Equity release is one route to the money in your home rather than the only one. Downsizing, remortgaging, retirement interest-only products and second charge loans each work differently, and the right comparison is total cost rather than cash released.
Homeowners who have built up substantial equity sometimes want to access some of that money for a major expense, home improvements, debt repayment, family support or another long-term need. Equity release is one possible route, but it is not the only option.
Depending on your age, income, existing mortgage, property value and reason for borrowing, alternatives can include downsizing, remortgaging, a retirement interest-only mortgage or a second charge mortgage. Each works differently, carries different costs and has different consequences for your home and finances.
Downsizing means selling your current property and buying a less expensive one, with the difference potentially becoming available after the costs of moving and purchasing the new property are taken into account.
The major advantage of this route is that you are not necessarily taking on additional secured borrowing. However, the financial calculation needs to include estate agent fees, legal costs, Stamp Duty where applicable, removals and the cost of the new property.
There is also a lifestyle question. Downsizing may mean moving away from an area you know, changing the size of your home or giving up features that are important to you. The financial outcome therefore needs to be considered alongside the practical implications.
If you have a mortgage and sufficient equity, remortgaging can potentially allow you to raise additional funds. The new mortgage replaces the existing one, and the additional borrowing is secured against the property.
Whether this works depends on affordability and the lender's criteria. Your age, income, existing mortgage, property value, credit history and the reason for the additional borrowing can all be relevant.
It is also important to look beyond the amount released. Early repayment charges on the existing mortgage, arrangement fees on the new mortgage and the overall interest cost can affect whether remortgaging makes financial sense.
For some older borrowers, a retirement interest-only mortgage can be an alternative to equity release. You normally pay the interest each month, with the capital repaid when the property is sold, the borrower dies or another agreed event occurs, depending on the mortgage terms.
Eligibility and affordability are specialist areas, and the lender needs to be satisfied that the repayment strategy is realistic. It is therefore important not to treat this as a simple substitute for equity release without considering the full terms.
A second charge mortgage is a separate secured loan taken against a property that already has a first mortgage. It can allow you to raise funds without replacing the existing mortgage.
This can be useful in certain circumstances, particularly where the existing first mortgage has a favourable rate or where remortgaging would trigger significant early repayment costs. However, a second charge is still secured against your home. If you cannot maintain the repayments, your property could be at risk.
The four routes are fundamentally different. Downsizing involves moving home. Remortgaging changes your main mortgage. A second charge adds another secured borrowing arrangement. Equity release uses a specialist product designed to unlock housing wealth, often later in life.
The right comparison therefore starts with the purpose of the money. If you need a relatively modest sum for a defined project, a mortgage-based solution may be relevant if affordability supports it. If you want to reduce housing costs and release a larger amount, downsizing may be worth exploring. If you have little or no conventional mortgage affordability, the available alternatives can look very different.
A common mistake is to compare options by asking which one releases the most money. The more useful comparison is the total financial effect over the period you expect to use the arrangement.
Consider interest, fees, early repayment charges, the impact on inheritance, monthly affordability and what happens if your circumstances change. A second charge may leave the first mortgage untouched but introduce another monthly payment. A remortgage may simplify the borrowing but could change the interest rate and term. Downsizing avoids taking on new mortgage debt but comes with moving costs.
The purpose of the funds should also be discussed openly. Different lenders can have different attitudes to debt consolidation, home improvements, gifts to family members or other uses. The reason for borrowing can affect which products are available.
Before making a decision, establish the current value of the property, outstanding mortgage balance, monthly income and expenditure, any early repayment charges and the amount you actually need. Then compare the available routes on a like-for-like basis.
AB Mortgages can help you explore mortgage-based alternatives such as remortgaging, retirement lending and second charge options where appropriate. Equity release is a specialist area and should be considered with suitably qualified advice. Downsizing also benefits from independent legal and financial planning.
It can be, but there is no universal answer. Downsizing avoids taking on equity-release borrowing but involves selling and buying costs, including legal, moving and potentially tax costs. Equity release can involve arrangement and advice costs and can affect the amount of equity left in the property. The two routes should be compared using your actual figures.
Potentially. If you have sufficient equity and can meet the lender's affordability and eligibility criteria, you may be able to increase the mortgage and release additional funds. Your existing mortgage terms, early repayment charges, age, income and reason for borrowing can all affect the available options.
A second charge mortgage is a separate secured loan that sits behind the existing first mortgage. Remortgaging normally replaces the existing mortgage with a new one. A second charge can be useful where retaining the existing first mortgage is important, but it creates an additional secured debt and repayment.
Some older borrowers may qualify for retirement-focused mortgage products, including retirement interest-only arrangements. Eligibility depends on age, income, affordability and the proposed repayment strategy. It is not suitable for everyone, so the full terms and long-term repayment plan need to be considered.
There is no universal cheaper option. The total cost depends on the interest rate, fees, term, amount borrowed and the borrower's circumstances. A second charge also creates a secured repayment obligation, while equity-release products have their own costs and long-term effects. A like-for-like calculation is needed.
It can change the amount ultimately left in your estate, but the effect depends on the value of the properties involved, moving costs, any mortgage and what you do with the released money. Downsizing can also reduce future housing costs, so both sides of the financial picture should be considered.
Some second charge lenders may allow debt consolidation, subject to their criteria and affordability assessment. Because the new borrowing is secured against your home, it is important to compare the total interest and term carefully and understand the consequences of falling behind with payments.
Start with the amount you need, why you need it, your property value, existing mortgage, income, age and affordability. Then compare the total costs, monthly payments, early repayment charges and long-term effect on your home and estate. A mortgage adviser can help assess the mortgage-based options, while broader financial and legal advice may be appropriate for the overall decision.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Not all Buy to Let Mortgages are regulated by The Financial Conduct Authority.
Written by
Ashley has spent over 20 years in property, building and selling two estate agencies before founding the firm. He leads residential, buy-to-let and protection advice at AB Mortgages, and the complex, high value cases at AB Specialist Finance. His standard is simple: every client gets MD-level service.
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