If you are living in an unencumbered property, by which we mean a mortgage free property that you own outright, you might be interested in a remortgage to release a lump sum of money from the property’s capital.
Is it possible to get a mortgage on an unencumbered property?
Yes, you can remortgage if you own your house outright. You can use the value of your home as security against a new mortgage to release equity for personal purposes or to buy another property.
If you own your home outright it’s known as an “unencumbered” property.
How does an unencumbered mortgage work?
Before we explain how an unencumbered mortgage works, let’s explain what unencumbered actually means.
What does Unencumbered mean?
The term “Unencumbered” mortgage refers to a mortgage that you might take out on a property that is mortgage free. You can use it to release the equity in your home to pay off other debts, raise a deposit for a new property, or any other purpose for which you might benefit from equity release.
Getting a mortgage on an unencumbered property
When applying to a lender for an unencumbered mortgage, they will need to carry out an affordability assessment. The lender will also take your age and employment situation into account when determining your eligibility.
Is getting an unencumbered mortgage hard?
In lots of ways having an unencumbered property can make getting a mortgage a more simple process. It definitely can speed up a remortgage as you will not have an existing mortgage to repay.
However, if you have bad or adverse credit, are approaching retirement, or have experienced a significant drop in income, you may find it hard to get an unencumbered mortgage.
This doesn’t mean getting a mortgage is out of the question.
With over 40 years of experience of remortgaging clients that own their property outright, it’s been our observation that they often have more options than they first think. With mortgage lenders now happy to consider lending to an older age it can also be an affordable option compared to taking out a loan. – Stephen Roberts
Related article: Learn what stops you from getting a mortgage…
Specialist unencumbered mortgages
Some specialist lenders offer unencumbered mortgages to people who have been turned down by the major high street lenders, so you should speak to a mortgage broker for more information on these. A broker can also advise you on what you might need to do to improve your chances of a successful application.
Why remortgage a house you own outright?
Your reasons for remortgaging will depend on your personal circumstances. Common reasons to remortgage include:
- Remortgage to pay for home improvements
- To consolidate debts
- To buy an expensive purchase, such as a new car
- To gift a first-time buyer in the family
- To buy a holiday home
There are other reasons why you might want to release a lump sum of money from a mortgage-free property so this list is not meant to be exhaustive. As to whether or not you will be given a mortgage will depend on how happy the lender is with the reasoning behind your mortgage application.
Can I get a better deal on a mortgage if I own my house outright?
Typically, lenders will offer you the same rates and incentives when you own your home outright as if you had a mortgage on it. Because you have already proven your ability to pay off a mortgage. In the lender’s eyes, this shows them that you are financially responsible and less of a risk to themselves and therefore you will not be seen as a higher risk.
it comes down to Affordability
Of course, whether or not you are offered the best deal will depend on your own circumstances. You may be ruled out of the best loan to value mortgages if your income has dropped or if your employment situation is unsteady, for example.
Improve your affordability or credit score
So, while you may have paid off your existing mortgage, there is no guarantee that you will get the best deal. You can improve your chances of a better loan offer by improving your affordability, boosting your credit score, and speaking to a mortgage broker (such as ourselves) who will help you find the best remortgage deals. – What credit score is needed to buy a house?
What do lenders look at when deciding whether to approve a new mortgage on a mortgage-free property?
Lenders want to know that you can make your monthly mortgage repayments before they let you remortgage a property. As such, they will take a number of factors into account when determining whether or not to approve your mortgage application and they will check such documents as your bank statements and payslips. Factors include:
- Your age
- Your income
- Your spending
- Your credit history
- Your debt-to-income ratio
- The type of property you would like to mortgage
If you meet the mortgage lender’s criteria, you have a better chance of being approved for an encumbered mortgage. But if they suspect you won’t have the means to make your monthly repayments, you may be turned down.
If your application isn’t approved, don’t worry! Contact a mortgage broker at YesCanDo Money, and we will look at all the remortgage deals that are available for somebody with your set of circumstances.
Can I get a buy-to-let mortgage on my unencumbered home?
In short, the answer is yes, but as is the case for any would-be property investor, unencumbered mortgage lenders will usually want a 25% deposit for the buy-to-let mortgage and you may be subjected to higher mortgage rates and fees.
If you own your property outright, you will likely have enough equity built up for your buy-to-let mortgage deposit. But before you are approved for a BTL remortgage, the lender will want to know the projected rental income on the property and how you plan to make monthly repayments if the interest rate rises or if you have a shortfall of tenants.
I’ve inherited a property, can I get a mortgage for it?
Yes. If you have inherited a property that had no mortgage, you can take out a mortgage to finance home improvements if you want to sell it, or you could take out a Buy to Let mortgage if you want to rent the property out to others.
Remortgaging an inherited property
Remortgaging an inherited property is a fairly simple process but you will still be subject to the lender’s criteria and affordability checks. To improve your chances of a mortgage offer and to gain access to the best deals available, contact our team of expert mortgage professionals.
Where can I get the best unencumbered mortgage?
With over 140,000 mortgage deals being offered by the 90+ lenders on the mortgage market, it can be hard to pinpoint the right deal for your own personal circumstances.
As mortgage brokers, this is where we come in. A mortgage advisor at YesCanDo Money can point you toward the unencumbered mortgage deals that are right for you, no matter your reason for raising capital for your remortgage. Get in touch with us today and arrange an appointment for the free expert advice and support that we can give you.
Remortgage with YesCanDo Money
If you want to remortgage a property for equity release, we can give you the mortgage advice you need. We will let you know how equity release works, give you information on the mortgage types that are right for you, and find you the best mortgage deal for somebody in your circumstances.
As we are a FEE-FREE mortgage broker, there is no charge for any of our services. Contact us today using the details on our website and we will arrange a meeting for you with an appointed representative who will give you all the free expert advice and support you need during your mortgage journey.
Unencumbered Mortgage FAQs
Yes, although your choice of mortgage lenders may be smaller if you’re retired or near retirement age as some high street lenders may consider you a risk if your income has changed. Contact us if you would like to know more and we will put you in touch with a specialist lender that is happy to take applications from older applicants.
Yes, but you may be charged a higher rate of interest because of the level of risk you pose when compared to somebody in permanent employment.
The loan-to-value ratio of your mortgage might also be less although if you are applying for a loan using your unencumbered property as security, you may still be able to access some of the better mortgage deals on the market.
If you’re nearing the end of your mortgage, you may have built up a substantial amount of equity. As such, you will be in a strong position to remortgage.
You could take out a mortgage with the same lender but if there is a chance that you might be offered a better mortgage deal elsewhere, it is worth making the switch to another lender.
Talk to us if you are nearing the end of your mortgage as we will advise you on the best lenders and deals that are right for your situation.
It depends on the severity of your credit issues. If you have taken steps to improve your credit rating, and your last credit issue was a long time ago, you may be able to get an unencumbered mortgage.
If you haven’t taken steps to improve your credit rating, your loan application may be turned down or you may be offered a mortgage with higher interest rates.
It’s advisable to build your credit score before you apply for a mortgage as this will improve your chances of acceptance and attaining lower rates of interest. You can build your credit score by doing such things as paying off the balance on any personal loan you hold, making bill repayments on time, and disputing errors on your credit file. For more advice, speak to a mortgage advisor on our team.