1. What Is Remortgaging UK to Release Equity?
Equity is the amount you own – you can work out your equity by taking the property value and subtracting the balance on your current mortgage. What is remortgaging UK to release equity? If you own a property worth, say, £400,000 and you have a mortgage of £300,000, you could increase your mortgage borrowing by remortgaging to £320,000 – you release £20,000 of equity.
Lenders will accept applications to remortgage and release equity for various reasons. However, because of how remortgage works UK, some lenders might be keener on certain applications than others.
For example, if you’re investigating when to start the remortgage process to improve your property or construct an extension, a lender might offer better interest rates than if you want to release equity to pay for a new car.
That is because, if you’re exploring how remortgage works UK for improvements, the property will be worth more once the work is complete, making the lender’s assurances better – if they have to repossess the house at any time, they will be confident they can recoup the full value of the debt.
What Is a Remortgage Example of Equity Release
- You bought your property for £300,000 four years ago on a three-year fixed-term deal at 90% LTV.
- It is now worth £380,000, and you have repaid £30,000 of the original mortgage balance.
- You need to borrow £20,000 to finance a loft conversion.
- Your current LTV is 63% – you borrowed £270,000 and have brought that down to £240,000.
- You can remortgage for £260,000 to release £20,000 of equity, and the remortgage will be at an LTV of 68%, well within the normal maximum of 90%.
Of course, working out how much can I remortgage my house for UK depends on the proportion of the mortgage you have paid back and whether your home has appreciated. However, looking into how to remortgage and release equity is normally simple if your property is worth more than when you first bought it and you have kept up with the mortgage repayments.
2. How to Remortgage to Buy Another Property
How to remortgage to buy another property depends on the equity calculations we looked at above. You can use a remortgage to increase your borrowing, releasing equity as a deposit on a second property purchase.
There may be caveats because what is remortgaging UK for a buy-to-let differs considerably from a residential purchase. Lenders might also apply higher interest rates for second homes, holiday lets or investment properties due to how remortgage works UK.
What Is a Remortgage Example of Financing a Property Purchase
We’ll stick with our above case study and assume you want to purchase a buy-to-let apartment for £180,000 and need a deposit of 25%, or £45,000.
This is another question of how to remortgage and release equity, but it is still possible. You own a home worth £380,000 and have a mortgage of £240,000. A remortgage lender might offer up to 90% of the property value – or £342,000 as a max remortgage.
Therefore, how to remortgage and release equity as a deposit could work, remortgaging to £285,000 and using your £45,000 capital as your deposit.
3. How Far in Advance Can I Remortgage Ahead of a Fixed-Term Deal Ending?
Remortgaging before a mortgage reaches the end of a fixed-term deal is the most common scenario. What is remortgaging UK at the end of a fixed contract? Lenders often set up a fixed rate for two to five years, charging a stable interest rate, and your monthly payments are static.
When the fixed term ends, they switch you to their Standard Variable Rate, a much higher interest cost. When to start the remortgage process is important because changing too early might incur steep early exit penalties.
How far in advance can I remortgage also depends on your contract terms, but it’s often wise to remortgage on the date your fixed-term deal ends.
What Is a Remortgage Example of Remortgaging Before a Fixed-Term Deal Ends
Let’s replicate the case study above and say that our £240,000 mortgage was originally on a three-year fixed rate of 1.4%, but for the last year, you've been paying the SVR, which is 5.4% a month on average.
Interest rates fluctuate, and you can't budge for your mortgage payment because it changes quickly.
Another lender is offering a remortgage for the £240,000 balance at a fixed three-year term at 4%. Because of how remortgage works UK, you could reduce your monthly payments on the same mortgage value and property from an average of £1,594 a month to £1,409 – and will know the exact amount every month.
How much can I remortgage my house for UK relies on the property valuation. Still, it's also essential to work with an experienced, independent broker to ensure you know when to start the remortgage process and pick the best fixed-term deal at the lowest possible interest rate.
Another lender may offer similar terms but a 3.1% interest rate fixed for two years. That means you'll need to check how much can I remortgage my house for UK 12 months earlier but bring your monthly cost down to £1,297 for the next two years – by which time general interest rates may have fallen.
4. How Much Can I Remortgage My House for UK to Consolidate Debts?
When to start the remortgage process to consolidate debts also depends on whether you're in a fixed-term deal, but assuming you are not, you can save a considerable amount of money if you're struggling to keep up your repayments.
Debt consolidation works much the same way as how to remortgage and release equity, although not all lenders will accept debt consolidation remortgage applications.
What Is a Remortgage Example of Debt Consolidation
Our homeowner has the same mortgage as we first looked at but also has a credit card debt of £15,000. They pay interest of 21.46% and the minimum every month, which adds £393 to their outgoings, on top of their mortgage.
How remortgage works UK is that the homeowner remortgages from £240,000 to £255,000 and clears the credit card balance. Now, they are paying 4% on a fixed term, which means their mortgage increases from £1,409 to £1,497 – an outgoing of £88 for the extra £15,000 of debt instead of £393.
However, there are still 21 years left to run on the mortgage, so although how to remortgage and release equity to repay debts is simple, over the long term, they will pay roughly £22,176 in total against the £15,000 debt.
If they had repaid the debt through the credit card, it would have cost £39,298 in total over 41 years – so in this case, learning how to remortgage and release equity would be highly favourable.
