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Remortgage to Release Equity

Anyone who owns their home and regularly makes payments on their mortgage will have accumulated equity.

There could come a time when you wish to carry out home improvements, pay for a wedding, or maybe for a university course. So to be able to release this equity from your home can be a great way to raise capital.

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Author: Carl Shave - CEO and co-founder
Last updated: 21 Dec 2024

What is equity?

Equity is the amount of money you have accumulated in your property through mortgage payments.

For example, if your property is valued at £400,000 and there is £200,000 left on the mortgage, you would have £200,000 in equity. Of, if you look at it as a percentage, you will have 50/% equity.

If you want to get an idea of your property’s value so you can understand your equity, there are a few options. You could do your own research and look at similar properties that have sold in your area, this will give you a rough idea.

If you want to be a little more accurate, you can always contact an estate agent and have them value your home.

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Useful Information

Can I remortgage to release equity?

Yes, it is possible. This is subject to a lenders checks during the application. They will need to be happy that you have built up enough equity in your home. They will also need to ensure you can meet the new payment amount, as the total amount you owe them will increase.

Be aware, you may have to pay an early repayment charge to your existing lender if you remortgage.

Those who remortgage to release equity should think carefully about how and when they are going to do this. However, the decisions that you make now can affect your financial situation for years to come.

It helps to ask for advice from a mortgage broker like us here at Just Mortgage Brokers. This will ensure that you are making the right financial decision for you.

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How do I remortgage to release equity?

You will first need to establish how much you want to remortgage. Lenders will only allow you to raise funds for specific reasons as permitted by their individual criteria.

You will then need to identify a lender to use. You could stick with your current lender, or you could take out a new loan with a new lender. A mortgage broker will be able to advise you on the most suitable option.

Next, you will go through an application process, similar to that of when you applied for a purchase mortgage. This is so a lender can assess your situation and decide if you’re a suitable borrower. Again, to ensure your situation is painted in the best light, use a mortgage broker. This could make or break your application being accepted.

If a lender is happy with your application, they will send you an offer. Once any legal matters have been resolved where applicable, your new mortgage can begin, and you will receive your additional loan funds.

Your additional funds are usually paid directly as a lump sum into your nominated bank account on the day of completion.  On occasion it may be paid to you via a cheque.

Finally, keep in mind that most lenders will require a certain amount of equity to remain in the property. Furthermore, they will only allow you to raise funds for specific reasons as permitted by their individual criteria.

There are many reasons why people remortgage to release equity in their home. Maybe there is a baby expected and you need an extra bedroom, or you have a grown-up child heading off to university. It might be that you are getting married – and we all know how expensive that can be, or you might want to consolidate your debts.

There are an infinite number of reasons why we need a lump sum of money at any given point, and if done at the right time, in the right way, remortgaging your home can be the perfect solution.

Speaking to an expert can help ensure you get the best deal. So if you are thinking about remortgaging get in touch with one of our team here at Just Mortgage Brokers today.

What are the benefits and drawbacks of remortgaging to release equity?

Considering both the positives and negatives of any mortgage scheme is crucial before you commit to it. This is to ensure you are making the right decision based on your personal circumstances.

Below we have highlighted some points you should consider before you look to remortgage to release equity.

  • The money raised can be used for many different things.
  • In some cases you can borrow more than other loan types.
  • You don’t need to sell your home to obtain the capital.

  • Your mortgage term can increase as the loan amount increases.
  • As the loan amount increases, so can your new monthly payments.
  • When remortgaging to a new deal, your interest rate could increase if you have experienced credit issues previously.
  • You could incur an early repayment charge for leaving your current lender before your term ends.
  • As with any type of mortgage deal, your home can be repossessed if you don’t make payments.

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Frequently asked questions

There isn’t a number set by lenders that limits the minimum and maximum you can borrow. Instead there are a few factors that will play a part.

It will all depend on how much equity you currently have and the value of your home. Essentially the more equity you have, the more likely you’ll be able to release a larger amount.

Lenders will also look at how much you can afford to borrow. As the loan amount increases when you release equity, it’s likely that your mortgage payments will increase too. So, a lender will need to be confident that you can afford the new amount.

Therefore, they will look at things like your income, expenditure, and credit history.

If you want to get a rough idea of what you could borrow, why not try out our free remortgage calculator?

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You’ll be pleased to know that there are other options you can choose instead.

Some of the most popular borrowing alternatives include:

  • Equity release – these mortgages allow those over the age of 55 to get a lump sum without having to sell and move house.
  • A personal loan – sometimes personal loans can work out cheaper, this is because of the term duration. Because the loan term will be shorter than that of a mortgage, you will likely pay less interest over time.

If you want to discuss your borrowing options, reach out today. We can pair you with one of our expert advisors who will be able to recommend the most suitable options.

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