Paid or part paid off your mortgage? Good news: it is possible to get equity release. In this article, we’ll explain how equity release works on a fully or part paid up mortgage.
Yes. After paying off or clearing your mortgage, you can tap into your home’s equity with equity release. Generally, you can receive equity release funds as either a single lump sum, in periodic smaller amounts (a ‘drawdown’), or a mix of both. You can also take out equity release to repay an existing standard residential mortgage or secured loan providing you can release enough. An equity release calculator will inform you of approximately how much you can borrow.
You can secure equity release, even if your home is partly or totally mortgage-free. However the absence of a mortgage will increase your borrowing capacity through equity release, but it’s important to be mindful of the associated risks. For instance, your means tested benefits could be affected, you will reduce the value of your estate and money for any long term care needs.
Although it is possible to apply for an equity release plan on a mortgage-less property, equity release can help you to clear your mortgage, by releasing sufficient funds from your home. You will need to clear any mortgage when you take out any equity release plan.
Repaying a mortgage with monthly payments or with cash or savings will lead to an increase in your home’s equity. Another way to increase your home equity is through any increase in property valuation over time. Releasing equity to spend as you wish will however reduce the value of your estate. Depending on what type of equity release plan you take out will depend on how much money you can take and how much equity will be left in your estate.
There are multiple ways to release equity from a paid off mortgage on a house, but a popular way is via equity release, of which there are two types: an a lifetime mortgage where you make payments each month or not, and home reversion, which entails selling part or all of your home to receive either a lump sum or regular payments, or a mix of both. You also have a retirement interest only option that again allows you to take out a lump sum, and you make regular monthly payments. With this plan however if you stop paying your monthly payments your home may be repressed by the mortgage lender. However with equity release plans, you cannot be repossessed whilst the property remains your main residence.
For further information, please feel free to get in touch on 0808 169 8316. Alternatively, you can request a callback, send us an email, or message us through the live chat on our website.