If your property has increased in value or you’ve paid down your mortgage, you may have equity you can access. Remortgaging to release equity lets you unlock some of that value as cash, which can be used for home improvements, debt consolidation, or other purposes.
What is Equity?
Equity is the portion of your property you own outright – the difference between its value and your outstanding mortgage.
Example:
- Property value: £300,000
- Mortgage balance: £150,000
- Your equity: £150,000
Your equity increases as you pay off your mortgage and as property values rise.
How Releasing Equity Works
When you remortgage to release equity, you take out a new mortgage for more than your current balance. The difference comes to you as cash.
Example:
- Current mortgage: £150,000
- New mortgage: £200,000
- Cash released: £50,000
Your monthly payments increase because you’re borrowing more. The amount you can release depends on your property value and how much lenders will advance based on your income and circumstances.
What Can You Use It For?
Home improvements – extensions, renovations, upgrades. Lenders view this favourably as it potentially increases property value.
Debt consolidation – replacing high-interest debts with lower mortgage rates. Can reduce monthly outgoings, but you’re securing previously unsecured debt against your home.
Large purchases – cars, weddings, other significant expenses.
Helping family – gifting deposits to children, supporting relatives.
Investment – some use equity to invest elsewhere, though this carries risk.
Business purposes – funding business ventures or purchases.
How Much Can You Release?
Lenders typically allow borrowing up to 75-90% of your property’s value, depending on your circumstances. The maximum depends on:
Property value – a current valuation determines this
Your income – affordability rules still apply
Age – older borrowers may face restrictions
Credit history – affects available products and amounts
Existing mortgage – must be cleared as part of the remortgage
Things to Consider
You’re increasing your debt – monthly payments rise, and you’ll pay interest on the released amount for the mortgage term.
Total interest paid – spreading borrowing over 20-25 years means significant total interest, even at low rates. A £50,000 release could cost £20,000+ in interest over the term.
Debt consolidation risks – converting unsecured debt to secured debt means your home is at risk if you can’t pay. And if you run up new unsecured debt afterwards, you’re worse off than before.
Early repayment charges – if your current mortgage has ERCs, factor these into whether remortgaging makes sense now or later.
Alternative options – further advance from your current lender, secured loan, or unsecured borrowing might suit better depending on circumstances.
The Process
- Check your current deal – when does it end? Are there early repayment charges?
- Get a valuation estimate – online tools give rough figures; a formal valuation comes later
- Assess affordability – can you manage higher payments?
- Compare options – remortgage vs further advance vs other borrowing
- Apply – similar process to your original mortgage
- Completion – new mortgage pays off old one, cash released to you
Is It Right for You?
Releasing equity suits some situations better than others. Good reasons include:
- Home improvements that add value
- Consolidating expensive debt where you’ll genuinely reduce costs
- Necessary large expenses where alternatives are more expensive
Less suitable when:
- You’d struggle with higher payments
- You might run up new debt after consolidating
- Short-term needs that could be met other ways
- Approaching retirement with limited future income
Get Advice
Equity release through remortgaging is a significant decision. We can assess whether it makes sense for your situation, compare your options, and find the right approach.
Contact SJ Financial Solutions to discuss releasing equity from your home.
