Remortgage To Release Equity
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Remortgage To Release Equity
Carolyn Dunion explains how remortgaging to release equity works.
This podcast and article refer to releasing capital from a property and are not equity release advice.
Can you remortgage to release equity?
Yes, you can.
Can I remortgage early to release equity?
I’m taking this to mean releasing equity before a current product comes to an end. Most people will have a mortgage rate that will end before the term of their mortgage. Typically that might be a two, three or a five-year fixed rate or tracker arrangement.
There’s nothing to stop you remortgaging whilst you’re in a fixed rate or another type of product, but you have to be careful – because early repayment charges may apply.
There can be scenarios where it’s worthwhile doing that, but it’s always worth taking advice to make sure it’s the right thing for you.
What are the reasons for remortgaging to release equity?
There are lots of reasons why people choose to do this. Home improvement is probably the most popular one. You might want to release money to do an extension, add a conservatory or replace your kitchen or bathroom.
We also see people looking to release equity for debt consolidation. Again, it’s very important to take advice on whether that’s the right thing to do, but it can be done.
We used to see people remortgaging to release equity to buy another property for Buy to Let purposes. That’s less popular now, but people sometimes release equity to buy a holiday property. There are lots of reasons why people choose to do it.
How do I remortgage to release equity in my property? How does the process work?
Number one, contact McKendry Dunion Financial, of course. The next step depends on what’s right for you. You might choose to move the whole mortgage to a new lender, including the equity you wish to release. That would be a new application.
Or, perhaps you can take borrowing with your existing lender, which tends to be quicker and easier. However you do it, there will be an application process, and the lender will assess affordability at that point to ensure you can pay back the mortgage with the additional equity released.
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How easy is it to remortgage to release equity?
Staying with your existing lender is the quickest and most straightforward way to do it. Depending on your circumstances, most lenders will estimate the valuation of your house, which sometimes is accurate and sometimes not.
If you’re doing a full remortgage to another lender, there’s an application process – but that’s something that we handle for clients. It’s pretty straightforward. We will ask you for lots of documents, of course, because we like paperwork in financial services, and we want to know your current circumstances.
How long does it take to remortgage to release equity?
If you’re doing it with your current lender, it could be under 10 days. It can be very quick.
Again, it very much depends on your circumstances.
If you’re remortgaging to a new lender, there’s a legal process as part of that. A solicitor, who is usually paid for by the lender, releases the charge over your property title with your current mortgage lender and adds a charge for the new lender. That can take a little time, so it can be around six weeks from start to finish, assuming all is going well.
How much can I remortgage for and release equity?
There are two important factors. One is your own level of affordability and how much the lender would be prepared to lend you as an individual or a couple. The other is the value of your property. There must always be a certain amount of equity left within it.
You can’t remortgage for more than the property’s worth, and how much equity needs to be left in the property depends on the lender and the size of the remortgage. Typically, you need to leave between 5% and 20%. Mortgage advisers can give you those parameters.
How can a mortgage broker help here? Is there anything else we need to know?
It’s always worth talking to a mortgage adviser. There are a number of ways you can trip yourselves up with early repayment charges, etc.
It’s also useful to have somebody to navigate through that and make sure it’s the right course of action for you. We’ll make sure that you’re not incurring any unnecessary charges.
Key Takeaways:
- Remortgaging to release equity is possible, even before a current mortgage product comes to an end.
- The most popular reasons for releasing equity are home improvement and debt consolidation.
- The process involves either moving the entire mortgage to a new lender or taking additional borrowing with your existing lender, with the lender assessing affordability.
- Staying with your current lender is the quickest option (which can take under 10 days), while switching to a new lender can take around six weeks due to the legal process.
- The amount of equity you can release is limited by your affordability and the property’s value, as lenders typically require between 5% and 20% equity to remain.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.