Ever heard of releasing equity? It simply means that you can get access to the cash tied up in your house. For example, if you have a mortgage of £150,000 on a house that’s worth £200,000 you have equity of £50,000. This means that paying for the wedding, renovating the garden, buying that new car and many other opportunities are suddenly available to you.
Releasing equity can happen in 2 circumstances:
- Remortgaging: by remortgaging your home you can release a large sum of money for just a small increase in your monthly mortgage repayments. A broker can help find the best deal for you – getting professional advice is important when you are dealing with something of a financial nature.
- Equity release: other methods can be more complex and longwinded – you can find out more about that here https://www.moneyadviceservice.org.uk/en/articles/equity-release at the Money Advice Service before you take action.
If you decide to go down the remortgage route then don’t forget that mortgage lenders all have different criteria, and it’s this criteria that will affect the decision on the remortgage.
They will take into consideration:
- If you have an unencumbered (mortgage free) property and if so, how long it has been this way. As long as you have a steady income and suit the lenders other conditions, then having an unencumbered property won’t be much of a problem. Some lenders treat unencumbered as a remortgage and others as a new purchase.
- Loan to Value: this is the percentage of your mortgage vs the value of your house. Most don’t let you release equity above 85%. For example, if you have a mortgage of £150,000 on a house that’s worth £200,000 you have equity of £50,000. The percentage in this scenario is 75%. Generally the higher the percentage the less likely a mortgage lender is to release the equity.
- The reason for releasing equity – home improvement, debt consolidation, investment, buy to let deposits etc. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
Once a lender has considered the above it all comes down to their standard criteria for affordability, interest rate selection etc.
This could be a long and arduous process if you go about it yourself. A mortgage broker like Active Brokers will be able to apply and sort through all the lenders in the UK to find you the best deal or manage your application with your current lender. Getting professional advice and assistance is the safe way to make sure that you’re getting the right remortgage and the equity release you need.
Disclosure: this is a featured post.