Home equity can give you more choices later in life, but using it can affect your repayments, future flexibility and the value left in your home.
Before deciding, understand how much equity you have, the routes available and what each could mean over time.
What to consider before using home equity
Equity
Estimate your available equity
Estimate your property value and subtract any mortgage or secured borrowing still outstanding.
Routes
Compare the main routes
Remortgaging, a retirement interest-only mortgage, a lifetime mortgage and downsizing work differently.
Purpose
Match the route to your plans
Consider whether you want to repay borrowing, adapt your home, move or support other plans.
Long-term impact
Consider the wider impact
Using equity can affect repayments, future flexibility, means-tested benefits and inheritance.
What does home equity mean?
Home equity is the difference between your property’s current value and any mortgage or other secured borrowing still outstanding.
Having equity in your home is not the same as taking out equity release. A lifetime mortgage is one way to access property wealth, while remortgaging, retirement interest-only mortgages and downsizing are separate routes.
The amount you may be able to access depends on the route and your circumstances. Remortgages and retirement interest-only mortgages normally involve income and affordability checks, while lifetime mortgage limits are generally based on age, the property and the provider’s criteria.
A simple equity example
| Estimated home value | £350,000 |
| Existing mortgage | − £100,000 |
| Estimated home equity | £250,000 |
This does not mean you could access the full £250,000. The amount available depends on the route, your circumstances and the relevant costs and criteria.
Common uses for home equity
Homeowners may consider using equity when their mortgage, housing needs or later-life plans change.
Home equity may be used to:
- reduce or repay an existing mortgage
- fund home improvements or adaptations
- support family financially
- create more flexibility around retirement
- move to a more suitable home
The purpose matters because it can shape the most suitable route, the likely cost and how much equity remains in your home.
Compare ways to access home equity
There is more than one way to use value from your home. Some routes involve borrowing against the property, while downsizing can release equity without taking out a new mortgage.
Monthly repayments
Remortgage or further borrowing
A remortgage or further borrowing may let you borrow against your home if your income, age, property and lender criteria support it. You normally make monthly repayments, and your loan-to-value and mortgage term will be assessed.
Interest paid monthly
Retirement interest-only mortgage
You normally pay the interest each month while the original amount borrowed remains outstanding. The loan is generally repaid when the property is sold, usually after the last borrower dies or moves permanently into long-term care. You need reliable income to maintain the monthly payments.
Interest may roll up
Lifetime mortgage
A lifetime mortgage is a type of equity release secured against your home. Depending on the product, you may make payments or allow interest to be added to the balance. The loan is usually repaid when the property is sold after the last borrower dies or moves permanently into long-term care, and rolled-up interest can reduce the equity remaining.
Sell and move
Downsizing
Downsizing means selling your current home and moving to a smaller, lower-cost or more manageable property. It may reduce or clear borrowing or release equity, but moving costs, property choice and future plans still need to be considered.
Considering a lifetime mortgage?
Use our calculator to estimate the total loan you may need and how the balance could grow.
How much home equity should you use?
Deciding how much equity to use is as important as choosing the route. The amount should fit the purpose and leave enough flexibility for later.
What you need the money for
Be clear what you need the money for and whether a smaller amount could achieve the same aim.
Monthly affordability
For routes requiring repayments or monthly interest, check whether the payments would remain manageable if income changes or costs rise.
Long-term cost
Compare rates, fees and repayment charges. If interest is added to the loan, the balance can grow over time.
Equity and inheritance
Borrowing against your home can reduce the equity available for a future move, later-life needs or inheritance.
Means-tested benefits
Releasing money may affect means-tested benefits or wider financial planning, so consider this before deciding.
Worth knowing
The maximum amount available is not necessarily the right amount to use.
A calculator can provide a useful estimate, but the right route and amount depend on your wider circumstances.
How Muttuo Mortgages can help
There can be different ways to use the equity in your home. We can help you understand which routes may fit your finances and longer-term plans.
Review your property value, mortgage balance and available equity
Compare relevant mortgage options from more than 100 lenders
Understand how different routes may affect your repayments and plans
Talk through your options
Explore how your home equity, income and existing mortgage may shape the options available to you.
You should think carefully before taking out a lifetime mortgage.
Equity release will reduce the value of your estate and may affect your entitlement to means-tested benefits.
A lifetime mortgage is a loan secured against your home.
To understand the features and risks, ask for a personalised illustration.
Your home may be repossessed if you do not keep up repayments on your mortgage.
Your home equity questions answered
Can I access home equity without selling my home?
Potentially. Remortgaging, further borrowing, a retirement interest-only mortgage or a lifetime mortgage may allow you to remain in your home, subject to affordability and product criteria. Downsizing involves selling your current property and moving.
Is using home equity the same as equity release?
No. Equity release is one way of accessing property wealth, but you may also be able to use equity through remortgaging, a retirement interest-only mortgage or by downsizing.
Can I remortgage to release equity after 50?
Potentially. Your options will depend on factors such as your income, age, property value, loan-to-value, mortgage term and lender criteria.
How much home equity can I use?
The amount will depend on the route and your circumstances. Having a certain amount of equity does not mean you can access all of it, and lender or provider criteria, costs and affordability may limit what is available.
Can using home equity affect inheritance or benefits?
Yes. Borrowing against your home can reduce the value of your estate, and equity release may affect entitlement to means-tested benefits. The impact depends on the route and amount used.
