Finding the perfect home can be quite the challenge. Some of us might get lucky first time, but for others the journey is more like a hermit crab’s: going from shell to shell, trying to find one that’s not too big, not too small, until eventually we end up with a home that’s just the right fit.
And when you’ve spent a lifetime searching for the perfect pad, it’s probably not something you’ll want to give up in a hurry. Here we explore ways your property can put pennies (and pounds) in your back pocket without you having to pack up your possessions.
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 reassuring to know there are fund boosting options out there that don’t involve upping sticks and calling in the removal firm. Again.
Two possible options are exploring a lifetime mortgage or looking at remortgaging. Both allow you to stay in the same house, but access 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 – the type of equity release we offer – 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 for as long as you’re around. 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 could be stung with a hefty early repayment charge. |
| The amount you borrow under a lifetime mortgage is yours for the rest of your life, so you won’t need to worry about monthly repayments. It’s only 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 property owners over 55, 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 equity release money to do this. |
| You’ll be able to get the funds you need to maintain your standard of living, spruce up your home, help a family member onto the property ladder themselves, or even go on the holiday of a lifetime. | Interest is added annually on the amount you've borrowed and any interest already added. This method of charging interest in known as compound interest and means the amount you owe increases quickly. |
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 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. And your monthly repayments will be more manageable. | To free up more cash when you remortage, 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 firmly off the starting block when it comes to understanding how you can get money back from your home without having to leave it behind. 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, apply to both remortgaging and 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.