If you are one of the 13% of UK retirees with outstanding mortgage debt,¹ you may want to consider using equity release to repay your mortgage.

Equity release offers an option to eliminate compulsory monthly mortgage repayments and improve financial flexibility.

Like all mortgage solutions, equity release has it's downsides, so read this article to determine if it is the right option for your mortgage debt settlement.

Our team at SovereignBoss strives to provide accurate and up-to-date information to help educate you on your later-life financial journey.

We have consolidated our research in this easy-to-read article on this important topic.

Therefore...

Is It Worth Using Equity Release to Clear Your Mortgage?

Yes, using equity release to repay your mortgage could be worthwhile.

With thousands of pensioners over 55 opting for equity release to repay their mortgage costs, it sometimes allows them to retire earlier.

Why people use equity release has manifold reasons, but thousands of pensioners over 55 are opting for equity release repay their mortgage costs.

Are UK Retirees Still Repaying Mortgages in 2025?

Indeed, many UK retirees in 2025 are still burdened with mortgage payments. 

Economic fluctuations and long-term mortgages mean that more than 1 in 10 (11%) of the over-55 age group have mortgage debt in the final decade before retirement.²

Additionally:

1 in 6 first-time buyers expect to be repaying their mortgages into retirement.³

How Can You Use Equity Release to Repay Your Mortgage?

You can use equity release to repay your mortgage by withdrawing a portion of your property's value while retaining the right to live there.

These funds can be used directly to repay any outstanding mortgage balance, eliminating all compulsory repayments.

Instead:

You can volunteer to repay a portion of the loan and monthly interest whenever you have the means to do so.

Or:

You can let the interest compound and have it repaid from your property’s sale when you pass away or relocate to long-term care.

Criteria for Using Equity Release to Repay a Mortgage

To use equity release to repay a mortgage, you must:

• Be at least 55 years old
• Your home must have a minimum property value of £70,000 and be of standard construction.
• The property must be your main residence and be in reasonable condition. 

Additional criteria may apply and may differ depending on your plan and provider.

What If You Do not Have Enough Equity to Repay Your Mortgage?

You will not qualify for equity release if you do not have enough equity to repay your mortgage.

This is because you can not have more than one loan on the same property.

If this is the case, you can consult a financial expert to discuss equity release alternatives that may better suit your needs and goals. 

How Long Does It Take to Clear?

The time to clear a mortgage using equity release can vary but may take up to 12 weeks.⁴ 

Once your application is approved, which can take several weeks, the funds can be used immediately to repay your mortgage. 

The efficiency of this process depends on your provider and the complexity of your financial situation.

Should You Repay Your Mortgage Early Using Equity Release?

Whether you should use equity release to repay a mortgage early is a personal decision influenced by many factors; hence, you should consult a financial advisor or broker. 

It could save you from monthly repayments and provide more financial freedom. 

However, it is critical to consider potential downsides, such as reduced inheritance and higher overall costs due to accumulated interest.

You should also consult with your mortgage provider to determine whether settling the debt before it's due date incurs early repayment fees. 

What Are the Pros and Cons?

The pros and cons of repaying your mortgage early include greater financial security, but you are using your property value.

More information...

Pros

The pros of repaying your mortgage using equity release include:

• Eliminating Monthly Payments: You are no longer obligated to make monthly payments.
• Cash Wealth: You can turn your property value into tax-free cash.
• You Can Stay In Your Home: You have guaranteed access to your property until you pass away or go to long-term care.

Cons

The cons of using equity release to repay your mortgage include:

• Limited Liquidity: In the event of an emergency, you could have used all the money in your estate.
• Lost Investment Opportunities: The money you use to repay your mortgage early may be put to alternative uses. 
• Possible Penalties: Some mortgages have repayment penalties, which means that you could be charged a fee for paying off your mortgage early. Always check your loan agreement for any such conditions.

Comparing Equity Release to Other Mortgage Repayment Methods

Equity release can be compared with other mortgage repayment methods on several levels.

• Access to Funds: Equity release allows you to unlock the value of your home while still living in it. Other repayment methods, such as selling your property, may require you to move out.
• Rate of Repayment: With a standard repayment mortgage, you make monthly payments to gradually repay the loan. With equity release, there are no monthly repayments.
• Interest Rates: The interest rates for equity release schemes are typically higher than for standard mortgages.  
• Impact on Inheritance: Equity release can reduce the value of your estate and, therefore, the amount you can leave to your heirs. This is a significant consideration if preserving your wealth for the next generation is important to you.

Some alternative mortgage repayment methods:

Remortgaging 

Remortgaging involves taking out a new mortgage to replace your existing one, either with the same or a different lender. 

You may be able to borrow more than you owe on your current mortgage and use the difference to repay other debts or expenses. 

You may also be able to obtain a lower interest rate or a longer term on your new mortgage, which could reduce your monthly payments.

However, you will need to meet the lender’s income, age, and credit history criteria, and you may face fees and charges for switching mortgages.

Retirement interest-only mortgage

A retirement interest-only mortgage allows you to pay only the interest on your loan each month and repay the capital when you sell your home, pass away, or move into long-term care. 

You will need a reliable income to pay interest, but you will not have to worry about the interest compounding over time as with equity release. 

You will also need to meet the lender’s age, income, and property value criteria.

Secured Loan

A secured loan is secured against your property, similar to a mortgage or equity release. 

You can use the money for any purpose, and you will have to repay both interest and capital regularly over a fixed term. 

The interest rate may be lower than on an unsecured loan but higher than on a mortgage or equity release. 

You will also risk losing your home if you fail to repay the loan.

Unsecured Loan

An unsecured loan is a loan that is not secured against any asset, such as a personal loan, overdraft, or credit card. 

You can use the money for any purpose, and you will have to repay both interest and capital regularly over a fixed term. 

The interest rate may be higher than on a secured loan, but lower than on equity release. 

You will not risk losing your home if you fail to repay the loan, but your credit score may be affected.

Home Improvement Loan

A home improvement loan is a specific type designed for funding home improvements, such as extensions, renovations, or repairs. 

It can be either secured or unsecured, depending on the amount you need and your credit history. 

You can use the money to increase the value of your home, which may help you release more equity in the future. 

However, you will have to repay both interest and capital regularly over a fixed term.

Downsizing

Downsizing involves selling your current home and moving to a smaller or cheaper property. 

You can use the difference between the sale and purchase prices to fund your needs or wants. 

You will not have to worry about any repayments or interest charges, and you may also reduce your living costs. 

However, you will have to pay stamp duty, legal fees, survey fees, and removal costs for moving. 

You may also lose some of the emotional attachment and comfort of your current home.

These are some of the other mortgage repayment methods you could consider instead of equity release. 

Each option has advantages and disadvantages, depending on your circumstances, needs, and goals. 

You should compare them carefully by seeking independent financial advice from a qualified professional before taking out any loan or selling your home.

Common Questions

In Conclusion

Utilising equity release to repay your mortgage is a significant decision with potential benefits and drawbacks. 

It offers a way for older homeowners to clear mortgage debt, enhance their retirement income, and remain in their homes, which can be appealing. 

On the other hand, it can diminish the value of your estate, affect eligibility for means-tested benefits, and may come with higher interest rates than traditional mortgages. 

It is critical to consider your personal circumstances, and if equity release is a route you are contemplating, seek professional financial advice. 

Ultimately, using equity release to repay your mortgage should be a carefully weighed decision, made with a thorough understanding and expert advice.