Could you release equity to re-mortgage?
16 June 2021
How releasing equity to re-mortgage works
Re-mortgages are very common within the UK. In fact, in December 2019, there were 16,820 re-mortgages — a 5.9% rise on the same month the year before. Although residential mortgage lenders are still commonplace, homeowners over 55 are increasingly turning to equity release when they’re looking to re-mortgage.
The main advantage that lifetime mortgages have over residential mortgages is that lifetime lenders don’t require you to make monthly payment, which is a great option for those struggling to keep up with their repayments. This is one of the reasons why lifetime mortgages have become particularly appealing to homeowners over 55 during the coronavirus crisis and the financial uncertainty it has created. Whereas with a residential lender, if you fail to keep up with your mortgage repayments, your house might be repossessed, with a lifetime lender your mortgage is fixed for life and you don’t have to make monthly repayments, meaning you won’t need to worry about a change in your circumstances.
However, should you wish to make monthly repayments, many lifetime mortgages will still give you this option either through interest-only payments, lower repayments, or higher repayments if you want to reduce how much you owe. Furthermore, depending on certain criteria, such as your age and the value of your home, you may also be able to unlock some of the capital in your property when you re-mortgage, giving you cash to re-invest elsewhere.
The benefits of releasing equity to re-mortgage
There are lots of benefits to re-mortgaging with a lifetime mortgage lender, including:
- Paying off your existing mortgage: This will mean that you can stay in your home if you’re struggling to keep up with monthly payments, if your current provider won’t extend the terms or if you’re facing repossession. With a lifetime mortgage, there is no need to make repayments, although there is the option to repay the interest as you go, to ensure you maintain the value of equity you hold in your property.
- The ability to re-mortgage later in life: As you get older, you might find that residential lenders could be reluctant to lend to you, making it harder to re-mortgage should you wish to. Lifetime mortgages are specifically aimed at those over 55, so your age shouldn’t affect your application
- Unlock cash: In releasing equity from your property, you could access money for purposes such as home renovations or providing financial help to your loved ones.
- Stay in your home: When you release equity, you’re entitled to stay in your home until you move into permanent residential care or pass away.
Is equity release right for me?
The best way to understand about whether you should re-mortgage using equity release is by talking to a qualified adviser. Whilst there are comparison sites available, price comparison sites are unfortunately unable to properly consider your unique circumstances, reasons for getting a lifetime mortgage and other options — such as, whether you’d like the option to repay the interest as you go.
Our founder and Managing Director, Jan Johnson, said: “We’re seeing lots of homeowners over 55 who are looking to re-mortgage with a lifetime mortgage. The important thing to remember is, just like when you took out your residential mortgage, you should work with an adviser to ensure that you end up with the product that’s right for you. Working with an equity release specialise will also enable you to ensure that you’ve understood all the industry relevant terms and can make an informed decision.”
If you want to find out whether you could use equity release to re-mortgage, then please get in touch.