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Author: Carl Shave-Director
Updated on January 30th, 2024

Remortgage to Release Equity

If you own your own home and have been steadily paying off your mortgage loan over a number of years, then a certain amount of equity will have built up in your property. It might also have gained in value through a natural increase in house prices since you originally bought it.

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There might come a time when you need to raise a significant amount of money for whatever reason – perhaps you want to make home improvements, inject cash into a new business, fund a son or daughter through college, buy a second property or consolidate your debts into one efficient monthly payment. Remortgaging your property to release the equity stored in your house can be an effective way to obtain the cash to make your plans happen.

However, before committing to a remortgage, you must carefully consider all your options, and take time to plan how and when you will do it. The actions you take at this point will affect your financial situation for years to come, and you would be strongly advised to get guidance from an expert professional to ensure you are making the most suitable and effective decisions, at the right time. Read on to find out more

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Remortgage for raising capital

The amount of equity you have in your home is determined by the value of your mortgage less the outstanding balance remaining, so if your original mortgage (the price you paid for your home) was £250,000, and the outstanding balance remaining is £150,000, then the amount of equity in your home is £100,000. This amount will only increase over time as you continue with monthly repayments on the loan.

Mortgage companies or lenders may also include the increase in the market value of your property since you bought it (as determined during a professional valuation) in the equity in your home. But be aware that house prices can fall as well as rise, so you will not always be able to count on this, and that you will also never be able to borrow the entire value of your property.

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Remortgaging your property can unlock the equity accumulated within it, delivering a sizable lump sum for you to use for whatever purpose you require. However, you should remember that almost all lenders will need a certain amount of equity to remain in the property (in the same way as needing a deposit on a mortgage), and some may only be willing to lend funds for specific reasons, as defined in their individual criteria.

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When do I Remortgage?

From a purely practical point of view, the best time to remortgage is when the introductory term on your current mortgage comes to an end. However, if you are outside of this anyway, you may not be surprised to learn that there is no perfect time to arrange a remortgage, and the best time for you to do so will depend on a range of external and personal factors.

You may have been planning to remortgage for years, having built up the equity in your home with a plan in mind for its future use and a strategy in place to manage the new repayments, in which case the timing is of your choosing. Or you may have unfortunately experienced a sudden emergency, or realised that you will need money to make changes to your property or your lifestyle as soon as possible.

Of course one aspect to remember is that remortgaging to release equity can only happen when you have the equity in the property to use – you may need to have been paying off your mortgage for several years in order for enough to accumulate to make a difference, or justify the costs of remortgaging.

With every single case being different, it’s important that you seek advice from an experienced mortgage advisor who has an in-depth knowledge of the mortgages market. At The Mortgage Centres, we have been helping people in all kinds of circumstances to find the best-suited mortgage deal for many years, and have built up a considerable amount of insight and strong relationships.

Read Our Remortgaging Guide

Why should I Remortgage?

There are a number of reasons for wanting to remortgage your home to release equity – both personal and practical.

On a personal level, you may want to raise money for:

  • Home improvements or alterations
  • Starting a new business
  • A son or daughter going to college
  • A second property
  • Getting married
  • Care payments
  • Consolidating debts into one monthly payment
  • A special purchase, such as a car or dream holiday

The list could go on – there are almost limitless reasons why you might need a significant lump sum of money at any given time, all down to your individual circumstances.

On a practical level, remortgaging can be the most cost-efficient method of obtaining the money you need. Personal loans, credit cards and other lines of credit – some designed more for short-term borrowing – typically come with a far higher interest rate than a mortgage. By finding the right deal for a remortgage, you could save yourself a significant amount of money both in the short and long-term future.

If done in the right way, remortgaging can be the perfect solution for your financial needs. It’s important to work with a specialist mortgage broker such as The Mortgage Centres, where we not only have in-depth knowledge of the market but can also access deals not typically available to the public. We will be happy to guide you through every stage of the remortgaging process, making sure you understand your options at all times.

To get more information on how we can help, or to book a free, no-obligation chat with an advisor, feel free to get in touch today.

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