Equity Release vs. Remortgaging: Which Option is Best for You?

In today’s dynamic property market, homeowners in the UK are increasingly looking for ways to unlock the value in their homes. Two popular options that often come up in discussions are equity release and remortgaging. But which one is right for you? As a leading mortgage broker in Milton Keynes, Visionary Finance is here to help you understand the pros and cons of each option.

Understanding Equity Release and Remortgaging

Before we dive into the comparison, let’s clarify what these terms mean:

Equity Release

Equity release is a way for homeowners aged 55 and over to access the value tied up in their property without having to move. There are two main types of equity release:

1. Lifetime Mortgages: You borrow a portion of your home’s value, with the loan and interest repaid when you die or move into long-term care.
2. Home Reversion: You sell a part or all of your home to a provider in return for a lump sum or regular payments, while retaining the right to live there.

Remortgaging

Remortgaging involves switching your existing mortgage to a new deal, either with your current lender or a different one. This can be done to secure a better interest rate, borrow more money, or change the terms of your mortgage.

Comparing Equity Release and Remortgaging

Now, let’s compare these options across several key factors:

1. Age Requirements

• Equity Release: Typically available to homeowners aged 55 and over.
• Remortgaging: Available to homeowners of working age, subject to lender criteria.

2. Impact on Ownership

• Equity Release: With a lifetime mortgage, you retain ownership. With home reversion, you sell part or all of your home.
• Remortgaging: You retain full ownership of your property.

3. Repayment Terms

• Equity Release: Generally, no monthly repayments. The loan and interest are repaid when you die or move into long-term care.
• Remortgaging: Requires regular monthly repayments.

4. Interest Rates

• Equity Release: Often higher than standard mortgage rates, but rates have become more competitive in recent years¹.
• Remortgaging: Can offer lower interest rates than equity release.
• Impact on Inheritance

• Equity Release: Can significantly reduce the value of your estate.
• Remortgaging: Generally has less impact on inheritance, as you’re paying off the loan over time.

6. Flexibility

• Equity Release: Less flexible, as it’s designed as a long-term solution into retirement.
• Remortgaging: More flexible, allowing you to switch deals or lenders more easily and frequently.

Who Might Consider Equity Release?

Equity release could be suitable for:

1. Retirees looking to supplement their pension income
2. Homeowners wanting to make home improvements without moving
3. Those wishing to help family members onto the property ladder
4. Individuals looking to pay off existing debts

According to the Equity Release Council, the equity release market has grown significantly in recent years, with £3.89 billion released in 2020 alone².

Who Might Consider Remortgaging?

Remortgaging could be a good option for:

1. Homeowners looking to secure a better interest rate
2. Those wanting to borrow more against their property
3. Buy-to-let investors looking to expand their portfolio
4. Self-employed borrowers seeking to adjust their mortgage terms
5. To help friends and family get onto the property ladder
6. Home improvements

The remortgage market in the UK remains robust, with £63.8 billion worth of remortgaging in 2020, according to UK Finance³.

The Role of a Mortgage Broker

Whether you’re considering equity release or remortgaging, consulting with an independent mortgage adviser near you can be invaluable. As mortgage brokers in the UK, we at Visionary Finance can:

1. Assess your individual circumstances
2. Provide impartial advice on the best option for you
3. Search the market for the most suitable deals
4. Guide you through the application process

For buy-to-let mortgage advice, we’re particularly well-equipped. Our team of buy-to-let mortgage brokers can help investors navigate the complexities of the buy-to-let market.

Special Considerations

Expat Mortgages

If you’re a UK expat looking to invest in property back home, an expat mortgage broker can help you navigate the unique challenges you may face. At Visionary Finance, we have experience in helping expats secure mortgages in the UK.

Self-Employed Mortgages

Self-employed individuals often face additional hurdles when applying for mortgages. Our team is experienced in helping self-employed borrowers find suitable mortgage products. Learn more about self-employed mortgages.

Making Your Decision

Choosing between equity release and remortgaging is a significant decision that can have long-term implications for your financial future. Here are some steps to help you make an informed choice:

1. Assess your current financial situation and future needs
2. Consider your age and how long you plan to stay in your current home
3. Think about the impact on your estate and any inheritance plans
4. Consult with family members who might be affected by your decision
5. Seek professional advice from a qualified mortgage adviser

Remember, what works for one person may not be the best solution for another. That’s why it’s crucial to get personalised advice tailored to your specific circumstances.

Conclusion

Both equity release and remortgaging can be effective ways to access the value in your home, but they suit different circumstances. Equity release can provide a tax-free lump sum or regular income for those in later life, while remortgaging offers more flexibility and potentially lower interest rates for those still in the workforce.

As one of the best mortgage brokers in the industry, Visionary Finance is here to help you navigate these options. Our team of experienced mortgage brokers and advisers can provide the guidance you need to make the right choice for your financial future.

Ready to explore your options? Reach out to Visionary Finance today. Our team of expert mortgage advisers in Milton Keynes and across the UK is ready to help you make an informed decision.

• Website: https://visionaryfinance.co.uk/
• Email: [email protected]
• Call: 01908 465 100

Remember, your home may be repossessed if you do not keep up repayments on your mortgage.