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Equity release vs remortgage

Undecided between equity release or remortgaging your existing residential mortgage? Key could help you find the answer.

If you’re looking to release some of the funds tied up in your home, you could look at remortgaging your property, or maybe even explore equity release.

Property wealth among those in or approaching retirement has never been higher. It's great news for homeowners looking for a financial boost later in life. But what if you want to stay in your own home and still reap the rewards of increasing house prices? 

Why not speak to our team to see whether equity release or remortgaging your existing residential mortgage could be the answer for you. Whichever route you look to take, there are a number of considerations to both.

What is equity?

When considering equity release or remortgaging, it's important to understand exactly what equity is. The equity in your home is the value held in the property that is not under a mortgage or any secured debt.

How to work out your home’s equity

 

It’s simple to work out your home’s equity:

(The market value of your house – any existing secured debt) = your equity

As an example, if your property is worth £400,000 and your mortgage is £100,000, you’ll have £300,000 of equity.

How to access some of this equity

You have a few options to access some of the funds locked in the value of your home: 

Downsize

  • One option is to downsize to a cheaper property
  • You’ll pay off your mortgage and keep any amount left over once you’ve paid for the costs of selling and buying

Equity release

  • If you don’t want to move home, then you could look at equity release
  • You have two options which allow you to stay in the home you love

Remortgaging

  • Remortgaging is moving your existing mortgage from one lender to another
  • Your new mortgage will then replace your old one

ⓘ Did you know...

You could also make sure you're getting all the benefits you're entitled to. Our advisers can help you check what you're entitled to and tell you how releasing equity could affect any means-tested benefits you may already receive. Alternatively, you could ask a loved one for financial help or use any savings you may have.

What is equity release?

Equity release is a way for homeowners aged 55+ with a property valued at a minimum of £70,000 to release some of the tax-free funds from their home. It could play an important role in helping you take control of your later life finances, although it's important to know that equity release is a complex product with long lasting effects that may not be right for everybody.

There are two types of equity release:

  • Home reversionwhere you sell all or part of your home to a reversion company for less than market value in exchange for a cash lump sum, with no interest to pay on the money released, and no monthly payments to make. When the plan comes to an end, the home reversion provider takes its percentage share of the sale proceeds. You need to be 65 or over to qualify. Find out more about home reversions.

  • Lifetime mortgage: which is a loan secured against your home and lets you access some of the tax-free funds tied in the value of your home while still retaining full ownership. You need to be 55 or over to qualify. Find out more about lifetime mortgages.

You have two options when it comes to releasing your funds with a lifetime mortgage – either as a lump sum or in smaller payments after an initial lump sum, known as a drawdown lifetime mortgage.

  • After any existing mortgage or secured debt has been settled, the tax-free money released is then yours to spend in a variety of ways

  • You retain full ownership of your property - you’ll be able to enjoy the funds you’ve released and your home, without the stress of moving

  • A lifetime mortgage to release equity usually doesn’t involve monthly payments
  • The loan plus compound interest is usually repaid after your property is sold when your plan ends - typically when you or the last remaining applicant either passes away or enters long-term care
  • A drawdown facility isn't guaranteed and your lender may have the option to withdraw your drawdown facility. If you choose to make a drawdown, the funds will be subject to the prevailing, fixed interest rate at the time. This may be higher than your original interest rate.

Equity release benefits

Your specialist equity release adviser will explain:

  • You can unlock cash from your home, tax-free, to help meet your needs in later life
  • You’ll always retain full ownership of your home and can stay in it for as long as you wish with a Key lifetime mortgage
  • You can choose to make reduced or no monthly repayments to suit your circumstances
  • You’ll never owe more than your home’s worth with a Key lifetime mortgage
  • You may be able to remortgage your plan in the future to release further funds or secure a better interest rate, although this isn’t guaranteed and may be subject to early repayment charges

Drawbacks

Your equity release adviser will also outline the following important things to think about:

  • A lifetime mortgage is a loan secured against your home and subject to compound interest, meaning the amount you owe can grow quickly
  • Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits
  • Equity release may leave you with limited or no property equity remaining
  • Equity release will reduce your financial options in the future
  • A lifetime mortgage is a long-term financial product and is not designed to be fully repaid until the death or entry into long-term care of the last remaining borrower, otherwise early repayment charges may apply

Things to consider

  • All our equity release advice relates to Key lifetime mortgages only - a loan secured against your home
  • The loan, plus compound interest, is typically repaid through the sale of the property when the last remaining applicant passes away or moves into long-term care
  • Our fixed advice fee of £1,299 is only payable on completion
 

ⓘ Did you know...

Equity release isn’t for everyone, so consider all your options and seek advice before going ahead to make sure equity release is right for you.

What is remortgaging?

Remortgaging, as opposed to equity release, involves taking out a new or additional mortgage or altering the terms of your existing loan.

Remortgaging, is taking out a new mortgage deal with a different lender to replace an existing mortgage, the terms of which may be different to your existing mortgage. It's also slightly different to taking out a new mortgage when you buy a property.

Homeowners who have an existing mortgage against their property could have the option to remortgage their existing residential mortgage to receive an additional lump sum, which includes retirement mortgages.

  • You could be eligible to remortgage your existing residential mortgage to take out equity on your home, as long as you meet the affordability and lending criteria

  • If you’re still paying off your mortgage and your initial fixed term is coming to an end, it’s potentially an option to remortgage your existing residential mortgage - to secure a better rate

  • If you do have equity in your home, this is when you could look at releasing some of it

Remortgaging to release equity

Remortgaging to release equity is a decision which must be thought about carefully. If you’re exploring the option of remortgaging your existing residential mortgage to release equity, here are a few things you’ll need to look at to work out whether it’s an affordable choice for you:

  • The amount you owe compared to the value of your home
  • Your income – this could be from your pension or work
  • Your monthly outgoings
  • What you’ll be using the money for

ⓘ Did you know...

If you decide to go ahead, your monthly repayments will likely increase to cover the bigger loan amount, and extending your mortgage's term means it will take you longer to pay it off.


If you’re considering remortgaging to release equity, speak to the expert team here at Key. We’ll talk you through the options available and see whether this could be suitable for you.

Benefits of remortgaging & equity release

  • You could release a lump sum from your home

  • You could benefit from your home's increase in value

  • You could consolidate all existing debts into one monthly repayment (through remortgaging only)

  • You may be able to borrow more from a new lender

  • You'll always own your home (through a lifetime mortgage only)

  • You could switch to a mortgage more suitable to your financial situation and spend your money in a wide variety of ways

Drawbacks of remortgaging & equity release

  • You'll need to prove affordability before being accepted (through remortgaging only)

  • You could be refused based on your age, credit history or income (through remortgaging only)

  • Remember a mortgage is secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage

  • Some of your funds may be used to cover costs and fees

  • You should always carefully consider before securing a loan against your home

  • It's important to think carefully before using your secured loan to consolidate unsecured debts

Things to consider

  • A mortgage is a loan secured against your home
  • Your home may be repossessed if you do not keep up repayments
  • You should always think carefully before securing a loan against your home
  • Our fixed advice fee of £1,299 is only payable on completion

These methods of accessing funds from your home are not the same and there are key differences between equity release and remortgaging. The main factor is that remortgaging is available to homeowners of any age, whereas equity release is only for those aged between 55 and 95.

If you own a property, it’s likely that your home is your biggest asset. There may come a time in your life where you’d like to access some of its value, without having to sell and move on. 

Stay where you love
Our homes often mean much more to us than just being a place to live, and the thought of packing up and moving can often be a tough decision to make.

Retain ownership (through lifetime mortgage only)
You could access the funds you need now and keep full ownership of your home. This could be to help loved ones or make home improvements, for example.

Access some of the value locked in your property
Your “value”, which is commonly known as equity, is essentially tied up in the bricks and mortar of your property. If you’d like to access some of your equity, you’ll need to look into remortgaging or equity release.

What can the funds from equity release or remortgaging be used for?

When releasing equity, the good news is that you could use the funds in a variety of ways.

There are many reasons why people choose to remortgage or use equity release. Here are some of the most common uses:

Clear an existing mortgage

If you have an existing mortgage, you could clear it to free up more disposable income. This could give you peace of mind and make it easier to manage your finances in retirement.

Gifting to a family member

The equity you release can be used to gift money to a family member. This could be a way to help them with their own financial needs.

Pay off existing debts

If you have existing debts, such as credit card debt or personal loans, remortgaging or equity release could help you to pay them off.

Home improvements

If you're thinking of making some home improvements, remortgaging or equity release could provide you with the funds you need, from future proofing your property to installing a new kitchen.

Look at our customer stories to find out what others have used their equity release funds for.


Back to "What's in this guide?"

Is it better to remortgage or use equity release?

This depends on your personal situation and what might be the right option for one person, might not be the ideal situation for another.

ⓘ Did you know...

As everyone has different needs, it's important you understand your options when considering remortgaging vs equity release. Key can help you find the right product to suit your needs - arrange a callback today and one of our experts will happily help you get started.

Remortgaging vs equity release at a glance

 
  Remortgaging Equity release
Monthly payments Mandatory Optional
Options to access funds Lump sum only Lump sum or Drawdown
Eligibility Credit checks, age & affordability Applicant age/value of home 
Loan secured against home Yes Yes
Advice fee* £1,299 £1,299

* Payable on completion

Your other options

Here are some alternatives that may be more suitable for you:

Equity release costs

Here are some guides to help you understand equity release costs:

ⓘ If another product is more suitable, we'll refer you to a different adviser within Key Group who can help. If you go ahead, you'll only be charged the same £1,299 advice fee you'd pay with us, even if their fee is usually higher.

 
Back to "What's in this guide?"

Why choose Key?

We understand that remortgaging or equity release is a big decision. So why should you choose Key to help you reach your later life finance goals?

We're regulated experts

Key is regulated and a proud member of the Equity Release Council
 

Trusted award-winners

We've won 80+ awards and 17,000+ excellent Trustpilot reviews, making us the UK's most trusted equity-release specialist

BestEquityReleaseAdviser2022-(1).png

Highly experienced

We have over 25 years' experience in helping more than a million over-55s with tailored equity release advice on later-life products. Our knowledge means that, once we've taken the time to understand your needs, we’ll have a sound idea of what the right plan is for you.

Customer stories

 

ⓘ Did you know...

Over the years, our customers have benefitted from expert advice, experience and professionalism from Key. We've been rated 'Excellent' on Trustpilot and you can check out the great things our customers have to say.

All members of Key I spoke to were helpful and friendly, nothing was too much trouble for them

Ms Kane

I must say that Key were very helpful and understanding through the whole process

Mr Griggs

We used Key to provide funds to upgrade parts of our house


Mr Dennison

Advice from the experts

Whether you’re considering equity release or looking to remortgage your existing residential mortgage, remember it’s a big commitment. So, speak to the experts who can help you explore all the options allowing you to decide.

With some products such as our lifetime mortgages, you’re unable to take one out without taking advice first.

Our friendly and experienced team are available to answer any questions you may have and will help you choose the most suitable option for your circumstances. Contact us today or call 0808 252 9170. Alternatively, get started online today with our quick and easy-to-use calculators to see how much you could release. 

Equity release calculator

Curious to find out how much in tax-free funds you could release from your home? It’s quick and simple using our equity release calculator.

Mortgage calculator

To get your quick mortgage calculation use our free online calculator for instant results.

Not sure what mortgage is right for you?

Our mortgage finder can help you understand your mortgage options when it comes to later life.

Read our equity release articles

Equity release isn't something you should rush into. Read our RetireWise articles to learn more about how it works and whether it's right for you.

How does equity release work?

 

How long does equity release take?

Is equity release safe?

Page last updated: Friday 18 August 2023