Remortgage with Equity Release

Most property values that have increased over the last 15 years, so many people are fortunate to have a lot of equity within their property which they would like to tap into and use for many reasons. Here we explore why people release equity and how it can be achieved?

Why remortgage your property to release the equity?

There are many reasons why people do this – here are the typical reasons that we see:

• Raise Money for Home Improvements – Maybe you wish to carry out home improvements such as a new kitchen, loft conversion, extension, new front and back garden or just a complete upgrade to the whole house. Taking out credit cards to fund this work can be expensive, so releasing equity through a remortgage could be a better solution.
• Consolidate Debts – May be you have loans and credit cards that you want to consolidate with the aim to reduce your outgoings to a more sustainable and affordable level.
• Buy Another Property – Maybe you want to purchase a Buy to Let property or a holiday home. You could release equity to put down a large deposit.
• Gift Money to Family – With high property prices it is hard for the next generation to get onto the property ladder unless they have a good deposit to put down. By remortgaging and releasing equity you could help them purchase their first home.
• Purchase Car – May be you need a new car and are looking at ways to finance this. You could try and borrow the money through an unsecured loan, but if unsuccessful maybe a remortgage could help you raise the money by releasing the equity within the property.
• Business Expansion – If you own a business and want to grow this, you may need a cash injection which could come from releasing the equity you have in your home through a remortgage.

What ways can I release equity in my property?

• Remortgage – This is basically achieved by replacing your existing mortgage lender with a new mortgage lender with a higher borrowing amount.
• Secured Loan – You keep your existing mortgage lender in place and you take out a secured loan (also known as a 2nd mortgage) against the property. This is ‘secured’ against the property and a charge is noted at the land registry.

It is important that when you want to release equity that you look at both remortgages and secured loan options and price out what is the most cost effective taking into account all the relevant charges. Using a qualified mortgage broker can really help with this. There are many remortgage and secured loan lenders in the market and making sure you take out the right finance is important.

Please note that most lenders require there to always be a surplus equity amount within the property of around 10%-15% depending on the lender criteria although with some specialist lenders it may be less.

How much equity do I have in my property?

Equity is the difference between the property value and the debts secured against it. Firstly look online to establish the property value, you could visit websites such as Rightmove or Zoopla to get an idea of its market value or speak to a local estate agent. Secondly, speak to your existing mortgage lender to find out the current mortgage balance – if you have any other charges against the property you will need to know the balance of these also.

Simply take the property value minus the debt secured against it will give you the equity you have. When you take out a remortgage a formal valuation will be needed to confirm its true market value.

Example: If your property is valued at £250,000 and you have a mortgage outstanding of £100,000 therefore you have equity of £150,000.

How long does a remortgage to release equity take and what is needed?

Typically a remortgage should complete in around 6 weeks although this time frame can vary depending upon the complexities of the case. To ensure a smooth application please make sure you provide all the required documentation ASAP. Typical documents that would be required on a case are:

• Proof of Identity – Passport or Driving License.
• Last 3 Months Bank Statements – This is to understand your outgoings and how you manage your account.
• Proof of Income – If you are employed this would be your last 3 months payslips and P60 or if you are Self Employed this would be last year’s tax overviews and tax calculations or your accounts.

The lender does have their own documents which they would require to be completed and they always reserve the right to ask for additional information to satisfy their due diligence.

Reasons for and against remortgaging to release equity

Unlocking the equity is a way of raising money for home improvements &/or debt consolidation and as it is secured against an asset (your home) you can borrow larger sums of money over a longer period of time. However, remember if you fail to keep up your repayments you may lose your home. Also bear in mind that if property values drop you could have a debt which is more than then property value itself.

If you are consolidating debts you should be fully aware of the impact of this – i.e. what is the long term cost of adding these debts against your home. You may pay back more in the long run by doing this. Your mortgage adviser will be able to advise you of the estimated costs.

How to remortgage to release equity?

The remortgage advisers at The Money Hub would be more than happy to help you release equity to achieve your goals. It is important that you get advice in this area tailored to your circumstances and be fully aware of all the associate costs. Please either call the office or complete the above enquiry form.