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Equity Release
Yes, a lifetime mortgage can clear your existing mortgage in one move, with no monthly repayments required afterwards. Here's how it works, what it costs, and when it isn't the right choice.
Yes. If you're 55 or over, you can use a lifetime mortgage (the most common form of equity release) to clear an existing mortgage secured on your home. The funds released are used to redeem your current mortgage balance, usually at the point your equity release plan completes, and from then on you have no monthly mortgage repayments to make.
Because a lifetime mortgage doesn't require monthly repayments, interest is added to the loan over time instead, and the total amount owed grows through compound interest. It's a serious long-term decision that will reduce the value of your estate, so it's worth speaking to an advisor about whether it suits your circumstances before you go ahead.
If you're carrying a mortgage into retirement and want to stop making monthly payments, equity release to pay off your mortgage is one of the more established routes available to homeowners aged 55 and over. It works through a lifetime mortgage: a loan secured against your home that doesn't require monthly repayments, with interest added to the balance instead.
You can use the funds released to clear your existing mortgage in full, usually at the same time as your equity release plan completes. From that point, your old mortgage is redeemed and you have no more monthly mortgage payments, though the equity release loan itself continues to accrue interest over time.
To qualify, you'll typically need to meet a few conditions:
If you'd like to understand the wider mechanics first, our guide to equity release explained covers how the product works from the ground up.
Not sure where to start?
Talk through your mortgage balance, age, and property value with an advisor who compares a wide range of lifetime mortgage lenders.
There's rarely one single reason someone looks into this. Most people we speak to are dealing with a specific, practical problem rather than chasing a lifestyle upgrade.
Equity release isn't only used to clear a mortgage. Many homeowners also use it for equity release for debt consolidation, clearing credit cards, loans, or other borrowing at the same time as their mortgage.
Common motivations
An interest-only mortgage reaching the end of its term
If you took out an interest-only mortgage and don't have a repayment vehicle in place, equity release can clear the capital balance when the term ends, so you're not forced to sell.
Reducing monthly outgoings in retirement
Removing a mortgage payment from a fixed retirement income can make a genuine difference to monthly cashflow, especially if pension income is limited.
Staying in the family home rather than downsizing
Downsizing can free up cash, but it also means leaving a home with memories and moving costs. Equity release lets you stay put while dealing with the mortgage.
Qualifying for better terms through an enhanced lifetime mortgage
Some health and lifestyle conditions can mean you're eligible for an enhanced lifetime mortgage, which may allow you to release more of your property's value.
This is the question that matters most, and it's the one most guides skate past: what will an equity release plan actually cost you over time? The honest answer is that it depends on the interest rate you're offered, which varies by lender, your age, health, and the loan-to-value you choose, so we can't quote a single figure here. What we can do is explain how the cost builds up, so you know what to ask your advisor.
Unlike a standard mortgage, a lifetime mortgage usually has no monthly repayments. Instead, interest is added to the loan balance each year, and the following year's interest is calculated on the new, larger balance. This is compound interest, and it's the single biggest factor in what your estate will be worth when the plan eventually ends.
To put this in context: releasing £50,000, £80,000, or £120,000 are all common amounts homeowners use to clear an outstanding mortgage, and the exact loan-to-value you can access depends on your age and property value. For a full breakdown of how much you might be able to release at your age, see our guide on how much equity can I release?
The no-negative-equity guarantee means you will never owe more than the sale value of your home, provided the plan meets Equity Release Council standards. This protects you and your estate from the risk of compound interest growing beyond your property's value.
A lifetime mortgage is a long-term commitment, and the effect of compound interest means the total amount owed can grow significantly over time. Ask your advisor for a personalised illustration based on your age, health, and property value before you decide.
If you're in poor health or have a lifestyle condition such as diabetes or high blood pressure, always mention it during your advice appointment. Enhanced and ill-health lifetime mortgages can sometimes offer access to more equity than a standard plan, purely because of how the lender assesses life expectancy.
Equity release is one route to clearing your mortgage, but it isn't the only one, and it isn't always the cheapest option over the long run. It's worth understanding how it compares before committing.
If you're under 65 and in good health, a retirement interest-only mortgage may work out cheaper over time, because the loan balance never grows. An advisor can run illustrations for both side by side so you can compare like for like.
Remortgaging in retirement is also worth exploring if you're still earning or have a strong pension income, since some lenders will consider extending or replacing your mortgage rather than requiring equity release.
Using equity release to clear a mortgage involves your solicitor coordinating two things at once: releasing the new funds and redeeming the old loan. Here's the sequence in practice.
Early repayment charges on a current fixed-rate mortgage can run into several thousand pounds if you're still within the deal period. Always check your mortgage offer document, or ask your existing lender for a redemption statement, before you set an equity release completion date.
The mechanics
Your property is valued
The equity release lender arranges a survey to confirm your home's value and condition, which determines how much you can release.
Your current mortgage balance is confirmed
Your solicitor requests a redemption statement from your existing lender showing exactly what's owed, including any early repayment charges.
Early repayment charges are settled first
If your current mortgage deal carries an early repayment charge (ERC), this is paid from the released funds before anything else. It's worth checking your existing mortgage terms before you proceed, as a large ERC can significantly affect the numbers.
The new lifetime mortgage completes as a first charge
Once your old mortgage is redeemed, the equity release plan registers as the first charge on your property, and you have no further mortgage payments to make.
None of these situations guarantee equity release is or isn't right for you. Speak to an advisor who can look at your full circumstances, including your pension, savings, and family plans, before you decide.
Independent equity release advice
Most equity release plans used to pay off a mortgage complete within 6 to 10 weeks from initial advice to funds being released, though this can vary depending on your solicitor, the lender, and how quickly your existing mortgage lender responds.
If your current mortgage deal has an early repayment charge that reduces over time or expires on a set date, it may be worth timing your application around that. Your advisor can factor this into the overall timeline.
The timeline
Initial advice and illustration (1-2 weeks)
Your advisor assesses your circumstances and provides a personalised illustration showing how much you could release and the likely cost.
Application and valuation (2-3 weeks)
Once you decide to proceed, the lender arranges a valuation of your property and processes your application.
Legal work (2-3 weeks)
You'll need independent legal advice before completion. Your solicitor will also request a redemption statement from your existing mortgage lender.
Completion and mortgage redemption (around 1 week)
Funds are released, your existing mortgage is redeemed, and the new lifetime mortgage is registered against your property.
Equity release is regulated by the Financial Conduct Authority, and reputable lenders are also members of the Equity Release Council, which sets additional standards on top of that regulation.
Your home may be repossessed if you do not keep up repayments on your mortgage or other loan secured on it. Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits, so it's worth thinking carefully and getting independent legal advice before securing any borrowing against your home.
Every Equity Release Council member guarantees your right to remain in your home for life, or until you need to move into long-term care, and every applicant is required to take independent legal advice before completion. Speak to an advisor to check that any plan you're considering carries these protections.
For free, impartial guidance on equity release and your options, you can also contact MoneyHelper on 0800 138 7777.
Your protections
Common questions
Yes. Equity release is commonly used to clear an interest-only mortgage when it reaches the end of its term and there's no repayment vehicle in place. The funds released are used to redeem the interest-only balance, leaving you with a lifetime mortgage that doesn't require monthly repayments.
It can. Releasing equity increases your savings and capital, which may reduce or remove your entitlement to means-tested benefits such as Pension Credit, Council Tax Reduction and Universal Credit. It won't affect benefits that aren't means-tested, such as the State Pension. A regulated advisor can check how a release might affect your specific benefits before you go ahead.
Yes, most lifetime mortgages can be taken out jointly. Both applicants are usually protected under Equity Release Council standards, meaning the surviving partner can continue living in the property for life. The youngest applicant's age is normally used to assess eligibility.
Most lifetime mortgages are portable, meaning you can transfer the plan to a new property, provided it meets the lender's criteria at the time. It's worth checking this feature specifically before you take out a plan, as not all properties will qualify.
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Equity Release
Our equity release specialists can help you understand your options and find the right plan for your needs.
