Equity Release with an Existing Mortgage: What You Must Know

Can Your Current Mortgage Stop You From Releasing Equity?
Contributors: Nicola Date, Katherine Read. Edited by Rachel Wait & Reviewed by Francis Hui
Do You Want to Take Out Equity Release With an Existing Mortgage? Discover How Much Equity You Can Release With an Existing Mortgage & How to Use the Funds You Unlock. Get the Answers You Need Here. Keep Reading…

Are you a retiree who’s heard of equity release, but your existing mortgage is stopping you from applying?

Current statistics show that 1 in every 6 UK retirees will be paying a mortgage until they’re over 65. Don’t get stuck in the same situation!

We’re here to guide you as to how you can get equity release while you have an existing mortgage.

As experts in our field, we discuss the following in this article:

    EveryInvestor is dedicated to providing you with the most recent equity release advice available to assist you with your financial situation in retirement. 

    As a result, we’ve spent hours researching and keeping you up to date on the latest trends in retirement financial products.

    Let’s get into it!

    Before You Start Reading….

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    Can I Get Equity Release if I Have a Mortgage?

    Yes, you can get equity release even if you have a mortgage on your home.

    If you’re a homeowner with a mortgage, are over 55, and would like to release some of the cash locked up in your home, you may be eligible for an equity release loan.

    Equity release providers will require that they’re the primary and sole first charge listed on your property.

    Your equity release funds will settle any outstanding mortgage you may have, and you’ll receive the balance as a cash tax-free lump sum into your bank account.

    2 Types of Equity Release You Can Get if You Have an Existing Mortgage:

    The 2 types of equity release you can get if you have an existing mortgage are either a lifetime mortgage or a home reversion plan.

    Here’s more about these.

    Lifetime Mortgages

    A lifetime mortgage, also known as a retirement mortgage, enables you to borrow money against the value of your home while continuing to live in it. 

    You’re not obligated to make any repayments.

    The loan and any interest accrued will be settled by the proceeds from the sale of your property when you pass on or move into permanent care.

    Home Reversion Plans

    A home reversion scheme allows you to access a cash lump sum tax-free when you sell all or part of your property to a reversion scheme provider1 for slightly less than its market value.

    Which Option Should I Choose?

    When deciding which option you should choose when it comes to equity release with an existing mortgage, it’s always best to first consult your financial adviser.

    They can help you decide if a lifetime mortgage or a home reversion plan is your best option based on your financial situation and individual set of circumstances.

    Residential MortgageLifetime Mortgage
    100% property ownershipYesYes
    The lender has a registered charge on your propertyYesYes
    Maximum loan amountUsually 4.5% of a joint income (based on affordability).Depending on your age and property value.
    Affordability assessment.YesNo
    Mandatory monthly paymentsYesNo
    Voluntary paymentsYesYes
    Minimum age of applicantsUsually 18 years old.55 years old.
    Maximum age of applicantsTypically up to age 75 (Usually be repaid by retirement).Lender dependent.
    The right to live on your property for lifeNoYes
    Interest rates are fixedFor the initial term only (2/3/5/10 years). Reverting to the Standard Variable Rate after that if not re-fixed.Yes for the lifetime of your mortgage, rates are usually fixed.

    How Does Remortgaging to Release Equity Work?

    Remortgaging to release equity works by you taking out a new loan on your property.

    To explain this, let’s give you an example.

    Perhaps you bought your home 15 years ago, and it was purchased for £300 000, and you took out a mortgage for £250 000.

    The loan you took may now have been reduced to £230 000, and at the same time, your property’s market value may have climbed to £400 000.

    This means that the equity you own in your home is £170 000.

    If you remortgage for a higher value than the £170 000 for say £220 000.

    You’ll benefit from a lower repayment if you get a lower interest rate2, as well as being able to release the balance in equity with your new mortgage.

    Before You Continue Reading….

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    Pros & Cons of Equity Release With An Existing Mortgage

    Here are some of the pros and cons of equity release with an existing mortgage.


    • Linking new borrowing to your mortgage is straightforward.
    • You can release equity for a wide variety of uses.
    • The money you unlock is tax-free.
    • You can use equity release to pay off your mortgage.


    • You’re increasing the size of your debt.
    • There may be cheaper ways to borrow.
    • You may have to pay early repayment charges when you pay off your old mortgage.
    • If you struggle with repayments, your home will be at risk.

    What Happens to My Mortgage When I Take Equity Release?

    Your existing mortgage will be repaid as part of the equity release process.

    Any existing mortgages are listed in a section on all equity release application forms and will be settled by your solicitors when you’re paid out by your equity release provider.

    Can I Use Equity Release to Pay Off My Existing Mortgage?

    Yes, you can use equity to pay off your existing mortgage.

    With rising property values, equity release allows older homeowners to cash in on the value of their homes and use the proceeds to pay off their existing mortgages and debts.

    How Long Does It Take to Clear an Existing Mortgage Using Equity Release?

    It’ll take about 3 months to clear an existing mortgage by using equity release.

    Common Questions

    I Already Have an Equity Release Lifetime Mortgage; Can I Borrow More?

    What if I Can't Cover My Outstanding Mortgage With Equity Release?

    How Can I Use the Money I Get From Equity Release?

    Why Remortgage to Release Cash?

    How Much Equity Could I Release With an Existing Mortgage?

    In Conclusion

    Equity release with an existing mortgage is possible; however, you need to seek financial advice from a professional adviser.

    There are numerous ways to obtain an equity release, and you can receive equity whether you have an existing mortgage or own the property outright.

    For peace of mind, it’s critical that you carefully consider your long-term needs and manage your finances well.

    How Much Can You Release?

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    Editorial Note: This content has been independently collected by the EveryInvestor team and is offered on a non-advised basis. EveryInvestor may earn a commission on sales made from partner links on this page, but that doesn’t affect our editors’ opinions or evaluations. Learn more about our editorial guidelines.