Equity Release to Pay off a Mortgage

Using Equity Release to Pay Off Your Mortgage
Worrying about How You Will Pay Off Your Mortgage When You Retire? Could Equity Release Be the Solution? Do You Qualify? We Look Into Using Equity Release to Pay Off Your Mortgage, the Benefits, & What to Watch Out For.

Equity Release to Pay off A Mortgage

Mortgage payments are the most common form of debt faced by retirees.

Did you know that 1 in 6 people are still paying off their mortgage past the age of 65?

Why struggle through retirement when there is a simple solution to your problems?

Releasing the equity built up in your home over the years could reduce your monthly expenses and help fund a more comfortable retirement.

We’re going to explain how!

In this article, we cover:

  • How to use equity release to pay off a mortgage.
  • How long does it take to pay off a mortgage with equity release?
  • 5 reasons you should use equity release to pay off your mortgage.
  • The disadvantages of paying off your mortgage with equity release.

We believe that retirement should be a stress-free time, and paying off your mortgage should be the last thing on your mind while you’re sipping on cocktails in Mallorca. 

So, our team at EveryInvestor, with in-depth knowledge of equity release, has put together a guide on how you can use home equity to reduce your monthly payments.

Read on for the key details.

Before You Start Reading….

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Should I Pay Off My Mortgage Early?

You should pay off your mortgage early if it helps reduce your monthly costs. 

You’ll reduce the interest you’re paying on the loan and the number of years you’ll have to pay it over by paying off your mortgage early.

So, you’ll not only be saving money on the interest, but by cutting out the monthly instalments, you’ll also have more money available at the end of every month.

On the other hand

If you have outstanding debts with interest rates higher than your mortgage interest rates, you could cost yourself more money by paying off your mortgage. 

Make sure you pay off the most expensive debt first.

It’s worth speaking to a financial advisor to make sure you’re making the right decision.

How to Use Equity Release to Pay off a Mortgage

To use equity release to pay off a mortgage, you must list your lender, mortgage reference, and an approximate outstanding balance upon application.

All equity release application forms have a section specifically for existing mortgages.

Your chosen provider will get a formal redemption statement from your mortgage lender, providing the balance outstanding on that specific date.

They will then settle the amount directly with your mortgage lender.

After the mortgage has been paid in full, any remaining money is yours to spend as you please.

Did you know 13% of retirees¹ are still paying off their mortgage? 

You don’t have to be part of that statistic!

How does it work?

Equity release unlocks the value of your property and turns it into cash.

There are several equity release policies to choose from that let you access the equity tied up in your home if you’re over 55. 

You can either take the money you release as one lump sum, smaller amounts over time, or both.

You don’t need to have paid off your mortgage to do this.

5 Reasons to Consider Equity Release to Pay Off Your Mortgage

The 5 reasons you should consider equity release to pay off your mortgage are: 

  • Pay off your mortgage early.
  • No need to wait until you retire.
  • Use the money to do other things.
  • Avoid repossession.
  • Borrow from major mortgage lenders.

Let’s take a closer look.

#1. Pay Off Your Mortgage Early

You can pay off your mortgage early with an equity release plan. 

As you get older, you may struggle to be approved for a remortgage deal from your bank, but equity release plans are specifically designed for homeowners over the age of 55.

Using equity release to pay off your mortgage earlier can reduce your monthly payments immensely.

#2. No Need to Wait Until You Retire

You don’t need to wait until you retire to apply for equity release to pay off your mortgage.

Equity release is available from the age of 55, as long as you fit the criteria.

More and more people are discovering that their retirement will be more expensive than expected.

Equity release is a great way to make your property work for you so that you don’t need to downsize or move.

#3. Use the Money to Do Other Things

You can use the money from your equity release plans to do other things once you’ve paid off your mortgage.

Such as paying off credit card debts, unsecured loans, buying a car, or going on holiday. 

The money is yours to use as you please.

#4. Avoid Repossession

Avoid repossession by using equity release to pay off your mortgage in full.

Even if you’re struggling to keep up with mortgage repayments because of ill health, loss of income, or lack of savings, you will still be able to release equity from your home.

#5. Borrow from Major Mortgage Lenders

You can borrow from major mortgage lenders who are members of the Equity Release Council (ERC). 

The major mortgage providers authorised and regulated by the Financial Conduct Authority² abide by the ERC’s no negative equity guarantee. 

So, you will never owe the lender more than the value of your home.

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

It can take up to 3 months to clear your mortgage using equity release. 

Once your application has been approved, your solicitor can pay off your existing mortgage in full with a single legal transaction.

The duration of this process depends entirely on the complexity of your situation, your current interest rate, and how much you want to borrow.

Lifetime mortgages have fast application times, and their terms are slightly more lenient.

So, if you find your circumstances have changed recently, i.e. being diagnosed with an illness, there is still a possibility that they will approve your application.

What Are the Disadvantages of Using Equity Release to Pay off a Mortgage?

The disadvantages of using equity release to pay off your mortgage are that you leave very little inheritance behind when you die and can pay more than expected because of the interest structure.

Equity release works on compound interest, meaning interest is added to both the loan amount and the interest that’s built up.

The loan is fixed against the value of your property, which is paid back when you go into permanent care or pass away.

So, the interest amount could snowball over the years without you even realising, affecting the amount of the inheritance you leave behind for your beneficiaries.

There is an option to minimise this debt by gradually paying it off, but they will charge you an early repayment fee.

Another disadvantage is that it could affect your eligibility for means-tested benefits, such as state pension³.

On the plus side

The interest rates on equity release plans have decreased over the last few years, making them more affordable. 

There is also a much wider range of equity release products, so you are more likely to find a plan to suit your needs and budget.

There’s a lot to consider when it comes to equity release, so it’s essential to seek advice from a professional before making any decisions.

Find Out If You Could Release Enough Equity to Pay Off Your Mortgage

You can find out if you could release enough equity to pay off your mortgage with the help of our online calculator.

The online calculator will estimate the amount of tax-free cash you will be able to release.

You can then take that figure and compare it with your outstanding mortgage balance.

You’ll only qualify for an equity release mortgage if the loan amount available is more than your mortgage balance. 

Common Questions

Is Using Equity Release to Pay off an Interest-Only Mortgage a Good Option?

Is Equity Release a Good Way to Pay Off Your Home Loan?


If you want to pay off your mortgage with equity release, it’s crucial that you consider the full repercussions.

Paying off your mortgage might sound like a dream come true, but it’s always a good idea to first look at other alternatives before securing a loan against your home.

Make sure you seek the advice of an experienced equity release advisor to ensure that you are not damaging your financial security by releasing equity from your home.

How Much Can You Release?

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Editorial Note: This content has been independently collected by the EveryInvestor advisor 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.