Releasing cash by remortgaging

Can I release money from my house?

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Remortgaging is the process of switching your existing mortgage to a different deal, using your property as security. A remortgage is typically used to move to a cheaper mortgage rate however, you could also use this option as a handy way to release cash tied up in the equity of your home.

What is equity?

Equity is a term that refers to how much of your property you own outright. For example, if you bought your property with a 20% deposit, then you would own 20% equity in the property.

A lender does not own any portion of the property. Technically, you own everything, however, the home is used as collateral for your loan. Your lender will have secured itself by getting what is known as a lien on the property.

A ‘lien’, simply put, gives somebody a right to someone else’s property. It is a legal claim against a property which provides security for the lender to take legal action to satisfy debts.

Usually, the level of equity you own in your home will go up as you repay your mortgage. This simply put is because your outstanding debt will represent a smaller proportion of the value of the property. Another way equity can increase is if the value of your property goes up.

What can I use the cash from my remortgage for?

There are many reasons you may want to remortgage. Lower rates, reducing monthly outgoings or shortening your mortgage length are some of the usual reasons. However, many people may want to start releasing cash by remortgaging and use the money for things around the home.

Home improvements are a popular reason to remortgage, as it can work out less expensive than putting the bill on a credit card or taking out a personal loan. Taking out a secured loan on your property, of course, can be risky, as, if you cannot keep up with your monthly repayments you run the risk of having your home repossessed.

Remortgaging to free up equity in your home can cover a number of things:

  • Paying off debts
  • Home improvements
  • Helping family financially, for example paying for University fees
  • Helping a family member get on the housing ladder with a gifted deposit
  • Boosting money for retirement (equity release)
  • Buying another property

How much money can I release?

To get an idea of how much your home is worth you can research what similar properties have sold for, using the Land Registry. Estate Agents can also visit your property and give an estimate.

Loan.co.uk offer a free property valuation on all remortgaging/ secured loans. Our experts will also be able to help you work out what you have paid thus far, and what some of the current exclusive deals there are across the market.

Once you have an idea of what your property is worth, you subtract the outstanding mortgage amount from the value of your home. You can ask your lender for a mortgage statement and this will set out what you currently still owe.

If you click here we can have one of our financial experts call you back, to help with any questions you may have in regards to remortgaging, releasing equity or secured loans. We can scan the market and get you quotes from leading lenders, instantly.

Can you remortgage to buy another property?

With the UK currently experiencing record low mortgage rates, it may be worthwhile revisiting what your current rate is, as well as how much money you may be able to release from your current home.

Average house prices increased by around 34% between 2010 and 2017. Meaning, if you have owned your home for a fairly long period and seen the value go up, now could be a good time to release some of that equity for another house, extra money, home improvements or anything you might want the money for really!

Most second home buyers will usually release enough money to cover a deposit on a second property. You are not allowed to take out a residential mortgage on a second home if you do not intend to live in it. So, if you are buying another property to become a landlord then you will need to take out a buy-to-let mortgage.

Buying another home means your expenses can go up, there are property fees to take into account as well as tax. It almost always pays to speak to a financial advisor who can help work out what equity you may have and how to best release it as well as find exclusive rates that suit your needs.

Loan.co.uk offer free property valuations, free quotes and expert advice every step of the way. Quotes are also ‘no obligation’ and you pay no fees until you have your loan!

Remortgaging to buy a second home overseas

Dreaming of a holiday home in the sunshine? Releasing equity in your home can be a great way to fund another property purchase. According to the Equity Release Council, older homeowners unlocked a record £3,94 billion from their properties in 2018 – a 29% increase from 2017.

For more senior homeowners there are a number of equity release schemes or plans on the market. Just remember, if you take out an equity release plan on your UK property, you will be required to live in it for at least six months of every year.

If you are looking at remortgaging to release some cash for the dream holiday home, then there are quite a few options. You can either pay outright for the property if you have enough money available. Alternatively, you can apply for an overseas mortgage. Many UK lenders do offer this, but it will differ from bank to bank.

When buying abroad always research the taxes, charges and legal implications. There can be added costs in translating documents to English and currency fluctuations.

Once you have extensively researched the area and property laws, chat to one of our advisors on what your options on for remortgaging and releasing your equity.

What is equity release?

Equity release is a financial product that is useful to older homeowners who want to release cash locked up in their property. Equity releases are only available to those aged 55 and older and it has traditionally been used as a top up to retirement income or to help pay off interest only mortgages.

As property values have increased over the past twenty years, homeowners have been increasingly looking at how to free equity in their homes.  Some of the reasons being so they can help with family members, such as gifting money for children to put down a deposit or even purchasing another property for themselves.

What is the difference between equity release and a remortgage?

The first suggestion for homeowners, when looking for more money for things such as home improvements or holidays, is to consider a remortgage.

This can be difficult however for much older homeowners due to lending criteria with banks and lenders. Many lenders will not lend into retirement so this can be a challenging route to free up equity in your home.

This is where equity release comes in, the minimum age is 55 and there are financial products geared toward this demographic. There are two types of equity release products.

The first one is a lifetime mortgage which is a specialist mortgage on your main residence. This type of loan will be secured against your home and will not have monthly repayments.

The lenders will only ask for the money to be paid back when you pass away or move into a care home. This can affect the inheritance you want to leave your family, although some plans will allow you to leave a portion to your loved ones.

The second option is a home reversion plan. This is typically offered to older customers and this lets you sell some or all of your home to a home reversion provider. You can still live in the property and like the previous plan; when you die or move into a care home the property will be sold off to repay the released money.

Equity release schemes can be tricky to navigate, and it is worth chatting to a professional adviser on how these types of plans can affect you.

The pros and cons of remortgaging to release equity

The obvious ‘big positive’ of releasing your equity is that you are essentially unlocking money that you can put to other uses. Maybe you can finally do those home improvements, consolidate debts or even jet off on a holiday.

But remember, you are increasing your loan size, and this is something to take seriously. Your monthly repayments could go up and remember that house prices can go down as well. If house prices fall sharply, you could end up in negative equity. Which means the size of your loan is larger than the value of your home.

It is important to budget and work out what your monthly outgoings are and speak to an expert about your options.

The importance of getting expert advice

Loan.co.uk is an award-winning broker service. We aim to make borrowing simple and simplify the application process. Our team is ready to chat about your plans: whether you are remortgaging, moving, improving or looking for a personal loan.

Simply click below to enter your details and we will call you back to generate an instant free quote. Our system is partnered with over 1,800 lenders and will find the best rate for your needs, with exclusive deals not available on the high street.

Get in touch today and find your rates, fast!

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