Are you considering equity release to pay off your mortgage?

Equity release allows homeowners to use the equity from their homes to pay off their mortgage with minimal or no repayments.

If you’re feeling unsure about whether this is for you, then you’ve come to the right place. 

With the cost of living increasing by an average of 13% in the last year¹, paying off a mortgage is the last thing you want to add to your list of worries.

Equity release can be a great idea, especially if you don’t have mounting debt.

But should you use it to pay off a mortgage?

Keep reading to find out more…

Why It’s Important to Pay Your Mortgage off Early

It’s important to pay your mortgage early to avoid any issues with defaulting on your monthly payments. 

When you pay your mortgage early, you save on the interest you’d have to pay back monthly. 

Life can be unpredictable, so aiming to be as debt free as possible frees up money elsewhere.  

Why You Should Use Equity Release to Pay Off Your Mortgage

You should use equity release to pay off your mortgage because retirement doesn’t have to be filled with worry and financial burden.

With equity release, the interest rates are competitive and, therefore, reasonable. 

When you free equity from your home, you can boost your retirement income and keep your home.

How to Use Equity Release to Pay Off My Mortgage 

Using equity release to pay off your mortgage is simple.

If your application is accepted, your solicitor will transfer the equity directly to your mortgage lender.

Equity release will clear your existing mortgage in one legal transaction.   

How Long You’ll Wait to Clear Your Mortgage Using Equity Release

You’ll have to wait up to 3 months² to clear your mortgage, depending on your situation.

Your solicitor will close your mortgage once the equity release process is complete.

Advantages of Using Equity Release to Pay Off Your Mortgage 

The advantages of using equity to pay off your mortgage include reducing your debt with no monthly repayments. 

Enticing? 

Keep reading to see if equity release is the answer you need.

You Can Pay Off Your Mortgage Early 

If you pay off your mortgage early, you significantly reduce the interest you’re paying. 

Paying off your mortgage early also reduces your debt and is excellent if you have a high-interest mortgage. 

You Can Use the Money to Pay Debts or Take a Holiday 

After you’ve paid your mortgage, and all costs relating to the equity release process, you can use the remaining funds. 

Repay debts, renovate your home or take a holiday–whatever you need.

You Still Own Your Home

With a lifetime mortgage, you own and will still benefit from the property market increase. 

Unlike a home reversion plan, you maintain ownership and will still benefit from future increases in your property’s value.

The best part?

Not only do you keep your house, but you’ll live a stress-free life. 

Without the burden of monthly payments, never having to lose your home if you miss a  payment and retire in a place you love.

You Don’t Have to Make Any Monthly Repayments

You don’t have to make any monthly repayments except in exceptional cases. 

However, there are exceptions if you want to repay the loan early. 

You can discuss this with an equity release advisor.

Disadvantages of Using Equity Release to Pay Off Your Mortgage 

The disadvantages of using equity release to pay off your mortgage include increased debt, early repayment fees, and having a reduced inheritance to leave your family.

However, these will vary depending on your plan. 

Keep reading to find out what other disadvantages are linked to equity release.

You’ll Have Increasing Debt Due to Compound Interest 

Equity release uses compound interest, and with a lifetime mortgage, your estate will pay the loan and interest that accumulates over time.

There’s a Limited Amount of Cash That You Will Be Able to Release

There is only a limited amount of cash that you will be able to release. 

Most equity release lenders will give you between 20% and 60% of the market value of your property³.

There Are Fees for Early Repayment 

When you take out equity release, don’t forget that there are early repayment fees should you decide to pay your loan off early.

This often hovers around 10% of the initial amount⁴.

Fees vary between lenders but there will be a limit on what percentage you can repay each year.

It’ll Affect Your Access to State Benefits 

Your access to state benefits may be affected by the equity release cash in your account. 

 Your opportunity to benefit from the state pension or health care will be affected.

Always consult a financial advisor. 

You’ll Have a Reduced Inheritance to Leave Your Family 

When you release equity from your home, you’re essentially selling your home and the rights you have to it. 

When the home sells, your family won’t benefit from the sale of the house.

Equity Release and Community Development

Equity release institutions play a vital role in community development by providing the necessary funding for essential services and infrastructure projects.

Through strategic partnerships with charitable organizations, these institutions leverage their financial resources to create lasting positive change in communities.

Common Questions

In Conclusion

Equity release is an excellent option to pay off your mortgage early if your existing debt isn’t.

If you’re considering taking out an equity release, use our equity release calculator below to get an idea of how much cash you can access. 

Once you know how much equity you can release from your property, educate yourself on the ins and outs of equity release.

Never make decisions without consulting your financial advisor so that you can find the best equity release plan to pay off your mortgage.