Can I Release Equity If I Am In Debt?

Equity release is the process of releasing funds that are tied up in your property whilst you are still living there. Releasing equity in your property is one way for you to raise some extra cash. If you, or the youngest homeowner is 55 or over, you may be eligible for equity release. The cash you raise from equity release, can be used for many different things. This includes paying off debt, from mortgages to unsecured loans.

Equity Release and Credit Card Debt

Lenders are not usually concerned with credit card debt when looking at equity release applicants. This is because with most equity release products it’s more common to have an interest roll up product where there are no monthly payments necessary. The money is only paid back once you have passed away or have entered long term care. This usually means that even if you have a poor credit score, it is still likely that you will be eligible for an equity release mortgage. When it comes to equity release, lenders are typically more concerned about the condition and the future saleability of your property.

If I am in debt, how can releasing equity help?

  • You could be able to pay off some, if not all, of your debts if you are being chased for payments.
  • It could prevent potential legal action from creditors.
  • If you are on a low income and have no other capital available.
  • You can remove debts that are a top priority or those that are charging you higher interest levels. 
  • Pay off debts that you cannot afford on your regular income

It is always advisable to seek professional advice from a qualified financial advisor if you are considering releasing equity from your property. Equity release is not always the best option for everyone so it is important to speak to a specialist before making any decisions. This is even more important if you also have a number of debts to pay off. 

Prioritise Your Debts

If you are looking into releasing equity in your property to pay off debts, a good place to start would be to try to separate your debts by priority. High priority debts will include those such as your mortgage, gas and electricity and council tax. These are higher in priority because if you do not pay them, it could result in you losing something e.g. your home or heating, or could lead to legal action against you. 

Other debts that are of less priority include credit cards, store cards or unsecured loans. It is still possible for you to get equity release if you have debt. Depending on the debt you have, will impact what the cash needs to be spent on. Lenders will take into account any unsecured debts and the nature of them. If they feel like there is a possibility of legal action being brought by creditors, they may ask you to also pay these off. 

Lenders can also check your credit record. They will ask for any unpaid debts against your name to be settled. Different lenders will have different options in terms of when these need to be paid off, either before they transfer you the cash or after.

Contact Robin Mortgage Design

There are many things to be aware of when considering equity release. See our previous blog on Equity Release to understand the key things to be aware of. We always advise you to discuss your equity release options with experts. Robin Mortgage Design have partnered with professional Equity Release advisers who are happy to help. Please get in touch on 033 242 386, or fill out our online enquiry form.

Equity Release includes Lifetime Mortgages and Home Reversion Schemes. The specialist third-party we will introduce you to is only able to advise on and arrange Lifetime Mortgages, and will refer to an approved specialist for Home Reversion schemes.

After you have registered your interest, one of our consultants will be in touch to discuss your options and where appropriate, make a formal introduction to a specialist third party. There may be a fee payable which will be confirmed to you by them.

The information in this blog is only valid for the date it is written. 13th June 2022.