Remortgaging To Release Equity
Remortgaging is a great way to release equity and free up cash for other projects. See how dedicated expert advice can help you release equity.
Are you looking to remortgage to release equity?
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If you need access to cash, perhaps for home improvements or other large expenses, remortgaging to release equity from your property can be a good option.
We’ll tell you exactly how you can release equity, what you can use the funds for and how you can use our remortgaging calculator to work out how much equity you might be able to release.
Can you remortgage your home to release equity?
Yes, if you have enough equity in your property you can release some of it when you remortgage. As with any mortgage, it does depend on meeting a lender’s affordability and eligibility criteria, but for many people it’s a great option for freeing up cash for projects like home renovations, replacing a car, debt consolidation or school fees.
How does it work?
Remortgaging to release equity is different from a straight equity release mortgage. Remortgaging is simply switching your mortgage for a new one with a larger loan amount, meaning that when you pay off the original mortgage you have cash leftover. Depending on your existing mortgage terms you may have to factor in additional costs and early exit fees.
How to remortgage to release equity
We recommend using a mortgage broker who specialises in arranging remortgages with equity release. This will boost your chances of saving time and money in the long run as well as ensure you secure the best deal.
Make an enquiry to set up your free introduction. After that, your broker will guide you through the following steps:
- Calculating your loan-to-value ratio – this is the difference between the outstanding balance on your mortgage and the value of your property
- Work out how much equity you want to release and why
- Finding the best remortgage deal with the lowest rates
- Optimising your credit records and completing all of the necessary paperwork for your application
Your initial consultation with a remortgage specialist will be free with no obligation to proceed, and it won’t leave any marks on your credit report.
Speak to a remortgage expert
How much can you release?
The exact amount of equity you can release will depend on a few factors, including affordability and of course how much equity you have available. Most high street lenders will be open to lending you around 80% of the current value of your home, known as the loan to value ratio (or LTV), although this may vary depending on what you want the funds for. A few can go higher.
For example, if you own a home currently worth £300,000 and have an existing mortgage for £150,000 then you could remortgage at £240,000 – 80% LTV – pay off your existing mortgage and release £90,000 in cash.
Lenders will want to be sure that you can afford the increased monthly repayments associated with a larger mortgage, so your income and other financial commitments will also come into play. Most lenders cap borrowing at between 4 and 4.5 times your annual income, sometimes 5 times or even 6 times in exceptional circumstances.
Try our remortgage calculator below to find out how much equity you can release and what your mortgage payments will look like afterwards.
Our remortgage calculator can tell you what your new loan-to-value (LTV) ratio and repayments will be after you've remortgaged and released equity
After you have remortgaged your new LTV ratio will be and your new mortgage payments will be as indicated below…
New Monthly Repayments:
Get started with an expert broker to find out how much they can help you save on your remortgage.
How soon can you release equity?
The exact time you must wait before remortgaging varies between lenders, but in most cases, you will need to have owned the property for at least six months. Depending on your reasons for wanting to do it, there are a few mortgage providers who have little or even no waiting period.
If you need to remortgage to release equity sooner than the six-month milestone, see our guide to remortgaging a property early.
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What the funds can be used for
There’s a good amount of flexibility around what you can use the released equity for, but it’s worth noting that it isn’t a free for all – you can’t just use the cash for whatever you want and some lenders will loan at different LTVs depending on how you intend to spend the equity you release. Some may also ask for proof of the planned use of funds.
Examples of what the funds can be used for include…
- Home improvements
- Debt consolidation
- School and medical expenses
- Buying another property
- Holiday of a lifetime
- Buying out a partner after separation
Most mortgage lenders class the above as ‘standard’ expense and will cap the LTV at around 80%. Some lenders may allow higher. This may be increased to 90% in special circumstances, such as a straight mortgage swap or to fund purchasing the final share in a shared ownership house. Remortgaging to release equity for investing, savings, paying a tax bill or business investment is not generally allowed.
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Is releasing equity through a remortgage a good idea?
Releasing equity can finally mean you get to purchase the car you’ve always wanted or visit your dream holiday destination but there’s also a number of things you should consider before applying.
- Access to money previously tied up in property
- Large degree of flexibility on what the funds can be used for – renovations, paying off loans, holiday of a lifetime etc.
- Potential for further opportunities to release equity in the future if property prices rise
- Your overall debt burden will have increase due to higher monthly repayments
- The total amount you repay in interest will be higher with a mortgage than a shorter-term loan along with other costs associated with a remortgage such as early repayment fees
- If property prices fall there’s a possibility you may fall into negative equity
Can you release equity without remortgaging?
Yes, remortgaging isn’t the only option if you need to release equity, there are other ways of making the most of cash tied up in your home. Common alternatives include…
- Taking out a second mortgage: also called a second charge mortgage or a secured loan. This is a loan that is secured against your property, with the lender taking second priority after your existing mortgage provider. A secured loan can be a more flexible option than remortgaging and you may find you’re able to borrow more this way depending on your circumstances. It’s a cost effective alternative if ending your current mortgage would incur high exit fees or if you’ve already got a great interest rate that you don’t want to sacrifice to remortgage.
- A personal loan: if you’re looking for a smaller amount of up to £25,000 then an unsecured personal loan could work out better for you. These are usually very quick to arrange, are paid off over a shorter period so you may have higher monthly repayments but will pay less interest overall.
- A bridging loan: could be an alternative to remortgaging if you need finance quickly, but only as a stop gap measure. Bridging loans are often quicker but can be expensive, so get advice from your broker if this is something you’re considering.
Refinancing a buy-to-let property to release equity
Many lenders are happy to look at remortgaging a buy to let property to release equity depending on circumstances such as what your overall property portfolio looks like and whether or not the rental income on the property makes the new repayments affordable. Check out our article to remortgaging on a buy-to-let for more information.
Remortgage to finish extension
Went to my own mortgage company with over 50% equity in my house to borrow some funds to finish an extension and got turned down. Used OMA they found a broker who were able to arrange a good deal. Excellent service. Would recommend and use again.
I was stuck on an interest only deal with Alliance & Leicester and they refused to help me in spite of my excellent credit rating The thought of possibly having my house repossessed in two years time was very stressful I first spoke to James on 10th Feb and my remortgage was completed on 19th March.
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My own bank of 30 years said they could not help me due to my particular circumstances, I turned to OMA who contacted me moments after I explained the the whole matter online. Graham was very patient and professional clarifying the situation and a day later I had a remortgage offer. Highly recommend
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Why use Online Mortgage Advisor?
Simply put, because or free mortgage broker-matching service could help you save time and money in the long run if you need to remortgage and release some equity.
If you’re keen to get started, the first step is to get matched with a broker who specialises in remortgages. A broker who has particular experience in this type of finance will be able to guide you through the specific requirements and restrictions around remortgaging to release equity, and should be able to save you significant time and money in the process.
All of the advisors that we work with have been vetted by us, so give us a call now on 0808 189 2301 or make an online enquiry to access our free broker matching service. We’ll quickly assess your needs and match you with a broker who meets your circumstances.
Yes, but you may be hit with high exit fees if you leave your mortgage whilst still tied into a particular deal. A secured loan could be a better option in this case.
The process takes 4-8 weeks on average from start to finish, so make sure you allow plenty of time. If you need money in a hurry, you might be better off with a secured loan as these are often much quicker to process.
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