Using equity release to pay off my mortgage

By taking a lump sum from the value of your home you can repay your mortgage lender, and once the balance has been cleared, you’ll own your home outright. It's important to remember that the lifetime mortgage will mean that there is still a debt secured on your home, but you won't have to make regular repayments. The loan plus interest is repaid when you pass away or move into long-term care, subject to our terms and conditions.

During the term of an interest-only mortgage (typically 25-35 years), you must make regular interest payments until the mortgage term finishes, when you repay the original loan amount (the principal) too. 

This is different to a capital repayment mortgage, which requires you to pay some of the principal loan as well as interest.

Using a lifetime mortgage to pay back your interest-only mortgage can be especially helpful if the term’s due to finish soon, but you don’t have the cash to repay the principal and want to stay in your home.

Say you bought your family home for £300,000 in 1996 and got a 30-year term interest-only mortgage. Throughout your term, the outstanding debt will still be £300,000, assuming you made timely repayments. 

As 2026 is approaching, you need to repay the principal, but you’re not ready to sell up and move home. A lifetime mortgage can be used to cover some of the principal and any remaining costs.

See how much money you could unlock from your home with our equity release calculator.

• No more monthly interest payments: A win for your piggy bank, especially later in life when your income might be reduced and fewer outgoings could really help with budgeting.
• Ease your financial pressures: If you're retired or on a fixed income, you can help to soothe any money worries by removing a significant regular outgoing. 
• Stay at home: If you're not ready to uproot and adapt to a new home and local neighbourhood then equity release could be the solution. With the confidence that you can stay put, knowing you own your home outright. 

Learn about the potential benefits and drawbacks of equity release in general.

Using equity release to pay off an interest-only mortgage can provide financial relief, but you should be aware of the potential risks and downsides associated with this option. 

• You could be limited by the amount of equity you have when the property’s sold, if you decide to downsize or move home. This is because interest will be added yearly on the amount you've borrowed and any interest already added – it's known as compound interest, which will quickly increase the amount you owe.
• If your property's value hasn't increased as expected, inheritance will be reduced and the equity left to you or your estate could make you question whether the lifetime mortgage is your best option. 
• There are some mortgages that come with early repayment penalties. So while it will offer some benefits, you should consider whether it's worth paying the charges. 

Before using equity release to pay off an interest-only mortgage, you must speak to an equity release adviser. With their help, you can make an informed decision about whether this option is right for you based on your financial situation and goals.

Choose from a range of retirement financial advisers using the government-backed service Money Helper.

Be protected if you downsize later

If you get a lifetime mortgage with us and then want to transfer the mortgage to another property that doesn’t meet our lending criteria, you may be able to pay off your lifetime mortgage in full, with no early repayment charge (ERC), thanks to our downsizing protection. This ERC would be waived if you’ve had equity release with us for three years or more. Please speak to your adviser or see the terms and conditions for more information on how this works.

If the new property’s worth less than your current one, you’d need to pay back some of the loan and interest accrued. However, if we can’t lend against the new property, you’d need to repay the lifetime mortgage and interest, and potentially a substantial early repayment charge, unless you can use downsizing protection. 

However, if you're also considering downsizing instead of a lifetime mortgage, our article compares two options for unlocking money from your home.

It's crucial you understand the fees, terms, and conditions of any equity release option before signing up. Your inheritance, tax situation, and overall financial health could be affected. Before making any decisions, you should talk to a financial adviser or an equity release adviser.

If you’re not sure if this is right for you, we have an article covering alternatives to equity release. 

To enquire about getting specialist equity release advice, call us on 0800 141 3493

When you get in touch with us, you’ll first speak to a team that will check you’re eligible for our lifetime mortgage. They’ll arrange a call with an expert FCA-regulated equity release adviser.

This adviser can only give advice about our lifetime mortgage, and they’ll tell you if they think it’s right for you. If so, they’ll give you a personal illustration and go through the all-important details with you – we’re talking benefits, costs and risks. If you come to us directly, you won’t pay a separate advice fee, instead we’ll pay the adviser commission once you complete on your lifetime mortgage.

You can learn more about equity release on our dedicated frequently asked questions page.