Can I Still Take Out an Equity Release Plan if I Have an Outstanding Mortgage?

Written by Daniel Tannenbaum on July 5, 2021

Updated September 2, 2021

Yes, you can certainly take out equity release if you still have a regular mortgage outstanding – and this is very common too.

You will be able to use an equity release mortgage to release cash that is tied up in your home and typically, this is used to pay off your existing mortgage immediately – freeing up cash for the more important things in life, such as topping up your pension, paying for weddings, home improvements or any other purchases.

In most cases, the equity release plan is used to pay off your mortgage immediately and this is processed by the equity release lender and their solicitors – and the lender becomes the first charge on your property.



Key Points


  • Yes, you can apply for equity release with your current mortgage outstanding – this is common
  • The equity release lender will pay off your mortgage immediately and become the first charge on the property
  • If the amount you release does not cover your mortgage, you could ask your mortgage provider for new terms or find the right kind of equity release plan
  • You will typically need to pay off other secured loans using the equity release – although this is not obligatory


See Other Useful Guides

Do you still own your home with equity release?

Is equity release safe?

What happens to equity release when you die?


How Does Equity Release Work With an Outstanding Mortgage?

When you are approved for equity release, the lender will typically pay off your existing mortgage either immediately or within the next 3 months – and that lender becomes the first charge on your property.

When applying for equity release, you will need to give the details of your current mortgage and provider including the mortgage reference number and outstanding balance. Your current mortgage lender will be contacted by your new equity release provider and their solicitors to obtain a formal redemption statement, showing the outstanding balance and interest.

The equity release lender and their solicitors will then pay off your mortgage directly, so you don’t have to. 


Why Should I Use Equity Release to Pay Off My Mortgage?

If you have an outstanding mortgage, you could be paying high interest rates every month and this could be eating away at your retirement.

When you opt for equity release, most of the plans do not require you to pay monthly, but the interest is accrued into the total loan amount which is then paid from your estate when you die or go into long-term care.

So with equity release, you are paying off your mortgage immediately and getting a large cash sum, tax-free, which you can use and enjoy for any lifestyle purposes. Most people use equity release to add to their pension, help their children buy a property, consolidate other debts or make home improvements for senior living.




What Happens if My Equity Release Amount Does Not Cover My Mortgage?

There is always a chance that the money you release from your home does not cover your outstanding mortgage, especially if you have a large mortgage or are closer to the minimum eligibility age of 55 where the amount you can release is less (starting from 25% of the property’s value).


There Are a Few Options:

  • You could top up the balance through savings or an unsecured loan 
  • You could wait a little longer before using equity release to pay off your mortgage – and by this point you could release a higher amount
  • You can speak to your existing mortgage provider and negotiate better terms – when was the last time you remortgaged?
  • You could consider different variations of equity release – for instance, medically enhanced plans can offer better terms by considering your health condition and lifestyle choices


Would I Need to Pay Off Any Other Secured Loans to Be Eligible for Equity Release? 

Yes, in most cases, equity release providers require you to pay off any other kinds of secured loans – because they want to be the first charge on your property.

This may not always be the case, but for some equity release applications you will have to disclose this and a secured loan may need to be paid off.

You also have the option to change your secured loan into an unsecured loan, so it is not attached to the property in any way.


Is Equity Release a Good Idea For Me?

Equity release can certainly be effective for households who are looking to free up cash that is tied up in their home. Rather than sitting on a large asset which you do not plan to sell, you could receive a huge cash injection ranging from 25% to 60% of the property’s value and you can use this to enjoy life and share it with your children and grandchildren. Plus, you have the peace of mind that you can continue to live in your home and maintain ownership of the home and pass this onto your loved ones when you die.

When deciding if it is a good idea, consider how much you need and how long for. Since there is interest charged on equity release, it can get a little more expensive the more you take out or the longer that you live for. 

With this in mind, it is important to consider your options and speak to an expert like Lending Expert to find the best plan for you – whether it is a drawdown plan, only charging interest on the money you release or selecting a plan that puts money aside as inheritance for your children. 

To discuss your equity release requirements today, you can get a free and impartial quote from Lending Expert here >>


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