06, June, 2023

Should I re-mortgage my house or release equity if I’m retired?

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Should I re-mortgage my house if I’m retired?
Re-mortgaging your house is a viable option in retirement if you want a lump sum of money to spend to go travelling, improving your home, or making a big purchase. However, you need to be able to make sure you can meet the monthly repayments so you aren’t at risk of your house being repossessed.

If you’re retired and have been considering ways to access funds, look no further. We Buy Any House have looked into remortgaging and equity release to give you all the information that you need to decide which is better for you.

Get a cash offer for your house today!

What is equity release?

Releasing equity in your property allows you to unlock tax-free cash that is currently tied up in your house. The amount that you’re able to release will depend on the value of your property, your general health and your age, but you’re often able to access much larger amounts of money through equity release than through remortgaging. This is because there are no affordability checks with releasing equity. If you choose a lifetime mortgage with your equity release, you don’t have to make any payments until your house is sold after you’ve passed away or been taken into permanent care. Because of the lack of monthly payments, retired homeowners often lean towards this option; especially those who are asset-rich but cash-poor.

What is equity release?

You can unlock equity in your house if you’re 55+, but if you still have a mortgage that you’re paying monthly you’ll need to use your equity release to pay this off first. After that you’re free to use the equity release however you choose; to fund your retirement, invest, or use for home improvements maybe. You also have the option of getting a negative equity release guarantee which is very useful- it means that no matter what happens to the housing market and how your house’s value changes, you will never owe more than the value of your house at the time your plan ends. This is a great reassurance for homeowners looking to release equity as it means that their children won’t be harboured with the rest of the loan after their death.

There are some downsides to equity release, however. It will reduce the overall value of your estate, and therefore reduce what you can leave in your will as an inheritance. It can also affect your tax position and has the potential to change your entitlement to any benefits. If this is a concern, view the alternatives to equity release.

What about remortgaging?

Remortgaging usually involves taking a larger deal out than your previous mortgage. There are several reasons homeowners choose to remortgage; younger homeowners will sometimes decide to remortgage if they have found better rates with another lender than their current lender, but retired homeowners will look at remortgaging if they want to unlock equity without losing their home after death. They will still need to make monthly payments, which is sometimes not ideal if you have a reduced income, but it means that if you own the house that you grew up in, or your children grew up in and it has a lot of sentimental value the house won’t have to be sold at the end to pay off the mortgage. Still unsure if re-mortgaging your house in retirement is right for you? Read the pros and cons of remortgaging in retirement.

Re-mortgaging vs equity release: which is better?

Ultimately it’s down to your circumstances as to which option is more suitable. Potentially, equity release is more suitable as there aren’t any monthly payments so there’s no drain on your income that’s likely to be reduced after retiring; however, it does mean that you can’t leave your house for your family to inherit, reducing your total estate.  Deciding which option is best is down to you, and if you’re not sure that either is suitable, you can contact us at We Buy Any House today to see how much your house is worth.

We buy any home in as little as 7 days, or timescales to suit you. Head to our website for more information.

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