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Can I Pay Back Equity Release Early?

This is a complicated question that is dependent on many factors. First, let’s consider why you might want to pay off an equity release before the provider wants the money back.

There are many reasons you may choose to repay your equity release before the loan is due.

Generally, people tend to avoid this as the idea of an equity release plan is that you can enjoy your money in the present moment and trust in the fact that the eventual sale of your home will compensate for the money you have borrowed.

However, there are circumstances that demand you to repay your loan early.

To give a few examples:

  • You may want to downsize or move to a larger property without transferring your loan
  • You may come into money (e.g. inheritance) and feel as though paying off your loan is the most sensible way to spend it
  • You may not want to continue to pursue equity release, and you are in the position to pay it off

Please call our 24-Hour Helpline: 0330 058 1579

I Want to Repay Equity Release Early: What Are My Options?

If you have decided you want to repay equity early, you have multiple options available to you, depending on whether you have taken out a lifetime mortgage or a home reversion.

It is also dependent on the specific plan you have opted for, as there will be different rules surrounding early repayment with each arrangement.

Check Your Repayment Options With Your Equity Release Provider

First and foremost, you need to check with your lender to find out if they would approve early repayment.

It is also wise to ask a financial adviser for guidance on this, as they will provide you with unbiased counsel that you can lean on to decide on the best decision for you.

If you do find an adviser, please make sure they are regulated by the financial conduct and that they are a member of the Equity Release Council (ERC) to ensure you are in safe hands if anything untoward occurs.

Please call our 24-Hour Helpline: 0330 058 1579

Put in an Early Repayment On a Lifetime Mortgage

If you have a lifetime mortgage, the good news is that early repayment is most certainly an option. Most schemes will acknowledge that some people want to repay early, so they will accommodate this.

With some schemes, such as the voluntary repayment schemes, you can repay early without facing any financial penalties, and you will also be paying much less interest as a result of this.

When it comes to paying back the loan ahead of the due date, you have plenty of flexibility, as you are able to pay more when you can afford to, and less when money is tight. You can make a full repayment whenever you like with this type of equity release plan.

However, it must be noted that there are often limits to this repayment, so sometimes you must wait until a certain amount of time has passed before you can begin to repay the loan.

What’s more, some lenders require you to pay off the loan in full after a certain amount of time, so you may have to hold off on it at the beginning.

If you would rather pay off the interest early and not the entire loan, you could opt for an interest-only plan and pay all of the interest charged over a period of time, on a monthly basis.

If you are paying off a portion of the interest each month rather than all of it, your debt will continue to increase but it will do this gradually over time rather than spiking.

Many plans allow you to make payments either in full or gradually, so you have flexibility when it comes to this.

Please call our 24-Hour Helpline: 0330 058 1579

Can I Pay Back Equity Release Early On a Home Reversion?

Unfortunately, if you are a customer of this plan, it is much harder to pay off equity release early.

To do this, you would have to sell your share of your home to generate money that will cover your loan, as the equity release provider already owns part of your property.

If you are concerned that you would not have enough money to purchase a new house after selling your share, remember that if your financial adviser is an ERC member, you are entitled to a ‘suitable alternative property’, so you will be able to find another home, albeit according to the criteria of the lender.

To find out more about this, visit the FAQs section of the Equity Release Council website.

Please call our 24-Hour Helpline: 0330 058 1579

Do Equity Release Lenders Apply Early Repayment Charges on Equity Release?

If you do decide to repay your loan early, there are often penalties for this depending on the lender, so you may incur an early repayment charge.

With most lifetime mortgages, you are expected to pay a hefty fine, so the repayment charge maybe 25% of the initial amount borrowed from the lender. This is of course something to be avoided, so it is important to look at the stance of your lender in terms of early repayment before you sign off on anything.

Again, if you are not prepared to pay the penalty, remember that some plans allow and embrace the fact that you want to repay your equity from your home before it is sold.

Consider getting a voluntary repayment plan as repaying is rewarded, rather than punished, with this scheme. However, remember that certain restrictions may apply.

Will Repaying Early Get Me Out of the Scheme So That I Can Move Home?

Yes, if you pay off your loan early, you will no longer be a customer of equity release, and you will be free to take out another mortgage, such as a traditional mortgage.

Any money that is left over will be considered yours, so you are free to do what you want with it, and it can be passed onto your dependents if this is what you desire.

Please call our 24-Hour Helpline: 0330 058 1579

Why Should I Consider Sticking With My Plan In Full?

Early repayment charges are not something to take lightly – you do not want to be spending extra money when you have already taken a risk with equity release, so it is wise to avoid this at all costs.

Generally, if you stick with your scheme and see it out to the end, you will be in a better financial position.

There are ways that you can adapt your way of living without leaving the equity release scheme, and we would encourage you to do this before you jump to repaying your loan ahead of time.

Can I Downsize and Keep my Loan Instead of Pursuing Equity Release With a Repayment?

Yes, in many cases, you will be allowed to repay your loan in order to downsize, and this may even be encouraged. You will transfer your current mortgage to a new property and continue to follow the lending criteria of the scheme you are with.

The property that you select must be approved by the lender, so you cannot choose any house that appeals to you, but you will benefit from the average property that a new equity release customer would receive.

If the property is higher in value than your current one, you could request a higher loan. If it’s lower in value, you may have to pay a small sum towards it as the provider is going to receive less money from the house sale.

Some providers require you to wait a certain amount of time before doing this, such as five years, whereas others can approve a downsize very early on.

Please call our 24-Hour Helpline: 0330 058 1579

Contact Us to Find Out Whether You Can Repay Equity Early According to Your Equity Release Scheme

Call us on 0330 058 1579 to find out if repaying equity early is something that is a viable option according to the terms and conditions of your lender.

Many lenders apply early repayment charges on equity release, but not all of them do, so we can look into this for you. If you would like us to contact you first, please go to our callback form and fill in your details.

If you haven’t yet taken out a loan and you would like to look at your options before doing so, we are more than happy to help. Our advisors are experienced in all things equity release, and they can advise you on how to go down this route, or alternatively, how to downsize or consider other loans from a lender.

If you would rather have a look for yourself before reaching out, why not have a look at our Help Centre where we answer your burning frequently asked questions?

Whether you want to end a home reversion plan early, or transfer your lifetime mortgage to a new property, all the information you need is on this section of our site.

We also encourage you to look at the popular equity release plans we have described, as this will enable you to make an informed decision on the arrangement that would suit you, with the help of a neutral adviser.

We are experts in many plans including new plans, which is great news as we are aware that different providers offer different schemes.

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