Equity Release vs remortgage

When it comes to releasing funds from your home you have a number of different options. Two of the most popular are Equity Release and Remortgaging, but what’s the difference between the two? 

The main difference between Equity Release vs remortgaging is that Equity Release has no monthly repayments while remortgaging does. This makes Equity Release a better choice than remortgaging when you want to unlock the most amount of money from your home. 

You may want to gift cash to a loved one, repay some debts or make renovations to you home. If you find yourself in this situation Equity Release and remortgaging may be suitable options for this…

How does Equity Release work?

Equity Release comes in the form of a lifetime mortgage or home reversion plan. Both options release equity that you’ve built up in your home. This allows you to either take a tax free lump sum with the option of further payments or take all the money at once.

How does remortgaging work?

Remortgaging is the process of releasing equity you’ve built up in your home by changing the terms of your existing mortgage deal. This may increase the monthly payments and the term of the mortgage. 

What is your home’s equity?

It’s important to understand what equity means as it’ll directly affect how much money you’re able to access through Equity Release or remortgaging.

Your home’s equity is the “value” it holds. Which is what it’s current market value is at this moment in time.

To calculate how much of the equity is yours:

“You take the current market value of your house – any outstanding secured debt you have = the amount of equity you have”

A quick example, if your home is worth £550,000 and you have an existing mortgage of £125,000 left to pay. You have £425,000 of equity.

The more equity you have, the more you’ll be able to access through a lifetime mortgage known as an Equity Release loan.

There are a lot of variables to consider with remortgaging but all other things being equal, if you’re considering remortgaging to release equity, then the more equity you have, the better interest rates on the remortgaging deals you’ll be offered.

Use our Equity Release calculator to find out how much you could release.

The differences between Equity Release and remortgaging

You can remortgage your property at almost any age but Equity Release is typically only available to people over the age of 55.

Let’s take a look at some of the other considerations between Equity Release and remortgaging.

Equity Release Remortgaging
Will I have anything to pay? With a lifetime mortgage there are typically no monthly repayments. You do have the option to pay off the interest if you choose. If you choose to remortgage to access money your monthly repayments will usually increase to cover the larger loan amount and it may extend the term of your mortgage.
How are the funds dispersed? With a lifetime mortgage, you can choose how you receive your funds – either in one lump sum or in smaller amounts following an initial release, drawdown. You have access to all the funds immediately.
Credit checks There are no credit checks or mortgage affordability criteria to meet. You will have to go through credit checks and your age and income will play a role in the rates you’re offered.
Ownership With a lifetime mortgage, you still own your home. If you don’t keep up with repayments your home may be repossessed.
Providers It’s always worth looking around for the best possible advice. Different lenders may be able to offer you better deals on your outstanding mortgage than your current provider.

Is it better to release equity or remortgage?

With Equity Release it’s always best to go with a provider that is part of the Equity Release Council as this protects you with a ‘no negative equity’ guarantee. Both Equity Release and remortgaging may reduce the value of your estate.

It’s also worth noting that with Equity Release you will be able to access more money than you could if you remortgaged. However, It would be irresponsible and incorrect to say one or the other is better. The questions you really need to answer, you do by taking the time to consider your personal circumstances now and in the future. 

Can I release equity without remortgaging?

You could arrange a new mortgage deal so that the loan is bigger than the one you already have. This is known as remortgaging to release equity and is different to Equity Release.  It will take you longer to pay off the home loan if you choose to extend the term to lower your monthly repayments.

Getting advice on releasing equity

Whether you’re looking to remortgage your existing residential mortgage or considering Equity Release, remember it’s a big commitment, so speak to an adviser who can help you explore all the options and make a decision.

Talk To The Experts

Ready to talk? Our friendly team are here to help. Simply pop a few details into the form and we'll be in touch.

Real Advice, For Real People

We'll show you:

  • Equity Release Vs RemortgagingWhen you can afford to retire
  • Equity Release Vs RemortgagingHow much money you'll need in retirement
  • Equity Release Vs RemortgagingHow to make the most of your pensions and other assets to fund your lifestyle

4.9 out of 5 stars on VouchedFor

Equity Release Vs Remortgaging

"I cannot find fault with the service we received. From the warm yet professional welcome to the financial advice we were given. You as a company should be proud of the service you are providing"

Mr. W