What is Equity Release Through Remortgaging?
When you remortgage to release equity, you're borrowing more than your current mortgage balance, taking the difference as cash. This is different from lifetime mortgages (also called equity release) which are designed for over-55s.
Example: Your home is worth £350,000 and you owe £150,000. You have £200,000 in equity. You could remortgage to £200,000 and take £50,000 as cash, while still having 43% LTV.
Common Reasons for Releasing Equity
People release equity for many reasons, but some purposes are more acceptable to lenders than others.
Common uses for released equity:
- Home improvements and extensions
- Debt consolidation
- Helping children with deposits
- Buying a second property or holiday home
- Large purchases (car, wedding, etc.)
- Business investment
Be cautious about debt consolidation. While it can reduce your monthly payments, you'll be paying interest over a much longer period. Short-term debt becomes long-term debt secured against your home.
How Much Can You Release?
The amount you can release depends on your property value, current mortgage, income, and credit history. Most lenders won't go above 85-90% LTV, and you'll need to pass affordability checks for the higher borrowing.
Costs to Consider
Releasing equity isn't free money - you'll pay interest on the additional borrowing for the life of the mortgage. Make sure you've calculated the total cost before proceeding.
Example: Borrowing an extra £50,000 at 5% over 20 years would cost you around £79,000 in total (£50,000 capital + £29,000 interest). That home improvement needs to be worth it!