Equity Release vs Remortgaging

Homeowners in the UK have two main options to unlock the value of their property without selling it: equity release or remortgaging.

Equity release is typically aimed at older homeowners (usually 55+) while remortgaging can apply to anyone with a mortgage. Both methods allow you to free up cash, but they work very differently.

In recent years, tens of thousands of people have turned to equity release – over 26,000 new plans were taken out in 2023 alone​.

Meanwhile, remortgaging is far more common – about 1.6 million UK home loans were expected to end their fixed terms in 2024, meaning those homeowners needed to remortgage or face higher rates​.

In this blog post, we’ll explore what equity release and remortgaging are, their eligibility criteria, pros and cons, and which might be better for you.

What Is Equity Release?

Equity release is a way to unlock some of the cash value (“equity”) built up in your home without having to move out​.

It’s primarily available to older homeowners (typically aged 55 and above) and usually comes in two forms: Lifetime Mortgages and Home Reversion plans.

1. Lifetime mortgage

A lifetime mortgage is the most common type – it’s essentially a long-term loan secured on your home, which you typically don’t have to repay until you die or go into long-term care. 

Instead of making monthly repayments, the interest can be “rolled up” (added to the loan balance), and the loan plus accumulated interest is paid off when the property is eventually sold​

You remain the owner of your home under a lifetime mortgage.

2. Home Reversion Plan

In contrast, a home reversion plan involves selling a percentage of your home to a mortgage provider in exchange for a lump sum (at below market value).

You can live in the home for the rest of your life, but when it’s sold, the provider gets a proportional share of the sale proceeds​. 

Equity release is only available for those aged 55+ (or age 60+ for some home reversion schemes), reflecting its focus on later-life financing​.

What Is Remortgaging?

Remortgaging means taking out a new mortgage on your home, either with your current lender or a new lender, to replace your existing mortgage. 

Homeowners remortgage for two main reasons: to get a better interest rate deal or to release equity (i.e. borrow additional cash against the home). 

In practical terms, remortgaging to release equity involves increasing the total loan amount when you switch mortgages.

For example, if you owe £50,000 on your current mortgage and your house is worth £200,000, you might remortgage for £70,000; £50k would pay off the old loan, and £20k would be new cash released to you​.

Unlike equity release, a remortgage will have a fixed term (say 10, 20, or 25 years) and requires monthly repayments of interest (and usually capital), just like any standard mortgage.

What’s The Difference Between Equity Release vs Remortgaging?

The main difference between equity release and remortgaging is that remortgaging is available to homeowners of any age (subject to lender criteria), whereas equity release is restricted to older homeowners​.

In both cases, the money you unlock can be used for almost any purpose – home improvements, supplementing retirement income, helping family, etc. Lenders will all have different criteria on the reason for capital raising. 

The key differences boil down to age eligibility, repayment obligations, and how the debt is ultimately cleared: equity release typically has no monthly repayments. 

It is cleared when you pass away or sell the home, while a remortgage must be paid off through regular payments over the agreed term.

Eligibility Criteria for Equity Release

To qualify for equity release in the UK, you (and your partner, if it’s a joint application) usually must be at least 55 years old for a lifetime mortgage, or around 60+ for a home reversion plan.

You need to own a property in the UK that is your primary residence, and it generally should be of a certain minimum value (often around £70,000 or more, depending on the provider).

If you still have an existing mortgage on the property, that’s okay, but you must pay off any outstanding mortgage from the equity release funds upon completion​.

This means equity release is often used by those who have already paid off most or all of their original mortgage. 

Importantly, unlike a normal mortgage, equity release doesn’t require an income or credit check in most cases, because you aren’t required to make monthly payments.

Mortgage providers will, however, assess the property (its value, condition, and type) to ensure it’s acceptable since the home is their security for the loan​

There may be upper age limits (some lifetime mortgages won’t lend beyond age 85-95), but the product is fundamentally designed for retirees or those in late middle age with sufficient home equity.

Eligibility Criteria for Remortgaging

Remortgaging is essentially the same as applying for a standard mortgage. 

There’s no formal age restriction – even young homeowners can remortgage (for example, switching from a first-time buyer deal to a new rate after a few years), and older homeowners can also remortgage if they meet lender requirements. 

However, practically speaking, lenders do consider age in the sense that they want the mortgage to be repaid before you reach a certain age (many lenders have an upper age limit, often around 70 or 75 at the end of the mortgage term, though some extend into the 80s or offer specific retirement interest-only mortgages for older borrowers).

To remortgage, you must meet affordability criteria: this means having a sufficient income (salary, pension, etc.) and a reasonable credit history to show you can afford the monthly repayments on the new loan​.

Lenders will look at your current income, debts, and outgoings just as they would for any mortgage.

If you’re already retired with a small fixed income, you might find it harder to remortgage for a large sum – this is a key point where equity release and remortgage differ.

Additionally, the amount you can borrow on a remortgage depends on the loan-to-value (LTV) ratio – typically, you can only borrow up to a certain percentage of your property’s value (e.g. 60% or 75% LTV) depending on your circumstances.

Pros and Cons of Equity Release

Pros of Equity Release	Cons of Equity Release
No monthly repayments: repay when you sell or pass away.	Reduces inheritance: loan and interest can eat into home value.
Stay in your home for life: no need to move or downsize.	Interest builds up over time: making it costly long term.
Tax-free lump sum: use the money to suit your personal circumstances.	Loss of full ownership: if using home reversion plans.
Potential Fixed interest rates for life: no surprise rate rises.	Early exit fees: repaying early can be expensive.
No negative equity guarantee: you’ll never owe more than your home’s value.
Option to move: some plans let you transfer the loan to a new home.

Pros and Cons of Remortgaging

Pros of Remortgaging	Cons of Remortgaging
Cheaper in the long run: because you’re making regular repayments, the debt doesn’t grow over time.	You must afford the payments: you’ll have to pay monthly without fail. If you’re retired or don’t earn enough, it might be hard to qualify.
Access to cash at lower rates: borrow extra money from your home when remortgaging,at potentially lower rates than equity release.	Interest rate changes: unless you fix your rate for a long time, your payments could rise if interest rates go up.
Flexible terms and options: choose how long you want the mortgage to last, the type of interest rate (fixed or variable), and whether to pay interest only or the full amount.	Shorter loan terms for older borrowers: lenders may offer shorter repayment periods as you get older, resulting in higher monthly costs.
Lower monthly payments: switching to a better rate through remortgaging can reduce your monthly payments.	Upfront fees & costs: you might need to pay for valuation, legal fees, arrangement fees, or early repayment charges.
Debt consolidation option: use remortgaging to combine all their debts into one.	Your home is on the line: If you remortgage to pay off other debts and can’t keep up with repayments, you risk losing your home.
Keep full ownership: your home stays fully in your name.

This list is not exhaustive and there may be other potential drawbacks of equity release & remortgaging.  

Equity Release vs Remortgaging: Which is Better?

Each homeowner’s situation can tilt the balance one way or the other. But the general rules of thumb are:

If you have the means to repay a loan and want to preserve your estate, remortgaging or other standard lending is often better. 

If you genuinely cannot afford payments or do not qualify for a mortgage, and you need the money, equity release is a valuable solution so you can use your home’s value without selling it if you are older.

The best option also depends on what you need money for. 

Equity release might be better if you need money to clear an existing mortgage, fund care, or support retirement income.

On the other hand, if you need money for home improvements when you’re younger or consolidating debt, remortgaging might be a better option.

Frequently Asked Questions

Does equity release affect benefits? 

Yes, taking a lump sum or income from equity release can affect your entitlement to means-tested state benefits.

Can I switch from an equity release to a remortgage? 

Converting an existing equity release (lifetime mortgage) into a standard remortgage is uncommon, but not impossible. In order to do this, you would need to pay off the equity release loan in full, which usually means qualifying for a new traditional mortgage of sufficient size.

Will I still own my home if I take equity release? 

If you choose a lifetime mortgage, yes, you remain the owner of your home. The loan is secured against your property, but the title stays with you; the lender just places a charge on it (like any mortgage).

Home reversion plans are different: you sell all or part of your property to the provider. In that case, you become a co-owner (if partial reversion) or a lifetime tenant. 

So, technically with a home reversion plan, you no longer own 100% of your home – the reversion company’s share means they own that portion.

Is the money I receive from a remortgage or equity release taxable? 

No, money released from your home (either via remortgaging or equity release) is not subject to income tax. This is because it’s not income or a gift; it’s a loan.

What happens to my house when I die if I have equity release or a remortgage? 

In both cases, your house can still be left to your estate/heirs, but the debt on it must be settled.

Your home may be repossessed if you do not keep up repayments on your mortgage.

All content is written by qualified mortgage advisors to provide current, reliable and accurate mortgage information. The information on this website is not specific for each individual reader and therefore does not constitute financial advice.