This content was reviewed and approved by Amy Fletcher.
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.
Choosing between equity release vs remortgaging can feel daunting. These options let you unlock some of your property’s value while keeping your home and the cherished memories that go with it.
We’ll take you through both choices, explaining the pros and cons of remortgaging or taking out equity release through a lifetime mortgage, so you can live the life you want.
Equity release vs remortgage explained
Your home is most likely your biggest asset and the largest investment you’ll ever make during your lifetime. You’ve paid a lot into your mortgage over the years, and your property’s value has probably increased. Now, you may want to access some of that money without selling or leaving a home filled with memories.
If your property has grown in value, you may be considering equity release, remortgaging or downsizing to raise some cash. The equity in your home is the value of your property after taking off the value of any outstanding mortgage or other secured loans.
For example, if your home is worth £500,000 and you still owe £250,000 on your mortgage, with no other debts secured on the property, your equity is £250,000.
Here are three common ways to access equity in your home:
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Sell your property: You could downsize to a cheaper home and use the leftover funds to pay off your mortgage or support your lifestyle.
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Remortgage: If you’d rather stay put, you could remortgage to release some equity, provided you meet eligibility and affordability requirements.
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Equity release: For those aged 55 and over, a lifetime mortgage lets you unlock part of your home’s value without having to sell.
Equity release vs remortgage: How do they work?
If you want to access your home’s value without moving, remortgaging or equity release are the main options. While they’re not the same, they do share some similarities.
Depending on your circumstances, there may be benefits and drawbacks to both equity release and remortgaging. That’s why it’s important to fully understand precisely how they work.
1. Equity release
Equity release lets you unlock money tied up in your property without selling or downsizing, and the money you receive is tax-free.
The two main types of equity release are:
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Lifetime mortgage: You take out a long-term loan secured against your home, which you don’t need to repay while you continue living there.
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Home reversion plan: You sell all or part of your home to a provider in exchange for a lump sum, regular payments or a combination of both. At LV=, we don’t currently offer advice on home reversion plans.
If you’re considering equity release, you can see how much cash you could unlock from your home using our free equity release calculator.
2. Remortgaging
Remortgaging involves taking out a new mortgage on your current home, letting you tap into the equity that’s grown. This gives you access to some of your home’s value to use however you like.
Remortgaging is a common way to release equity from your property, but there are also important factors to consider:
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You usually need to own a significant portion of your home outright.
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You’ll need to show that you can afford the monthly repayments and meet the lender’s income, affordability and credit checks.
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Mortgage lenders can be more cautious about offering loans to older borrowers.
Remortgaging is a handy option if you want cash without selling, but it does come with some rules to keep in mind.
Are you considering equity release or a remortgage?
Choosing between equity release and remortgaging is a major financial decision. Speak to one of our equity release advisers or request a call back.
Equity release vs remortgage: What’s the difference?
The key difference between equity release and remortgaging comes down to how you repay the money you’ve borrowed. With a remortgage, you’ll need to meet affordability checks and make regular monthly payments.
Equity release works differently, and you don’t usually need to prove income or affordability. The loan is typically repaid later when your home is sold, either after you pass away or move into long-term care.
This means that with remortgaging, your home could be at risk of repossession if you do not make the repayments. However, with equity release you have the right to remain in your home as long as you keep to the terms and conditions of your provider.
What are the pros and cons of equity release?
Equity release and remortgaging both come with benefits and drawbacks.
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Equity release lifetime mortgages |
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Pros |
Cons |
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Your monthly costs won’t usually go up. Unless you choose to pay interest each month (which some plans allow), most costs are upfront, like valuation, legal and advice fees. |
Interest will build up over time, known as ‘compound interest’ . Many people let the interest roll up, meaning it’s added to the loan and repaid later. Some plans do let you pay interest along the way if you prefer. |
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You can access money as you need it. Some plans offer a drawdown option , so you agree a total amount but only take smaller sums when it suits you. |
It could affect your benefits. Taking a lump sum might reduce your eligibility for certain means-tested state benefits. |
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You can access money from your home without needing to move. Although the loan is secured against it, you’ll still own your property, similar to a normal mortgage. In some cases, you may also be able to move home and take your lifetime mortgage with you. |
It may reduce what you leave behind. Because the loan is usually repaid from your home when it’s sold, your beneficiaries may receive a smaller inheritance, unless it’s repaid another way. |
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You can use equity release to pay off your mortgage , as long as you’re able to release enough from your property to cover the remaining balance. Many equity release schemes are also backed by the Equity Release Council’s no negative equity guarantee , so you won’t owe more than your home’s value when it’s sold. |
To release cash from your home using equity release, you’ll need to be nearly or fully mortgage-free. Any outstanding mortgage must be repaid, but you can use your lifetime mortgage loan to cover it. |
What are the pros and cons of remortgaging?
Below you’ll find the advantages and potential drawbacks of remortgaging.
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Remortgaging |
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Pros |
Cons |
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Just like with equity release, remortgaging lets you stay in the home you love. |
To access cash through remortgaging, you may need to borrow more or lengthen your mortgage term, which means it will take longer to fully own your home. |
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As you're making repayments each month, the interest won't build up as quickly as with a lifetime mortgage, meaning you could leave more to your beneficiaries. |
Your remortgage application might not be approved. This can depend on factors like your age, income or overall financial situation. |
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You could secure a better rate than your current mortgage, potentially lowering the total amount you need to repay. |
You may find it difficult to keep up with the repayments if your situation changes. |
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You can still remortgage in retirement, but your pension needs to be sufficient to cover the repayments. |
If your property’s value falls, you could end up in negative equity, meaning you owe more than your home is worth. |
Can you move to another property with equity release?
Yes, you can sell or move house with equity release, but it’s important to speak to your provider first. Whether you’re thinking about relocating, downsizing or gaining more flexibility in retirement, it may be possible if your provider agrees.
If you’re 55 or over, equity release is usually available through a lifetime mortgage or a home reversion plan. How much you can release depends on things like your age, your property’s value and your product’s terms.
Because the loan is secured against your home, selling it usually means the loan needs to be repaid. This is typically done using the money from the sale, with any remaining funds going back to you.
Keep in mind, though, that paying off your equity release could reduce how much you take away from the sale. There could also be extra fees or charges depending on your provider.
Equity release vs remortgage: Key considerations
Choosing between equity release and remortgaging depends on your individual situation. Here are some key points to consider:
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Income: With a remortgage, you’ll need to make monthly repayments. With equity release, you generally won’t have to unless you choose to pay interest.
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Age and joint borrowing: Lenders often consider age when approving a remortgage, which can make deals harder to find as you near retirement. For equity release, usually the youngest borrower must be at least 55.
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Amount you want to release: Equity release can often provide more capital since it doesn’t rely on your income. Remortgages that require monthly repayments may offer less flexibility.
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Affordability: Remortgaging can be cheaper overall. Lifetime mortgage rates are usually higher than standard mortgages because interest compounds over time, increasing the total amount repaid.
It’s important to seek professional financial advice to fully understand the benefits and drawbacks of both options and decide which is right for you.
Which option is right for me?
You should never rush into a decision between equity release vs remortgage. Remember, there may be costs involved, like advice or legal fees, whether you remortgage or take out equity release.
Equity release isn’t the only way to boost your income. There are other options too, such as downsizing or using other investments. If you’re unsure which way to go, a financial adviser can help you weigh up the benefits, costs and risks and figure out the best solution for your situation.
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