If you’re struggling with debt, it can often be at the forefront of your mind and cause endless sleepless nights with worry. Fortunately, there are options out there to help you manage your debt and even pay it off, offering you a clean slate to move into retirement worry-free.
At Bower Home Finance, we’re here to help. Our specialist equity release advisers are on hand to discuss your circumstances in detail and offer expert advice to help you move forward with confidence, whether you choose to use equity release, or an alternative is recommended. We’re here to help.
Understanding equity release
Equity release allows homeowners aged 55 and over to release equity from their property for a variety of reasons including clearing existing debt and current mortgages, funding home improvements, and helping family members onto the property ladder with a cash gift.
The amount you release through an equity release plan can provide you with a tax-free lump sum or can be available in a drawdown facility to access at a later date.
In order to proceed with equity release, you’ll need advice from an equity release adviser who will discuss your circumstances and help advise if it is the right option for you. Equity release products, such as lifetime mortgages and home reversion plans can be complex, and it’s important to seek expert advice to ensure you make an informed decision.
Equity release eligibility
If you’re looking to release equity from your home, you’ll first need to meet the eligibility criteria below:
- Aged 55+
- Own your own home in the UK worth £70,000+
- Your home must be your main residence
- Your home must be in a good, habitable condition
Learn more about if you’re eligible for equity release.
Paying off debt with equity release
To proceed with using equity release to pay off your existing debt, your adviser will discuss with you in detail about your personal circumstances. They will ask you questions about how much debt you have and who it is owed to, to be able to create a personalised recommendation and decide if equity release is right for you.
Your adviser will also discuss how much equity you may be able to release from your home and if this is enough to cover your debts.
Your equity release adviser will also discuss the pros and cons of equity release and if there are any alternatives that may be more suitable for your situation. It’s important to note that equity release will reduce the value of your estate and can impact your eligibility to means tested benefits, so it is important to consider your options carefully.
How much equity can I release?
To get started, you’ll first need to know how much equity is stored in your home. Whilst you won’t be able to release the full amount, this can give you an indicator of how much equity is stored in the property to consider all of your options carefully. The amount of equity stored in your home is equal to the value of your home, minus any mortgages or loans secured against your home.
The amount you can release with an equity release plan can depend on a few factors including:
- Your age
- Your property value
- If you have any medical conditions
- The equity release plan
- Your equity release providers terms
Find out how much equity you could release using our free online equity release calculator.
The types of debt
Whilst debt and loans can come in many forms, there are two main types of debt to be considered, secured and unsecured.
Unsecured debt
An unsecured debt is a type of loan or debt that isn’t tied to anything that could be used a collateral. This type of debt is often riskier for lenders due to there being no immediate security if you don’t keep up with payments, leading to potentially higher interest rates and a stricter eligibility criteria for applicants.
Some examples of unsecured debt include:
- Credit Cards
- Overdrafts
- Some personal loans
Secured debt
A secured debt is a type of loan that’s backed by something of greater value than the loan itself. It acts as security, especially if the loan amount is particularly large, and if you fail to keep up with repayments on a secured loan the lender can take what the loan is secured against, such as your home or car as collateral.
Some examples of secured debt include:
- Secured loans
- Mortgages
- Car finance
Are you struggling with debt?
If you’re struggling with debt, you are not alone. In fact, the FCA found that over 7.4 million people in the UK were struggling to pay their bills in 2024.
It’s important to know there are debt solutions out there, and people dedicating their time to help you focus on the future including Stepchange Debt Charity and National Debtline.
How equity release can help with existing debt
Equity release can be a great way to clear off existing debts, like credit cards, loans, or even a mortgage, making it easier to manage your finances. By unlocking some of the value tied up in your home, you could roll all your debts into one loan in the form of an equity release plan which can help simplify things and reduce your monthly payments as some plans do not require you to make monthly payments.
If you’ve still got a mortgage, equity release could help pay that off and free up extra cash every month, giving you more financial breathing space. That said, it’s really important to think about how it might affect things like your eligibility for means tested benefits. And of course, there are some costs involved with equity release, such as advice fees and the interest which will be added to the loan, which you’ll need to factor in.
Your equity release adviser can guide you through the pros and cons of using equity release to clear debt, so you can make a decision that’s best for your situation.
Types of equity release
Whilst there are two main types of equity release plans, home reversion plans and lifetime mortgages, one might be more suitable over the other depending on your personal circumstances.
Home Reversion Plans
A home reversion plan allows you to sell a part, or all, of your property to a lender in exchange for a tax-free cash which is available as a lump sum or in a drawdown facility. This will be sold to your provider at a discounted rate and in return, you will be able to remain in your home rent-free until you pass away or move into long term care. At the end of the plan, the lender will reclaim the percentage they own at market value through the sale of your home, and any remaining capital will be passed to your estate.
The cash released from a home reversion plan can be used for a range of things including clearing your existing mortgage or other debts, funding home improvements and larger purchases including cars.
It is important to speak with an equity release specialist before proceeding with equity release to ensure you understand the advantages and disadvantages of equity release, and how this might impact your personal circumstances.
Lifetime Mortgages
A lifetime mortgage is a type of equity release that allows homeowners to release equity from their property in the form of a loan secured against their home. With a lifetime mortgage, you will maintain ownership over the property and the loan and interest are typically repaid when the property is sold after you pass away or move into long-term care.
As members of the Equity release council, each of the plans we recommend come with a set of guarantees including a “no negative equity guarantee”. This means you will never owe more than the value of your home, so you won’t be leaving your family in debt from the amount owed from your equity release plan.
It’s essential to consider the interest rates and early repayment charges associated with lifetime mortgages, as these can impact the overall cost of the loan. An equity release adviser can help you understand the terms and conditions of a lifetime mortgage and determine if it’s the right option for your situation.
What are the alternatives to equity release?
Before considering equity release, it’s important to explore all alternative options. This can include:
- Downsizing to a more affordable property
- Using savings and other assets to repay existing debts
- Remortgaging your home
- Getting a lodger or renting out a room
By discussing your options with an equity release adviser, they’ll be able to recommend if equity release is right for you and the alternatives if it isn’t. A specialist equity release adviser can help you understand both the advantages and disadvantages of these alternatives, ensuring you make an informed decision.
Explore the alternatives of equity release.
Your local equity release adviser
At Bower Home Finance, we’re here to help you through your equity release journey with confidence.
Whether you’d prefer a face-to-face appointment or a quick chat over the phone, we have advisers across the UK who are here to answer any questions you might have and offer recommendations surrounding which plan we think is best for you.
Get started today by requesting a callback from a member of our team.
Proud members of the Equity Release Council
At Bower Home Finance, we pride ourselves in our transparent approach to equity release, which is why we’re proud to announce we are members of the Equity Release Council.
The Equity Release Council is a voluntary body dedicated to ensuring its members maintain high professional standards, acting with integrity and transparency while providing top-quality products and services to customers.
This means we adhere to the highest standards and ethical practices set out by the council, and we will only recommend Equity Release Council plans or those that have the same set of guarantees.
Learn more about the safeguards of equity release.
FAQ’s
Can I use equity release to pay off debt?
Yes, equity release is often used to pay off debt as there are no regular repayments required with equity release plans, allowing customers the chance to clear their existing debt without committing to new payment terms.
Can I use equity release to pay off my existing mortgage?
Yes, you can use the cash lump sum you release to clear your existing mortgage. By freeing up the money you would be putting towards the monthly repayments, you can step into retirement without the commitment of monthly repayments towards a mortgage.
At Bower, we will understand your unique circumstances and advise you to ensure you are receiving the best plan to meet your objectives. There are plans that allow you to make voluntary repayments and move home, subject to lender criteria. However, early repayment charges may apply in certain circumstances.
Equity release requires paying off any existing mortgage. Any money released, plus accrued interest to be repaid upon death, or moving into long-term care. Equity release will reduce the value of your estate and your entitlement to means-tested benefits now or in the future, and impact long-term care funding.
Bower Home Finance provides independent, impartial whole of market advice with an award-winning customer service experience. Initial advice is provided at no cost to you and without obligation. Only if you choose to proceed and your plan completes, would a typical advice and administration fee of £1,695 be payable.
If you are considering equity release, we strongly recommend that you read our equity release page carefully and talk to one of our specialists before deciding if you wish to proceed.
To find out more about any of the products and the service we provide, please call us on freephone 0800 411 8668, request a call back, email us, or join our live chat you’ll find on our website.
Please be aware that equity release may involve a home reversion plan or lifetime mortgage which is secured against your property. All features and risks are thoroughly explained in your free personalised illustration.
