Remortgaging to Release Equity: What You Need to Know
Buying your home is just the beginning. Over time, as you make mortgage repayments and property values rise, you build up equity in your property. For many homeowners, this represents a significant financial asset that can be accessed through a remortgage. At Akers Pritchett, our remortgage advisors regularly help clients who have seen the value of their home increase substantially and want to explore what their options look like.
What Is Equity and How Does It Build Up?
Equity is the difference between your property’s current market value and the outstanding balance on your mortgage. It grows in two ways: as your monthly repayments reduce your outstanding balance, and as the value of your property increases over time. The more equity you have, the more financial flexibility you have when it comes to remortgaging.
How Does Releasing Equity Work?
Releasing equity through a remortgage means borrowing against the value that has accumulated in your property. You remortgage for a larger amount than your current outstanding balance, and the difference is paid to you as a lump sum. This can be done as a standalone exercise or combined with switching to a new rate at the same time. Our advisors will look at the headline rate, any lender fees, the most appropriate mortgage term, and the type of product that best suits your needs before making a recommendation.
What Might the Additional Borrowing Be Used For?
Common reasons homeowners release equity include funding home improvements, consolidating debts, or meeting significant life costs. Home improvements are a particularly common use, as certain improvements may add long-term value to the property. Our advisors will discuss your reasons for borrowing as part of the overall assessment.
Costs and Considerations to Be Aware Of
Releasing equity is not without cost. If you are still within a fixed rate or other incentivised period, you may face an early repayment charge for leaving your current deal early. There will also typically be arrangement fees on any new product, and your monthly repayments are likely to increase because you are borrowing more overall. Lenders will carry out full affordability checks based on your current income and outgoings before approving any additional borrowing, regardless of how much equity is available.
It is also worth considering the impact on your loan-to-value (LTV) ratio. Releasing equity increases your LTV, which may affect the range of rates available to you. Our team will work through the full cost picture honestly before you commit to anything.
How We Can Help
Whether your current deal is coming to an end or you are mid-term and considering whether the numbers stack up, we will give you a clear and straightforward assessment. We serve homeowners across Nottingham, Derby, and Leicester. Get in touch today for a free, no-obligation conversation.
Frequently Asked Questions
Can I remortgage to release equity if I am still within my current deal?
Yes, though you will need to factor in any early repayment charge your current lender may apply. Whether this makes sense depends on how significant that charge is against the benefit of releasing the equity now. Our advisors will calculate the full cost of exiting early so you can make a properly informed decision rather than guessing.
Will releasing equity increase my monthly repayments?
In most cases, yes. Borrowing more means a higher outstanding balance, which will typically result in higher monthly repayments even if you secure a competitive rate. The extent of any increase depends on the amount of additional borrowing, the rate secured, and the remaining term. Our team will give you a clear monthly cost breakdown before you make any decisions.
How much equity can I release?
Lenders will not allow you to borrow up to the full value of the property. The amount available depends on your current LTV, the lender’s maximum LTV policy, and your ability to afford the higher repayments. Our advisors will assess this based on your individual circumstances and give you a realistic picture of what is available to you.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage.