Can you get equity release with an existing mortgage?

This content was reviewed and approved by Amy Fletcher.

Any references to tax-free or tax treatment are based on our understanding of current legislation and tax treatment at the time of writing, which may of course change in the future.  

If you’re considering equity release but still have a mortgage on your home, you’re not alone. It’s actually one of the most common questions people ask when exploring later-life lending. Although it is possible, there are important rules and caveats you need to understand first.

In this guide, we explain how equity release works if you already have a mortgage, why lenders require certain conditions to be met, how much you may be able to borrow, and whether this option is right for you.

The information on this page should not be considered as financial advice. If you are unsure what’s right for you, please make sure you speak to a financial adviser.

Can you get equity release if you still have a mortgage?

You can take out equity release if you still have an existing mortgage - but the mortgage usually needs to be repaid as part of the process.

In practice, this means:

• Equity release funds are used to pay off your current mortgage.

• Any remaining funds are released to you as a lump sum, drawdown facility, or both.

You don’t normally continue paying both a mortgage and equity release at the same time.

Equity release lenders typically require the mortgage to be cleared when the equity release plan completes. This is because equity release is secured against your property, and lenders usually need to hold what’s known as the “first legal charge” on the home.

A charge is simply a loan secured against your property. The first lender (or in this case, charge holder) is typically the mortgage provider, who will need to be paid back first. If there was a second lender, they would be paid back once the first lender has been paid in full, so there might not be enough money to also pay them in full.

Why does an existing mortgage need to be repaid?

The main reason is lender security.

Most traditional mortgages already have a legal charge against your property. Equity release providers require their loan to be the primary (first) charge, which ensures clarity over repayment when the property is eventually sold.

Requiring the mortgage to be repaid:

• Simplifies the legal structure.

• Reduces risk for all parties.

• Prevents conflicts between lenders later on.

This is standard practice across the equity release market.

How equity release works when you have a mortgage

The process is straightforward and closely follows the same steps as a standard equity release application.

Step 1 – Your property is valued

Your home is professionally valued to determine how much equity is available.

Step 2 – Equity release is used to clear the mortgage

Part of the equity release loan is automatically used to repay your existing mortgage in full.

Step 3 – Remaining funds are released (if any)

If the equity release amount exceeds your mortgage balance, the remaining funds are released to you.

Step 4 – No monthly repayments are required (usually)

With most lifetime mortgages, there are no mandatory monthly repayments. Interest typically rolls up and is repaid when the property is sold.

Most plans allow optional repayments to control interest growth.

An example of using equity release when you have a mortgage

John is 68 and owns a home worth £350,000.

He still has an outstanding mortgage of £60,000, with monthly repayments that are becoming difficult to manage in retirement.

After speaking to an adviser, John takes out a lifetime mortgage through an equity release plan.

• Based on his age and property value, he can release £120,000.

• £60,000 of this is used to repay his existing mortgage in full.

• The remaining £60,000 is released to John as a tax-free lump sum.

John now:

• Owns his home with no monthly mortgage payments.

• Continues living in the property for life.

• Only repays the equity release loan (plus interest) when the property is sold after he dies or moves into long-term care.

What types of equity release can be used?

There are two main types of equity release in the UK.

Lifetime Mortgages

You take out a loan secured against your home while retaining full ownership.

Key features:

• Interest rolls up over time.

• No mandatory monthly repayments.

• Loan is repaid when you die or move into long-term care.

• Optional repayments are usually available.

Home Reversion Plans

With a home reversion plan, you sell part or all of your home to a provider in exchange for a lump sum or income, while retaining the right to live there rent-free.

These plans are less common today and are usually considered only in specific circumstances.

Eligibility Rules You Need to Meet

To qualify for equity release with an existing mortgage, you’ll usually need to meet the following criteria:

• You’re aged 55 or over.

• Your property meets minimum value requirements.

• Your home is in good condition and of standard construction.

• The equity release amount is sufficient to repay the mortgage.

• You’re a UK resident.

Each provider has its own criteria, so eligibility can vary.

We have created a comprehensive equity release for home improvements guide if you require additional information in this area.

Pros and cons of using equity release to repay a mortgage

Understanding both the advantages and disadvantages is essential when coming to an informed decision.

Here are the pros and cons to be aware of: