Remortgaging is the process of switching your existing mortgage to a new deal or lender and is known to provide strategic financial benefits, especially if done with the support and guidance of a qualified mortgage advisor. A valuable financial resource often overlooked is the capital that can be unlocked by remortgaging, which, if you are looking to free up cash for a once-in-a-lifetime trip or a big home renovation, can be a huge benefit.
Let’s take a look at what exactly capital raising remortgages are and how they could help you with big projects for 2024.
What is a Capital Raising Remortgage?
A capital raising remortgage refers to the equity that is released from your property with a remortgage or secured loan taken out against the property. The equity refers to the funds you currently have between your existing mortgage and your property’s value. At this time of year, when spring is just around the corner, yet we’re still dealing with the long winter nights, planning for the future is a way to get through, and so a capital raising mortgage might just be the financial decision you need to make your dream a reality.
These types of mortgages tend to be available from most mortgage lenders up to 75% of your property value. There are instances of first-charge mortgage lenders offering up to 95% and second-charge mortgage lenders offering up to 100%, however, the higher the ratio, the more caution is needed.
Careful consideration is always advised before taking out a capital raising remortgage, as you are putting your property at risk if you’re unable to keep up with repayments. It’s also worth noting that if you are attempting to consolidate existing borrowing, you may be extending the terms of your debt and increasing the total amount to repay.
Why are They Offered and What are They Used For?
Remortgages that help to raise capital are offered to customers who need extra cash for big projects, life changes, or investments. There is a never-ending list of investments the capital can be used for, including:
- Home Improvements – this could include a long-overdue kitchen renovation, bathroom upgrade, or expanding your living space, and using the capital from remortgaging can help breathe new life into a tired home. Home improvements can also add value to your property, making it a smart investment in the long run.
- Debt Consolidation - if you have multiple debts with high-interest rates, remortgaging can help by consolidating them into a single, more manageable loan with a lower interest rate. This can simplify your finances, reduce monthly payments, and save you money over time.
- Investments – funding investments is another way capital from remortgaging can be used. Investment into business expansion or diversification, purchasing a buy-to-let, etc. can help to diversify and boost your investment portfolio.
- Gifts and Purchases– if you have big money to spend on the horizon such as large sums of money to family to buy their own property, a new car, cosmetic surgery, educational fees, weddings, or funerals, and even a lifetime holiday, a capital raising remortgage can be a great way to fund these.
What Can’t the Capital from a Remortgage be Used for?
It is important to pick a mortgage lender that will work with your particular preferences, that being said, there are some things that a capital raising remortgage cannot legally be used for, including:
- Repayment of gambling debts.
- Repaying tax bills.
- Buying stocks and shares.
- Funding business start-ups.
Considerations before entering a Capital Raising Remortgage
Before entering a remortgage to raise capital, it is important to understand your goals and whether your circumstances comply. For instance, only static properties qualify for a capital raising remortgage, such as houses, flats, bungalows, etc. This also applies to commercial-use buildings such as shops, garages, surgeries, and guest houses. Mobile homes, caravans, barges, etc. cannot be used as collateral.
You also don’t need a current mortgage to qualify for a capital raising remortgage, however, you can only apply for a first charge mortgage which will be limited to a maximum of 95% loan-to-value ratio. Buy-to-let properties are also open to capital raising remortgages, up to an 85% LTV, however, it is important to remember that interest rates above 75% increase dramatically.
How TaylorMade, an Independent Mortgage Broker in Manchester can Help
If you are planning to spend a large sum of money on a future investment, then using the capital tied up in your mortgage could be a viable option for you. Picking the right mortgage lender is the key to ensuring it is a success, which is why an independent
mortgage advisor in Manchester, such as TaylorMade, could be the answer you’re looking for.
We have the experience and knowledge of utilising capital raising remortgages on domestic and commercial properties, making us the leading mortgage broker in Manchester and one that can make this process as quick and simple as you need.
To get the best deals, speak with the leading mortgage advisor in Manchester, TaylorMade. Our team is here to help scour the market and get the best deal for you. Contact us today.
