With the rise in property value over the past 20 years there are a lot of people that have a large amount of equity in their property. Also if you have more recently gotten a mortgage you will have been making repayments, building equity in your property. The equity you have in your home is a great bit of security for you and your family it can also come in helpful if you want or need to carry out home improvements or have a big life event that needs a lump sum, such as a wedding. Releasing equity in your home can also be very useful for consolidating your debts, clearing the balance of any high interest credit or store cards that you may have.
Remortgaging to release equity is only an option if you have a good amount of equity in your property. Equity is basically how much of your home you own and how much is being secured on a mortgage. For example if your property is valued at £300,000 and you currently owe £200,000 on your mortgage, then you have equity of £100,000. The amount of equity you have will increase the more repayment you make on your mortgage.
To unlock the equity in your home you can remortgage, this will give you a lump sum for whatever you need it for. Some lenders will require you to state the reason for remortgaging as there are certain circumstances where some lenders will not be willing to give you a remortgage. It is also worth noting that most lenders will require you to leave a certain level of equity within your property, this lowers the risk of the additional borrowing for the lender.
When should I remortgage?
When to remortgage will depend on your individual circumstances. If you are planning something for the near future such as a wedding or a large purchase now could be a good time to look at your options. It may be that you are finding your current debt repayments are costing you too much each month. In this situation remortgaging may be able to save you thousands in interest and make your monthly payments a lot more manageable. Each case is different and for professional remortgage advice it’s important to speak with an experience remortgage advisor.
Remortgaging to get a lump sum
There are many situations that require people to need a lump sum. You may be looking to extend your property to add value or make more space for your growing family. You may want to help you children out with getting on the property ladder or go to university or you may be getting married yourself. All of these expensive life events can be made easier by releasing equity in your property. Be advised remortgaging your house to release equity will increase your monthly repayments and you may not be able to get a better rate than your current mortgage which means you will be paying more interest.
Alternatives to remortgaging
There are instances where remortgaging may not be an option but you still need a lump sum. If your current mortgage deal is very low interest you may not want to lose this product and end up paying more interest. You may also be in a worse financial position, bad credit or lower income than when you took out your original mortgage. In these circumstances there are other routes you can take to get a lump.
Second charge mortgages – this financial product is regulated the same way normal mortgage are. Basically a second mortgage is exactly what it sounds like. You will take out a new mortgage on your property. The amount of equity you have will also determine the amount you will be able to borrow. Second charge mortgages tend to have a higher interest rate than first charge mortgages.
Secured loans – A secured loan will allow you to get the lump sum that you need without remortgaging similar to second charge mortgages the amount of equity will have an impact on the amount you will be able to borrow. The secured loan will be secured on your equity within the property. This financial product will also have a higher interest rate than a standard remortgage but is a good option if you don’t want to or can’t remortgage.
We can help
There are several options out there depending on your circumstances. Speak to one of our experienced advisors and once they have the full picture of your circumstances they will be able to give you the best advice on which route to take. Fill in one of our enquiry forms or give us a call on 0191 442 38 44.