remortgage in later life?

If you’re retired, or will be retiring soon, the reality is that remortgaging to release equity may not be easy to do. This isn’t to say it won’t be an option, but there will be some obstacles to overcome.

There are no universal rules set in stone with regards to age limits. Different lenders will take different approaches to maximum age caps, so it will be important to shop around and compare lenders. That said, eligibility for remortgaging to release equity in later life is about more than just age – lenders will need to assess affordability. They will require you to demonstrate that your retirement income will be sufficient to cover the mortgage repayments.

When considering their decision, lenders will assess the following:

  • Your outstanding mortgage versus the value of your property
  • Your income (pensions, savings, etc.)
  • Your regular outgoings
  • Your plans for the money you release
  • Your credit record

It is wise to think carefully about affordability from your own perspective before committing to a mortgage. You don’t want your monthly repayments to cause undue stress and strain on your income. The expert advisers at Think Plutus can help you get a strong understanding of the viability of remortgaging for your circumstances.

Equity release

For homeowners over the age of 55, the option of equity release is available to unlock that capital tied up in your property. It’s a method of unlocking tax-free cash from your home’s value, either in the form of a lump sum or smaller amounts that you withdraw as you need them. The money can be spent however you like, whether to provide a more comfortable retirement, make some improvements/alterations to your home, or maybe to take the holiday of a lifetime.

Bear in mind that if you still have an outstanding mortgage balance, the money you release must first be used to clear this. Anything left over is yours.

The amount you can release will depend on the value of your home, your age and your health. In any case, when you take out a lifetime mortgage (the most common and popular equity release plan) you don’t have to be concerned with making monthly repayments during retirement. Instead, the loan plus interest is paid off by selling the home either when you die or move into permanent residential care.

Is equity release a good option for you?

If you have a lot of money tied up in your house, but your income is quite low, equity release could give you a much-needed financial boost in retirement. Even with an outstanding mortgage on your property, you could still meet the eligibility criteria – you will just have to pay off the mortgage with the money you release first. Whatever is left over will be yours to spend as you please.

Taking out an equity release plan is a big financial decision. It is not the right option for everyone, so you must consider all the available options before committing to it. It is highly recommended to seek expert advice to ensure you can make a decision with confidence that it is right for you.

Equity release will lower the value of your estate. This means that when you die, the inheritance you leave for your loved ones will be smaller. It may also affect your tax position and have an impact on your entitlement to means-tested state benefits.

Speak to the experts

If you’re weighing up the pros and cons of remortgaging versus equity release schemes to access the cash tied up in your home, remember this: it is a big commitment, so you must put a great deal of thought into your decision.

The advice from a seasoned expert is essential to help you find the best option for you.

Think Plutus is a whole-of-market mortgage broker with a depth of knowledge and experience in helping clients release equity in their home. We can find the best deal from the right lender based on your unique circumstances, taking a tailored approach that meets your needs. Contact us today and one of our friendly team will answer your questions and get the ball rolling on finding the best option for you. For trustworthy advice on releasing equity from your home, Think Plutus.

Think Plutus equity release

Speak to a lifetime mortgage adviser today

Our friendly team of expert advisers are ready and waiting to take your call today. If you have any questions, take a few minutes and get a free, no-obligation consultation. We can answer your questions and give you an idea of how much you could borrow.