If you want to release equity from your property, you may be able to do so by remortgaging. One of the main reasons people remortgage is to cut the cost of their mortgage repayments. However, when you switch to a new mortgage, you can release equity by asking your current or new lender to increase your mortgage loan by the amount of equity you’re looking to release.
If you’re looking to renovate your home or are planning to buy a second property, releasing equity by remortgaging could be a feasible option. Read this guide to find out how it works.
What is equity?
Equity is the part of your property that you own outright. If your home is valued at £350,000 and you have £200,000 left of your mortgage to pay, the equity would be £150,000.
The amount of equity you can release will depend on various factors, such as the amount of equity you have, the value of your property, the outstanding payments on your loan and your age.
How does remortgaging to release equity work?
When you release equity from your home, you will ask your new or existing lender to increase your mortgage by the amount of equity you wish to release. For example, say you want to release £20,000 to use for a kitchen extension, you would ask your lender to increase your mortgage by £20,000.
You can sign up to Moveable for free to access our mortgage provider database to find the best lender and term for you. You may need to give your lender information on why you need to release equity, such as a quote for your renovation project.
Can I release equity to buy a second home?
As long as you qualify for a remortgage, and the refinancing of your property will give you the amount needed to buy a second home, you can certainly do this!
In fact, our research found that this is becoming an increasingly popular option in the UK. We discovered that one-in-ten homeowners are looking to remortgage their home to buy a second one, which rises to one-in-five for millennial property owners!
Whether it’s to flip the property to sell off or buy-to-let, remortgaging to release equity is certainly a viable option for homeowners looking to buy a second property.
Are there any drawbacks?
Whilst remortgaging to release equity gives you the flexibility to free up money, it will mean you end up taking on a larger mortgage. This will likely result in higher monthly payments and longer mortgage term, which can be more expensive than taking out a bank loan.
How do I find out what mortgages are available?
When you sign up to Moveable for free here, you’ll be given a personalised guide with everything you need to know about getting a mortgage. We’ll direct you to the best place to find mortgage deals, as well as a breakdown of all the key terms you need to know! Moveable will also help you stay organised, with tips on preparing for your home move.