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Paying off your existing mortgage

Equity release could be an option to repay your existing mortgage and help take control of your later life finances

Can I pay off my existing mortgage with equity release?

One of the options that you could explore as a way to pay off your outstanding mortgage balance in retirement is by using some of the equity that has built up in your property over the years with an equity release plan.

Clearing your existing mortgage balance when you’re in or approaching retirement can not only be a welcome relief, but can also free up some of your monthly income to spend on some of the things you would really want and may need for later life

Although people choose to release equity for a variety of reasons, by using a lifetime mortgage (which is a type of equity release plan) to clear an existing mortgage, homeowners could reduce their monthly outgoings and use their additional income to help fund a more comfortable retirement.
 

Downsizing vs equity release

In the past, many felt the only way to access the value from their home was by downsizing. However, aside from the costs that come with downsizing such as conveyancing, surveys, solicitors and moving fees, there are also the obvious emotional repercussions of leaving a home you love to consider.

With a lifetime mortgage, which is a loan secured against your home, you could release up to 55% of the value of your property while staying in the home you love and remaining the home owner.

It’s proved a timely solution for some retirees who find themselves cash poor, whilst living in an asset worth thousands of pounds. However, you should always think carefully before securing a loan against your home to repay existing debt.

Lifetime mortgage 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
 

Is equity release right for you?

Equity release is a way for homeowners aged 55 and over with a property worth £70,000+ to release some of the tax-free cash from their property to spend on a variety of uses. However, it’s not right for everyone.  

At Key, our specialist equity release advisers will discuss your needs and ensure you consider all your financial options, and their expert advice is available over the phone, via video appointment or face-to-face, whichever is right for you.
 
And, if equity release isn’t right for you, we’ll tell you.

Here to help when you're ready

Use our free calculator

Find out how much tax-free cash you could release from your home now with our equity release calculator

Speak to an adviser

Book an appointment with a specialist equity release adviser at a time that's good for you

Assess your options

Our later life mortgage finder helps you consider your options

Page last updated: Monday 18 March 2024