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Remortgaging To Release Equity

REMORTGAGING | 31.08.2021

Whether you’ve paid a large chunk of your mortgage or the value of your property has increased, you might be considering taking advantage of the equity that has accumulated in your home. Remortgaging to release equity means you gain access to a cash lump sum, which you can use for things such as home improvements or paying off other debts. However, remortgaging a house to release equity isn’t always the best option for your individual needs, which is why we’ve created this guide to help you make the right decision.

How does remortgaging to release equity work?

Remortgaging to release equity is where you borrow money against your property using your available equity. This is the difference between how much of your property you actually own versus the mortgage you still need to pay off.  As an example, if you have £150,000 remaining on your mortgage, and your property is now worth £300,000 (increased from its original value of £200,000), the equity you hold in your home is £150,000. The market value of your property minus any outstanding mortgage on it is known as the loan-to-value (LTV) ratio. Taking the above example, an equity of £150,000 would be an LTV of 50%. So when coming towards the end of your current mortgage deal, you could remortgage for more than this amount (£200,000 for example), which will allow you to release £50,000 of equity to spend how you wish.

What is the downside to equity release?

As with any mortgage product, remortgaging to release equity does have some disadvantages you need to consider. These include: 
  • You are taking on more mortgage debt - should you miss any monthly payments, your home could be at risk of repossession. 
  • If you are rejected by multiple lenders, your credit score could be affected. 
  • There is no guarantee that house prices will continue to rise, which means you could be left in negative equity if prices fall significantly. This is where your loan is bigger than the value of your home. 
  • There may be early repayment charges. 

Will I be eligible?

Most lenders have an eligibility assessment they use to determine if you are suitable to remortgage to release equity. Eligibility is based on the following factors: 
  • Your credit history
  • Employment status 
  • Income
  • The amount of equity you currently have
  • Type of property
  • Your age

Alternatives to remortgaging for equity release

After discussing your options with a mortgage broker, you might find that remortgaging to release cash isn’t for you. Here are some alternatives worth considering: 
  • Using your savings 
  • Personal loan - if you’re looking to make home improvements, you can arrange a loan for a period of between one and five years and borrow up to £35,000. 
  • If you’re remortgaging to help your child or a loved one purchase a property, then you could take out a joint mortgage. Your income would be considered alongside the main applicant, which may make it easier for them to borrow the required amounts. 
  • Or you could act as a guarantor. So if your loved one falls behind with their repayments, the responsibility then lies with you.
Contact us today to discuss remortgaging to release equity in your home. Our expert mortgage advisers will be able to provide the information you need and start your application as soon as possible.
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Your mortgage will be secured against your property.

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

A fee of up to 1.95% of the mortgage amount, subject to a minimum fee of £1,295 and an overall maximum fee of £2,995 payable on completion.