Equity release or remortgage – how do they compare?

You don’t have to move to make the most of the money tied up in your home

Finding the perfect home can be quite the challenge. Some of us might get lucky first time but for others, the journey can present a few twists and turns before you’re settled. When you’ve spent a lifetime searching and making a house your home, it’s probably not something you’ll want to give up in a hurry. 

Hearing the words equity release or remortgage might ring alarm bells at first. And while it can be a difficult choice to make, it isn’t all doom and gloom. With these options, there are ways to keep your beloved home and its memories, while releasing some of its value to help you live the life you want. Here, we’ll walk you through both and outline the benefits and fallbacks of remortgaging or taking out a lifetime mortgage - a type of equity release, and the one we offer at Aviva.

Tapping into cash tied up in your home

Your house will often be your most valuable possession – and usually one you’ve worked most of your life to own. To get some of that money back, you might look at downsizing and moving to a smaller home. But if you’ve found your perfect fit and don’t want to move, it can be comforting to know there are ways to boost your funds without having to move and hire a moving company. Again.

Two possible options are exploring a lifetime mortgage or looking at remortgaging. Both allow you to stay in the same house, but lend you cash to use how you like. There are important differences between them, and one is likely to be a better fit for you than the other. We’re here to help by explaining some of the key features of each, as well as the main pros and cons. 

The lowdown on lifetime mortgages

You’ve reached 55, you’ve worked hard for years, and you’ve managed to pay off your mortgage. If you meet the criteria, equity release lets you turn the tables so the money tied up in your hard-won home can work for you in later life. A lifetime mortgage is a long-term loan secured against the value of your house that will last for the rest of your life, or until you go into long-term care. And like all lifelong commitments, you shouldn’t sign up without understanding how it works. Having a lifetime mortgage can affect your eligibility for means-tested benefits and could affect your tax position.

Let’s look at the good bits, and the not so good bits:

On one side... But then...
You won’t have to move house to access your money. Even though you’re securing the loan against your home, you’ll still own it until you (and your partner, if you’ve taken it out jointly) pass away or need to go into long-term care. And it may be possible to move and take your lifetime mortgage with you. If your circumstances change and you choose to pay back your loan in full early, you might face a large early repayment charge.
The amount you borrow with a lifetime mortgage is yours to spend on whatever you like and you won't need to worry about monthly repayments. It’s normally repaid when you die or go into long-term care. You’ll leave less behind as inheritance for those you care about most. Our lifetime mortgage lets you set aside a percentage of the value of your home with an inheritance guarantee, but this will reduce the overall amount you can borrow.
It can be an option for UK property owners aged 55 or over, as it often becomes harder to remortgage your home from age 50 onwards. You need to be close to, or completely, mortgage free to unlock cash from your home this way. Your remaining mortgage will need to be repaid, but you can use your lifetime mortgage loan to do this.
You have various options for using a lifetime mortgage, such as getting the funds you need to maintain your standard of living, give your home a makeover, help a family member onto the property ladder themselves, or even go on the holiday of a lifetime.
We charge interest on your loan as compound interest. This means we charge interest on the total amount of the loan, including the interest that's already built up so the amount you owe increases quickly. We compound the interest once a year however, we charge interest every day.

Read up on remortgaging

Another way to free up cash from your home is to remortgage. This could involve asking your current lender if you can increase the amount you’re borrowing or about extending your mortgage term. Extending can spread the cost over a longer period to reduce your monthly repayments. 

You can also use remortgaging as an opportunity to shop around the mortgage market for a better rate. And the good news is you can apply to remortgage when you still have money left to pay on the one you currently have.

Not sure if it’s right for you? We’ve outlined some key points you might want to consider:

On one side... But then...
As with equity release, when you remortgage your home you’ll still be able to stay put in the house you love. To free up more cash when you remortgage, you’ll either have to increase the amount you’re borrowing or extend your mortgage term, meaning you’ll be further away from owning your home outright.
You’ll still be able to pay your mortgage back in your lifetime, meaning you won’t have to worry about leaving less inheritance. If your circumstances change, you might not be able to keep up with the repayments.
It can be easier to remortgage if you’re under 55, but different lenders will set their own age limits, so make sure to check. It’s still possible to remortgage in retirement, but your pension must be able to cover the repayments. It's possible that your remortgage request won’t be approved by a lender. This could be for a variety of reasons, such as your age, income or financial situation.
You might be able to get a better rate than on your current mortgage, meaning you can reduce the overall amount you’ll need to pay back. If your home goes down in value, you could end up in negative equity – when the amount you owe is more than your property is worth.

How do I know what’s right for me?

You're on the right track to figuring out how to get cash from your home without having to move out. But take your time. Any decision involving where you live shouldn’t be rushed into.

And it’s worth noting that costs, such as advice and legal fees, may apply when remortgaging or taking out equity release. If you’re unsure of the right path, it’s worth speaking to a financial adviser – they can help you work out the best route for you. 

And these aren’t the only options for boosting your income. There are even more avenues to explore in our guide to equity release alternatives

It's important to consider the benefits, costs and risks before deciding whether a lifetime mortgage is right for you. But if you’re starting to think equity release could be just what you’re looking for, you can get more information about our lifetime mortgage.

Get specialist equity release advice

Take your first step by arranging a call with a UK-based equity release adviser. You don’t have to commit to anything, it’s just to see if it’s an option for you. And you won’t pay a separate advice fee. Instead, we'll make a commission payment to the adviser on completion of your loan. Here are two ways to get in touch.

  • Call us free

    Ring now and make an appointment with an equity release adviser.

    0800 141 3493

    • Monday to Friday: 9:00am - 6:00pm
    • Weekends and Bank Holidays: Closed
  • Ask us to call you

    Give us your name and number, and an adviser will call you. You can pick a chosen day and whether morning or afternoon is best.

    Request a call back

Your call will be answered by the Aviva Equity Release Advice team, who can provide information and advice on Aviva’s lifetime mortgages only. They're authorised and regulated by the Financial Conduct Authority. 

Calls to 0800 or 0808 numbers from UK landlines and mobiles are free. For our joint protection, calls may be recorded or monitored, and saved for a minimum of 5 years. Our opening hours may be different depending on which team you need to speak to.