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How to release equity from your home

There are many reasons that someone would choose to release equity from their property. It could be to fund home improvements, pay off debts, fund college or university fees, or start a business. You may also be at a stage of life when you want to release equity to fund your retirement.


Source – @sonance

Depending on your current season of life and financial position, there are two main ways people can release some of the equity from their property—namely remortgaging with a new lender or taking out a lifetime mortgage if you are over 55. In this article, we will look at how you can release equity from your home.


When most people look to remortgage their property, it’s usually to lower repayments by switching to a more favourable interest rate. However, some people choose to remortgage in order to release some of the equity from their homes. This is often true of people that have paid off a sizable chunk of their mortgage, or the value of their home has increased. When you remortgage to release equity, you’ll receive a cash lump sum. You can then use this for a variety of reasons. For example, paying off debts or helping any grown-up children get on the property ladder. You could even use it to go on the holiday of a lifetime. What you do with the money released is ultimately your decision.

Lifetime mortgages

For homeowners over 55, another option is to take out a lifetime mortgage. This is secured against your property as long as it remains your primary residence. You can release a tax-free lump sum from your equity or a series of lump sums over a set period. The loan is repayable when you either move into long-term care or die. The loan amount and any accrued interest are paid back by selling the property. Any surplus will be paid to your estate.

Why remortgage my property to release equity?

There are several reasons why you might want to release equity from your home, including:

Home improvements

Rather than moving to a bigger property, you may decide that building an extension is a better solution. You may also wish to renovate the interior but do not have the cash available to do so.

To help your children.

As your children grow up, you may decide to release equity to help fund their education or help them join the property ladder. Giving your children money now can also help reduce inheritance tax bills when you die.

To provide funds for your retirement.

If having a small pension is a concern, remortgaging could help you live a more comfortable retirement life. In addition, lifetime or equity release mortgages is another option for older homeowners.

Pay off short-term debts.

Some homeowners use the money to pay off short-term debts, including loans, credit cards, and overdrafts, to free up the funds they use to repay loans each month, often at a higher interest rate.

To fund a new business venture.

New business start-up loans are not always simple to acquire. There is a lot of paperwork, and you’ll need a water-tight business plan to get approved. However, borrowing money by releasing equity could be a more straightforward way to fund your new venture, often at a lower interest rate than a business loan. Releasing equity to support a business needs careful consideration though if you don’t achieve the success you hoped for, the loan will still need to be repaid.

For leisure

There doesn’t always need to be a sensible reason to release equity. For example, the equity released from your home can also fund a hobby or purchase a new car. You can even use it to pay for the holiday of a lifetime.

How to remortgage to release equity

To remortgage to release equity is a fairly straightforward process. When you approach lenders to remortgage, you request the amount you need to repay your existing mortgage plus the equity you want to release.

For example, if you have a property valued at £250,000 and have a mortgage of £150,000 and you want to release £30,000 of equity, you would need to remortgage for £180,000 instead of the original £150,000. Speak to a financial advisor who can help you find the best deals currently on the market.

How much equity do I have?

The amount of equity available to you will depend on several factors. These include the outstanding term on your mortgage, the value of your property, how much equity you have, and your age. In addition, your credit rating and affordability will be taken into consideration.

There are many online calculators that you can use to work out your equity value. However, we recommend speaking to a mortgage broker to evaluate your options before remortgaging.

Will my mortgage payments change?

Probably. When you increase the amount you own, your repayments will rise unless you extend the term of your mortgage, meaning you’ll pay it off over a longer period. In addition, if you manage to remortgage at a lower interest rate, this can work to your advantage.

The new interest rate you receive will depend on your new deal’s loan to value (LTV). This is the ratio that describes the amount borrowed versus the value of your property. Lower LTV remortgages attract better interest rates.

What are the pros and cons of releasing equity?

You should carefully weigh up the benefits and disadvantages of releasing equity from your home. We’ve summarised some considerations below:

● It’s straightforward to link new borrowing to your mortgage to release equity.
● You can raise cash for almost any reason.

● When you release equity, the size of your mortgage increases.
● There may be more cost-effective ways to borrow.
● Your interest rate may rise as a result of increasing your LTV.
● If you struggle with the increased payments, it could put your home at risk.

If you think releasing the equity in your home is suitable for your circumstances, always speak to a qualified mortgage broker to discuss all the available options and obtain independent advice tailored to your situation.

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Because we play by the book we want to tell you that...

1. We understand equity release isn’t for everyone, and we’ll never say it’s the right option for you, that’s why we pass you onto an Expert.

2. A lifetime mortgage is a loan secured against your property. With a lifetime mortgage there are typically no monthly repayments to make as the loan, plus roll up interest, is repaid when the plan comes to an end. Usually, that’s when you, or the last remaining applicant, either passes away or moves into long-term care.

3. With a lifetime mortgage you’ll still retain full ownership of your home.

4. Equity release will reduce the value of your estate and may affect your entitlement to means tested benefits.

5. Mortgage Advice Bureau Later Life offer lifetime mortgage products from a carefully selected panel of providers.

6. Unless you decide to go ahead, Mortgage Advice Bureau Later Life’s service is completely free of charge as their fixed advice fee of £1,295 would only be payable in completion of a plan.

7. ClearKey is an independent marketing website which only acts as an introducer to companies who offer advice on various financial plans, products and services.

8. Our partners are authorised and regulated by the Financial Conduct Authority.

9. are not authorised to give any advice and we are not liable for any financial advice provided by or obtained through a third party.

10. Life insurance products attract terms and conditions. Price information contained within this website are for illustration purposes only. You will receive a full policy document upon application which will set out the terms, conditions and limitations of cover provided under the plan.

11. Your home may be at risk if you do not keep up repayments. Think carefully about securing debt against your home. When consolidating existing borrowing be aware that extending the term could increase the amount repaid.