Remortgage to Release Equity

How does remortgaging to release equity work?

You will first need to have a suitable amount of equity built up in your home. Many lenders will usually impose a minimum. This can typically range from 10% to 15% of the total equity remaining in your property, depending on the lender and your circumstances.

Let’s say your home is worth £300,000 and you have £175,000 left on the mortgage. This means you have £125,000 in equity. A lender won’t allow you to release all of it so, for example, you may want to release £25,000.

Next you need to decide if you are going to stick with your current lender or use a new one. Remember, if you leave your current mortgage term early, you may be required to pay an early repayment charge or fee. If you’re unsure about what lender to use, seek the advice of a specialist broker.

Once you have chosen a lender, you will need to go through their application process. Here they will look at a range of factors to ensure that you are a suitable borrower.

Once approved, your funds will be released and they can now be put towards their intended use.

You will now have £100,000 equity in the property, as you have released £25,000. This means that your new mortgage payments are very likely to be more.

How much equity can I release through remortgaging?

You’ll be pleased to know that lenders don’t set a limit on how much everyone can release. Instead, there are a number of things they look at to determine what you can release.

Two of the main factors they will consider are the value of your home and the amount of equity you have in it.

Typically, the more equity you have in your property, the more you can borrow. Furthermore, if your property is valued at a higher price, this can also increase your borrowing.

Remember that almost all lenders will need a certain amount of equity to remain in the property in order for them to lend to you. Some lenders may only be willing to lend funds for specific reasons, as defined in their individual criteria.

To get an idea of what you could borrow, try our free remortgage calculator. This will give you a rough guide and help you prepare if you’re looking to remortgage.

How do I know how much equity I own?

A great way to get an idea of how much you have is by checking the Land Registry. Here you will be able to search for similar properties in your area that have sold recently.

This will give you an idea of your property value. You can then compare this to how much you have paid into your mortgage.

Alternatively, you can get an estimated value from a local estate agent.

What can I use the equity for?

There are a number of things you can use your released equity for, both personal and practical.

Some of the most common uses include:

• Home improvements or alterations.
• Starting a new business.
• A son or daughter going to university.
• A second property.
• Getting married.
• Care payments.
• Consolidating debts into one monthly payment.
• A special purchase, such as a car or dream holiday.

The list could go on – there are almost limitless reasons why you might need a significant lump sum of money at any given time.

If you’re unsure about what you wish to use your equity for, reach out today. One of our expert advisors will discuss your circumstances and recommend the best options.

What are the pros and cons of remortgaging to release equity?

As with any financial commitment, understanding both the pros and cons is essential. Below we have highlighted some things to consider before you release equity from your home.