Can I use equity release to pay off my mortgage?

Updated 24th August 2023

Using equity release to pay off a mortgage is one way homeowners can reduce their monthly outgoings. What with the cost of living crisis, poor performing pensions and dwindling savings, those approaching retirement often do so with some trepidation, worrying about how they will make ends meet.

Paying off a mortgage with equity release means you have one less payment to think about, as the loan is only repaid once you die or move into long-term care. But is releasing equity from your home the best way to pay off a mortgage, or are there other options you should consider?

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Using equity release to pay off a mortgage

When you release equity from your home with a lifetime mortgage, which is the most popular type of equity release, there are no monthly repayments to make. Instead, the loan accrues interest and is only repaid once you have died or moved into long-term care.

So, using equity release to pay off a mortgage is a way of reducing your monthly outgoings, as your old mortgage will be repaid and your new mortgage requires no monthly repayments.

Rather than selling the home, downsizing and moving to a new house, you could stay where you are and unlock some of the tax free cash tied up in the value of your property.

Using equity release to pay off an interest only mortgage

Until the 2008 financial crash, it was relatively easy and affordable to get an interest only mortgage. You only had to demonstrate you could pay the interest each month, because the capital did not need to be paid until the end of the term. Instead, you had to have a financial plan in place to repay the capital at the end of your mortgage term.

As a result, many homeowners took out interest only endowment mortgages with the expectation that when the policy matured, it would be sufficient to pay off their mortgage altogether. Sadly, this has proven not to be the case, and many are now facing substantial shortfalls when it comes to settling the mortgage debt.

Using equity release to pay off an interest only mortgage means you can use the money tied up in the value of your home to repay the debt. And as your new loan is only repaid when you die or move into residential care, there will be no monthly repayments to make.

Try the lifetime mortgage calculator

Can I repay my mortgage with equity release?

To repay your mortgage with equity release you need to be at least 55 years of age, with property in the UK or Northern Ireland worth at least £70,000. The amount of equity you can release from your home will depend on the property value and your age.

The money you release will be used to pay off the mortgage in the first instance, however any extra cash you release, can be spent as you wish. Perhaps clearing other debts, making home improvements or helping family get onto the housing ladder.

Converting to a lifetime mortgage

Converting to an equity release lifetime mortgage could help anyone taking a drop in income following retirement. Whilst you are effectively remortgaging, the big difference is that when you move to a lifetime mortgage, you no longer have to make monthly repayments.

Useful features of a lifetime mortgage

If you’re considering equity release to pay off your mortgage, some lifetime mortgage lenders offer a number of flexible options that may be of use, including:

  • The ability to make voluntary partial repayments without incurring an early repayment penalty.
  • Inheritance protection to ring-fence a percentage of your home’s future value to be passed on as an inheritance.
  • Downsizing protection after 5 years, allowing you to move to a smaller property and repay your lifetime mortgage without incurring any early repayment charge.
  • If you or your partner are in poor health, you may also be able to release more equity through an enhanced lifetime mortgage.

It’s important to remember that as the loan is repaid from the sale of your property, equity release will impact any inheritance you leave to family. So, understanding the pros and cons of equity release and seeking specialist advice is a must.

Try the lifetime mortgage calculator

Other ways to pay off an interest only mortgage

If you are coming to the end of an interest only mortgage and considering equity release to repay the loan, you may want to look at all the alternatives first. Using equity release to repay the loan may give you financial freedom however there could be an alternative option that may be more suitable.

Extend your mortgage

You could extend your mortgage, allowing yourself more time to save and repay the loan. However, this will depend on your income and age as most lenders will not extend beyond a certain age.

Switch to a repayment mortgage

By switching to a  repayment mortgage, you will repay the interest and some of the capital on a monthly basis. This means there will be nothing left to pay at the end of your mortgage term however your monthly payments will be higher.

Make larger monthly repayments

If you can afford it, you could make larger monthly repayments, on either a regular or an ad hoc basis. This will start to reduce your capital, lessening the amount you owe at the end of the mortgage term. Your mortgage lender can advise you the overpayment terms they offer.

Switch to a lower interest rate

Switching to a lower interest rate, either with the same lender or a new one, will reduce your monthly payments. You could then use the money you save to overpay your interest only mortgage, to reduce the capital.

Your ability to change to a new mortgage will depend on your age and financial status.

Change to a retirement interest only mortgage

Just like a standard interest only mortgage, a retirement only mortgage only requires you to make monthly interest repayments. The main difference is that there’s no set date to repay the capital by. Instead, your monthly repayments continue for the rest of your life or until you move permanently into care. The property is then sold, and the capital repaid.

As retirement interest only mortgages are designed for retirees, there is usually a minimum age threshold of at least 55 – the same as for an equity release lifetime mortgage. Also, as this type of mortgage is relatively new not all lenders offer them, however an independent financial adviser will advise you on the best course of action.


Downsizing could help repay your interest only mortgage. However, this depends on the value of your current property and whether it generates enough money to repay the capital on top of funding your new home. You could move to a cheaper area, but if this might leave you feeling isolated, equity release might be a better option, so you can stay in your own home.

How much equity could you release to pay off your mortgage?

With a lifetime mortgage you could release up to 55% of the equity in your home, depending on your personal circumstances. To get an idea of how much you could release use our free equity release calculator.

Speak to an equity release specialist

Equity release is a big decision and is not the right choice for everyone. There are also many lifetime mortgage providers in the UK, so it’s important to speak to an equity release specialist who can look at your situation and research the market to find the solution best suited to your circumstances.

To help you understand more about equity release, we work in association with Age Partnership. Their professionally qualified advisers will be able to answer all of your questions on using equity release to pay off your mortgage, helping you to decide if it’s the right choice for you.

If you would like to speak to a qualified adviser please ask for a call back .

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