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    Remortgaging to release equity is a great way to raise funds from your property’s value. Our guide aims to clearly outline this process and its advantages, whether that means funding home improvements, consolidating debts, or increasing financial flexibility.

    Read our helpful to equip you with the knowledge needed to confidently navigate remortgage options tailored specifically to meet your personal financial needs. Then get in touch with our friendly fee-free advisers for independent mortgage advice.

    Understanding Remortgaging and Equity

    Remortgaging to release funds from your property’s equity can be a smart strategy for homeowners. Releasing equity involves tapping into the value that has accrued in your home; something which may seem straightforward at first glance but is quite complex upon further examination.

    Before we explain remortgaging and equity further, let’s look at a real-life example of remortgaging to release equity to help you understand what can be achieved when doing so.

    Example of a Remortgage to Release Equity

    Alex owns a home that has been valued at £300,000 but still owes £150,000 on his existing mortgage. Looking to fund home renovations, he remortgaged for £200,000 which paid off the original £150k mortgage and freed up £50,000 cash. This raised funds can then be used towards home impovements; increasing the properties value further whilst making his home even better. In fact, by remortgaging, his monthly repayments actually decreased from £1200 per month down to £900 due to securing a better rate than the current mortgage lender SVR he was on. This example highlights how remortgage to release equity can finance significant expenses while also potentially lowering monthly costs.

    Remortgaging Explained

    Simply put, remortgaging involves replacing your current mortgage with one with different terms – usually offering higher interest rates or accessing equity that has built up over time. Here’s more information:

    • Finding an Attractive Rate: To keep monthly expenses manageable, finding a mortgage with a competitive interest rate can be the key.
    • Adjust Your Loan Terms: Remortgaging can help you to adjust mortgage terms so that they better suit your current life scenario, be it to pay off your mortgage faster or reduce your monthly payments.
    • Remortgaging Can Unlock Equity: Over time, your home accumulates equity–essentially cash building up in the property. Remortgaging allows you to tap some of that value for home improvement or consolidating debts.

    Learn How to Remortgage here >

    Equity Explained

    Equity refers to the difference between what your home is worth today and the total of any outstanding mortgage balance, acting like a savings account that builds with every payment and appreciation in the value of your property. Here’s why equity matters:

    • Building Value: Regular mortgage payments combined with any increases in property value are an effective way of saving for the future. By increasing equity through regular home improvement improvements and equity increases, monthly mortgage payments become an opportunity to build up savings right before your eyes!
    • Remortgaging Your Equity Can Provide Flexibility: Need access to significant funds for an important project or paying down debts? Remortgaging can provide this boost without forcing you to sell your home first.
    • Decision-Making in Financial Terms: Leveraging your equity can unlock new financial options and ultimately bring peace of mind.

    Remortgaging to release equity may seem intimidating, but it can be an effective way to maximise the value of your home and improve your financial status.

    The Benefits of Releasing Equity

    Releasing money from your home has multiple advantages; the main one being to raise funds. Below we explore some key advantages such as accessing extra funds, potentially lowering interest rates, and gaining greater financial flexibility and freedom.

    Unlocking Your Equity

    Unlocking the equity in your home means turning part of its value into cash, providing access to extra funds that could serve you in various capacities:

    • Home Renovations and Improvements: Use this money for home upgrades that improve living spaces while increasing their value and creating the life you envision for yourself and your family. From updating kitchen cabinets to expanding the size of your living area, these improvements could bring joyous transformation and increase its worth over time.
    • Major Life Events: When it comes to major life events like weddings, anniversaries, or education costs, having access to extra cash allows you to finance these important moments without the usual financial strain.
    • Unexpected Expenses: Life’s unpredictable circumstances often necessitate immediate financial resources. Equity release offers that safety net, whether for medical expenses, emergency repairs, or other unexpected costs.

    Lower Your Interest Rates

    Remortgaging to release equity can also serve as an opportunity to revisit and revise your mortgage terms, leading to possible benefits like:

    • Reduced Monthly Outgoings: Securing a mortgage with lower interest rates could significantly decrease monthly outgoings and help ease your budget.
    • Overall Interest Savings: Lower rates mean less money spent in interest over the life of your loan, potentially saving thousands in total interest costs.

    Financial Flexibility and Freedom

    One of the primary advantages of releasing money from your property is how it empowers and opens up financial possibilities:

    • Debt Consolidation: Applying released funds to consolidate debts with high interest rates such as credit cards or personal loans can help simplify finances while decreasing total interest payments.
    • Investment Opportunities: Extra cash could open up previously out-of-reach investment opportunities such as stock market trading, property investment (to Buy Another Property) even starting up your business venture – helping increase wealth over time.
    • Peace of Mind: Perhaps the greatest advantage of financial flexibility lies in its peace-of-mind benefits. From knowing you can cover unexpected life surprises to having the freedom to make choices that enhance your quality of life, financial flexibility is an invaluable asset.

    Releasing equity from your home provides an effective strategy to improve your financial condition. Letting it work for you means realising your dreams, supporting lifestyle needs, and safeguarding prospects.

    Understanding the Risks of Releasing Equity

    Releasing equity from your home offers many advantages, yet it’s essential to weigh all potential risks associated with doing so before making a decision. In this section, we outline some considerations you should bear in mind before taking such a step:

    • Impact on Future Equity: By tapping your home’s equity now, it will have less equity available later, which could limit your borrowing abilities or alter any inheritance plans for your family.
    • Increased Debt: While tapping into your home’s equity can increase its equity value, doing so also increases overall debt levels and could extend the time necessary for full ownership as well as increase the total interest paid over time.
    • Possible Fees and Charges: Remortgaging to release equity may incur various fees, such as arrangement fees, valuation fees, and legal costs; these could add up and affect the total cost of borrowing.
    • Interest Rate Risks: Switching to a mortgage deal with variable interest rates carries risks of increasing monthly payments if rates rise, so you must evaluate whether you can afford an increase in payments should interest rates increase.
    • Effect on Benefits: Releasing equity may increase your perceived income, potentially affecting eligibility for means-tested benefits. If you rely on these benefits, assess how this extra income could impact your financial assistance.
    • Long-Term Financial Security: While equity releases may provide immediate access to funds, it’s also essential that this decision aligns with your long-term retirement planning and long-term financial goals.

    remortgage advisor

    As a mortgage adviser, I fully recognise the potential of releasing equity as a powerful means to raise funds, providing you with enough cash to invest in your home, cover major expenses or consolidate debt. But before making such decisions, it is crucial that all applicants involved carefully assess all risks and long-term effects, making an informed decision that serves their best interests while simultaneously guaranteeing future financial security. – Grant Humphries (Mortgage Adviser at YesCanDo Money)

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    Eligibility and Requirements

    Remortgaging to release equity can be a smart financial move for homeowners. But it’s essential to understand all of the eligibility criteria and requirements involved – this includes how much equity can be unlocked from your home, as well as credit score requirements and passing income and affordability checks.

    How Much Equity Can You Release?

    The amount of equity you can release typically depends on your property’s current market value and the remaining mortgage balance. Lenders usually allow you to borrow up to a certain percentage of your property’s value, less any outstanding mortgage amount.

    For example, let’s say your home is valued at £300,000 and you owe £150,000 on your existing mortgage, you might be able to release a portion of the £150,000 equity. However, how much will be subject to the lender’s loan-to-value (LTV) criteria?

    Your Credit Score When Remortgaging

    Your credit score plays an integral part in remortgaging to release equity, as a higher credit score can help secure more favorable mortgage terms and rates from lenders. Lenders use your credit history as an assessment of risk as a borrower – keeping this positive will do wonders in improving it over time and opening up better offers from potential lenders. If it has increased since taking out your initial mortgage loan, this might present itself in better deals being offered!

    Income and Affordability Checks

    All mortgage lenders will conduct thorough income and affordability checks. This is to make sure you can comfortably meet the new mortgage monthly repayments, particularly if increasing your borrowing. They’ll ask for proof of income as well as details about spending patterns or financial commitments. This is based on a debt-to-income ratio to make sure your new mortgage won’t put you under financial strain.

    Understanding these eligibility and requirement aspects is key to successfully navigating the remortgaging process. It’s about ensuring you’re in a strong position to make the most of your home’s equity, in a way that aligns with your borrowing capacity as well as your current financial situation.

    how to remortgage to release equity

    How To Remortgage To Release Equity

    When contemplating remortgaging to release equity from your home, being well-prepared and understanding each step is of the utmost importance. This section seeks to guide you through preparation, mortgage selection, and application, completion steps as well as the benefits of consulting a mortgage broker.

    • Consult a Mortgage Broker: Consulting with a broker is a great starting point and can be an invaluable partner when remortgaging. Brokers have access to a wide range of mortgage products (over 14,000!) and also deals that may not otherwise be readily available to you. Their expertise can help find you the most appropriate mortgage deal based on your unique financial needs and circumstances.
    • Examine Your Existing Mortgage Terms: Before finding a new mortgage deal, closely evaluate your existing mortgage terms – particularly any fees or penalties associated with switching such as early repayment charges.
    • Assess Your Property’s Value: Knowing the current market value of your property is essential in understanding its equity release potential. Use online tools such as Rightmove or Mouseprice to get a rough idea. Alternatively, get a professional valuation for an accurate figure, however, it’s important to note that lenders will be the ones who provide the mortgage valuation figure for your property.
    • Gather Documents: For an efficient application process, gather important financial documents like bank statements, pay slips, and mortgage information. This step is key.
    • Select the Appropriate Mortgage Deal: Take great care to compare deals by considering interest rate type (fixed vs variable), terms, conditions, and any associated fees. A mortgage broker can help ensure an informed decision is made.
    • Apply: When ready, instruct your broker to submit a remortgage application on your behalf, with the mortgage lender of your choice, ensuring all provided information is accurate to avoid delays.

    how long does it take to remortgage and release equity

    How Long Does it Take to Remortgage and Release Equity?

    The average timeframe for remortgaging and accessing equity typically takes between 1 and 3 months, depending on various factors:

    • Application Process: This stage may take from several weeks to several months and involves filling out paperwork for approval. A mortgage broker can be instrumental in streamlining this process.
    • Property Valuation: Establishing the market value of your home is part of the application process, adding time to the schedule. This step may add several weeks.
    • Legal Evaluation and Closing: The final steps, such as legal work and finalising your new mortgage loan, usually take an additional couple of weeks to complete.

    Utilising the services of a broker when remortgaging can streamline the process, potentially save money with better offers, and help navigate any complexities efficiently – leading to a seamless transition and access to more equity for your home.

    How Long Will it Take for Remortgage Funds to be Released? Remortgage funds can take four to six weeks to hit your account after submitting your mortgage application. Once your mortgage is approved and your solicitor has requested the funds nearing completion, these funds should arrive in your solicitor or conveyancers account between 3-7 days later.

    4 Remortgage To Release Equity Alternatives

    If remortgaging isn’t the best option for you, consider alternatives such as personal loans, credit cards, or joint mortgages to access the funds you need. Each alternative comes with its own set of benefits and drawbacks, so it’s important to carefully evaluate your options.

    1) Secured Loans

    Secured loans enable homeowners to use the equity in their property as collateral to borrow. This method is an efficient way of raising substantial funds without changing mortgage lenders, particularly if you already enjoy favourable interest rates on existing mortgage loans that you want to keep.

    Pro: Offers the ability to borrow large sums of money, often with lower interest rates compared to unsecured borrowing options, as the loan is secured against your home.

    Con: Your property is at risk if you fail to keep up with mortgage repayments, similar to your primary mortgage. Additionally, it increases the total debt secured against your home.

    2) Personal Loans

    Although interest rates may be higher, you’ll pay off the personal loan in a shorter period, potentially saving money in the long run. You may be able to borrow up to £35,000, depending on your credit history and income. Personal loans are unsecured, meaning your home is not at risk if you default on your monthly repayments. However, failing to repay the personal loan can still negatively impact your credit score.

    Pro: Access to a lump sum of up to £35,000 with no collateral required, allowing for significant financial flexibility without putting your home at risk.

    Con: Higher interest rates compared to secured loans, and failure to repay can severely impact your credit score.

    3) Credit Cards

    For smaller amounts, consider a money transfer credit card with a promotional interest-free period. Be aware that high rates apply after the promotional period, and balance transfer fees may apply. Using a credit card responsibly can help you access funds without the need for additional loans, but it’s crucial to repay the balance before the interest-free period ends to avoid accumulating debt.

    Pro: The option for an interest-free period on money transfers can provide immediate, cost-effective access to funds for short-term needs.

    Con: High interest rates post-promotion and potential balance transfer fees can lead to debt accumulation if not managed carefully.

    4) Further Advance

    If you are mid-term on a fixed rate there may be an early repayment charge with your current mortgage provider. Talk to a broker who will ascertain whether you should release cash on your present mortgage with a further advance on your mortgage.

    Pro: Allows you to borrow more money from your existing lender on your current mortgage, potentially at a lower interest rate than other borrowing options.

    Con: This may come with early repayment charges and increases the overall debt secured against your home, extending the time to fully own your property.

    5) Overdrafts

    An overdraft arranged through your bank may provide short-term funding solutions with higher-than-usual interest rates that provide instantaneous access to funds without loan approvals or credit checks required for other forms of borrowing. An overdraft might help cover minor financial gaps quickly and without significant fees being accrued over time.

    Pro: Instant access to funds without the need for loan approval, ideal for covering short-term or emergency expenses.

    Con: Higher rates of interest than other credit facilities, and the potential for significant fees if the overdraft limit is exceeded or not arranged in advance.

    Releasing Equity With Help From a Mortgage Broker

    Consultation with a mortgage broker is one of the key components in successfully refinancing. A broker provides numerous advantages:

    • Access to Exclusive Mortgage Products: Mortgage brokers often have access to mortgage deals not readily available directly to consumers, offering potentially better terms and rates for you as a borrower.
    • Indepedent Tailored Advice: Brokers analyse your financial situation, goals, and needs before offering personalised mortgage options that best suit them – this could save both time and money in the long run!
    • Completing the application on your behalf: Remortgaging can involve an immense amount of paperwork and complex decisions; having someone provide navigational support during each step makes the experience less daunting and more efficient. A broker is there to guide you every step of the way and can make this experience less daunting and more streamlined.
    • Timing Your Remortgage: Knowing When To Remortgage is vital! Brokers can advise on the ideal timing to remortgage by considering factors like interest rate trends, early repayment charges, and your financial goals. Their expertise could save significant sums while providing access to equity at its most advantageous time.

    Frequently Asked Questions

    Apply for a larger mortgage that exceeds your existing one; any excess will become cash available for use by your business or yourself.

    Releasing equity typically refers to borrowing against your home's equity through remortgaging for a cash lump sum, while equity release provides older homeowners access to their home equity without selling by using lifetime mortgages or home reversion plans. While both types of releases utilise property equity, they offer distinct services and needs depending on each case based on technical aspects.

    Owning your home outright makes you eligible to obtain a remortgage loan against its value, allowing you to borrow against its equity.

    Releasing equity through remortgaging can be straightforward, given your current financial status and house prices; however, thorough checks and valuations must occur first.

    Consulting with a financial advisor or broker is the optimal way to explore and find the equity release option best suited to you.

    Remortgage funds typically arrive four to six weeks after you submit your mortgage application. Once approved and requested near completion by your solicitor or conveyancer, these funds should arrive in their account between three to seven days later.

    Remortgaging to buy someone out and remove them from your joint mortgage typically takes one to three months. This timeframe depends on the legal and financial complexities involved, similar to any standard remortgage process.

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    Jane Rowe (CII)
    Jane Rowe (CII)

    Jane (CII) is an outstanding Mortgage & Protection Adviser at YesCanDo Money. Boasting decades of industry expertise and an overwhelming passion for client care, she excels at guiding her clients whether they're making their first steps onto the property ladder, moving homes or exploring buy-to-let opportunities. Jane stands out as a true professional by finding the best solutions and prioritising client financial security first and foremost.

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