Remortgage to Release Equity

Equity is the difference between what you currently owe a mortgage lender on your mortgage balance, and the true value of your home on the market. For example, if you owe £150,000 on your mortgage and your home is worth £200,000, you have £50,000 in equity.

When you release equity, you are releasing a lump sum cash injection from your home, able to use it for an array of desired purposes.

Some people use the equity in their home to fund potential home improvements, modifications or alterations, to put down the deposit on a new property you would like to buy, to pay off any unsecured debts you have or to gift your children some funds (perhaps for their own deposit on a home).

A remortgage to release equity is not always the right decision for you to make, so a qualified mortgage advisor will take a look at your case and determine whether or not this is the right step for you.

To get a rough idea of how much equity you could have access to, you will need to work out what the true value of your property is.

This can be achieved by asking an estate agent for help in determining the value, or reviewing similar house prices in the area that your property is in.

Take this total and subtract your remaining mortgage amount from it; this will give you a estimate to how much equity is currently sitting within your existing home.

Yes, you can if you have enough equity within your house to pay back the loan. Depending on the amount of equity you own, you may not have to take all of the equity out to repay the loan.

It is always best to seek professional advice before securing any debts against your home and you may end up paying back more interest overall.

You should think carefully before securing other debts against your home. By adding your unsecured debts to your mortgage, which is secured on your home, you are potentially putting your home at risk if you cannot make the required repayments.

Although the total monthly cost of servicing your debt may have reduced, the total cost of repayment may still have risen as the term of your mortgage is longer than it may have taken to repay the debts originally.

The remortgage process can usually take four to eight weeks to complete.

Ideally, when you are remortgaging to release equity, you want to plan your remortgage at least 3 months ahead.

This is where coming to a mortgage broker can prove beneficial, as we'll make sure you're prepared as you can be and will work hard to help you achieve mortgage success.

Remortgaging to release equity will generally incur the same costs as most remortgages. If you remortgage before the end of your initial fixed period, you may have to pay an Early Repayment Charge (ERC).

This type of charge can often be quite costly in itself, so if it's worth checking with a qualified mortgage advisor first, to make sure remortgaging early will be beneficial to you.

In addition to this charge, you may also have some set-up fees for your new mortgage that you are remortgaging onto, though this will depend on the mortgage lender you are with and the specific deal that you are on.

If you are on much lower interest rates or your home has significantly increased in value, this may counteract these costs.

Yes, it is possible to use the funds you have gathered from a remortgage to release equity, and use that as the deposit for a buy to let purchase. It is important to remember though, that you will likely need a large amount of equity in order to do this.

The average deposit for a buy to let mortgage is around 25% of the property purchase price, so this will be a significant dip into the equity in your home. Additionally, they are often interest only mortgages, and these usually have higher interest rates and mortgage fees included.

We would always recommend seeking expert mortgage advice from a mortgage advisor if you are looking at this as an option.

If you have undertaken a remortgage to release equity, but later decide you would like to sell your home and move into a new property, you have a few options to choose from.

The first of these choices is porting your mortgage to your new home, which is where you would simply move it with you. This would depend on the flexibility of your mortgage and your mortgage lender.

Your other choice is to apply for a new mortgage on the new property, though this may be a costly endeavour if you are still part way through your fixed period with your existing mortgage lender, as you will likely have to pay an Early Repayment Charge.

Determining which of these will be the best option for you entirely depends on your circumstances, as one may be much more cost effective than the other.