Can You Pay Back Equity Release? 

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What is equity release?

Can I pay back equity release early?

How does interest work on equity release?

What are the benefits of paying back equity release?

Things to Consider Before Repaying Equity Release

Is paying back equity release right for you?

If you’ve taken out an equity release plan or are considering one, you may be wondering if it’s possible to pay it back.

The short answer is yes – most equity release products offer flexibility when it comes to repayment, but it’s important to understand how it works and what your options are. 

For this article, equity release refers to a lifetime mortgage which is the most common type of equity release product.  

What is equity release?

Equity release is a way for homeowners aged 55 and over to unlock some of the value tied up in their property without needing to sell or move.

This is typically done through a lifetime mortgage, which allows you to borrow a portion of your home’s value while continuing to live there.

The loan, plus any interest, is usually repaid when the property is sold – either when you pass away or move into long-term care. 

Can I pay back equity release early?

Yes, usually you can repay some or all the equity release loan early if you choose to. Many plans now offer flexible repayment options, allowing you to pay off part of the loan or the interest as you go along. This can be a great way to manage the amount owed and reduce the overall interest that builds up over time. 

Partial repayments can help lower the final balance without any pressure to make regular payments. Some plans also let you pay off the loan in full, but it’s important to check if there are any early repayment charges. Not all equity release products charge these fees, so it’s worth speaking to your over 50s mortgage advisor to understand what applies to your plan. 

Each equity release mortgage products will have different terms and conditions so it is important to check with your advisor or read the paperwork to understand if paying it back is possible, the limits, and if there are any early repayment charges. 

How does interest work on equity release?

With most equity release plans, the interest is rolled up over time, meaning it’s added to the loan amount instead of being paid monthly like with a traditional mortgage. This can make repayments feel less of a burden while you’re enjoying the cash from your equity release. 

That said, making voluntary interest payments is an option with some products. By paying off the interest as you go, you can avoid the total loan amount growing too quickly, helping to manage how much is owed when the property is eventually sold. 

What are the benefits of paying back equity release?

Choosing to repay part of your equity release loan comes with some benefits: 

Reducing the Overall Debt

By paying back some of the loan or interest, you can reduce the amount owed, leaving more for your estate or loved ones when the property is sold. 

More Financial Flexibility

Some people find that making repayments on their equity release loan gives them more control over their finances in later life. 

No Pressure

With many plans offering voluntary repayments, you can choose to repay only when it suits you, without the stress of mandatory monthly payments. 

Things to Consider Before Repaying Equity Release

Before deciding to repay part or all of your equity release loan, there are a few things to keep in mind: 

Early repayment charges

Check if your plan has any fees for early repayment, as this could affect your decision. Not all plans have them, but it’s something to look out for. 

Affordability

While voluntary repayments can reduce your debt, it’s important to only repay what you’re comfortable with.

Equity release is designed to give you financial freedom, so you should only repay if it fits into your overall financial plan. 

Inheritance

If leaving an inheritance is a priority, reducing the loan amount by making repayments can help preserve more value in the home for your loved ones. 

Is paying back equity release right for you?

Every situation is different, so whether you should repay your equity release loan depends on your personal and financial circumstances. The flexibility of modern equity release plans means you have more control than ever before, so it’s always worth considering how repayments could benefit you in the long run. 

If you’re unsure whether to repay some or all your equity release loan, it will be worth speaking to a specialist age 60+ mortgage broker, like us, who can explain your options in detail and help you make the right decision for your future.