Remortgaging To Release Equity

by | Thursday 9th Nov 2023 | Mortgage Insights

Remortgaging To Release Equity: A Comprehensive Guide

Release equity? What on Earth is that? Most people are taught about getting a mortgage to buy a property. A straightforward loan that you pay back per month to the bank until you clear the balance. But what if you want to take some money out of the house? Money that you have invested and equity that you have built up with your years of diligent payments. If you’re a homeowner, you may have heard about the potential to release equity from your property through remortgaging.

Releasing Equity When Remortgaging

This strategy can be a valuable tool for accessing the money tied up in your home, especially when your property’s value has increased over time. You may want to consider remortgaging to release cash. Remortgaging to release equity to buy another property is also something that a lot of savvy investors are looking into. In this blog post, we’ll use our expert mortgage knowledge to explore the potential benefits of remortgaging to release equity, exploring what it means, how it works, and why you might consider it. We’ll also discuss whether there are alternative methods for releasing equity without remortgaging.

What is Equity Release through Remortgaging?

Before we get into the nitty-gritty details of equity release, let’s start with the basics. Equity is the portion of your property that you truly own, which is the difference between your home’s current market value and the remaining mortgage balance. For example, if your property is valued at £700,000 and you have a £450,000 mortgage, your equity is the difference between £450,000 and £700,000. That would be £250,000. You own £250,000 of the £700,000 value of your property. When the value of your home increases, your equity also grows. Equity release, in the context of remortgaging, means unlocking some of this equity to use for various financial purposes.

When Should You Consider Remortgaging to Release Equity?

Could remortgaging to release equity be right for you

Could remortgaging to release equity be right for you?

There is a lot of discussion in the mortgage and property market at the moment about whether releasing equity from a property, especially in a tough economic climate, is a smart move. In our opinion, there are several scenarios where remortgaging to release equity might be a sensible financial move:

  1. Increased Property Value: If your property’s value has appreciated significantly since you initially purchased it, remortgaging can allow you to tap into the newfound equity. For example, if you bought a property 10 years ago, chances are that demand for property has increased and so has the value.
  2. Home Improvements: Sometimes when home improvements are needed, it can be difficult to get the money together. Especially when money is already tight. Releasing equity from a property can help fund renovations or upgrades to your home, increasing its value further. This is particularly good if you are remortgaging when house value has increased.
  3. Purchasing Another Property: Some fortunate homeowners can release equity from their current property to use as a deposit to fund the purchase of an additional home, like a holiday home or a buy-to-let investment. When remortgaging a buy to let to release equity, some people will even have enough cash to purchase another property outright. Expanding their portfolio even further. Again, if you are remortgaging when house value has increased, this could work very well.
  4. Retirement Planning: Equity release can be a great way of providing a source of income for your retirement years if your pension provisions are not quite high enough, or you don’t have any other means of income after you retire.
  5. Children’s Education: You can use the released equity to support your children’s educational expenses. It’s no secret that putting your children through nursery and school can be very expensive. By releasing some equity from your property, you can potentially use this towards forwarding their education.

While remortgaging can be a powerful financial tool, it’s essential to approach it with careful consideration and the guidance of a qualified professional mortgage advisor like us at Oportfolio and the financial partners that we work with.

Can You Release Equity Without Remortgaging?

You might be wondering ‘Can I release equity without remortgaging?’. There are alternatives, and we’ll briefly discuss a few of them:

  • Home Equity Loan: This is a separate loan that uses your home’s equity as collateral. It doesn’t replace your existing mortgage and is a viable option if you want to keep your current mortgage terms.
  • Sell and Downsize: If you’re willing to move to a smaller or less expensive property, selling your current home can release equity without the need for remortgaging.
  • Shared Ownership: This involves selling a portion of your property to release equity, while continuing to live in your home. Keep in mind that this is a less common approach.
  • Lifetime Mortgage: More suitable for retirees, a lifetime mortgage allows you to access equity without making monthly repayments, with interest accumulating over time.
  • Equity Release Schemes: These schemes are designed specifically for retirees and can provide a lump sum or regular income based on your property’s value.

It’s crucial to consult with a financial advisor before pursuing any of these options to ensure you make the right choice for your specific circumstances.

How Does Remortgaging Work to Release Equity?

Now, let’s dive into the mechanics of remortgaging to release equity. Here’s how the process typically works when you release equity through a mortgage broker:

  1. Property Valuation: The first step is to get your property valued. This determines the current market value of your home, which is essential for calculating how much equity you can release. By knowing how much your property is worth from a professional valuer, you can determine exactly how much equity you might be entitled to.
  2. Consult a Mortgage Advisor: To make informed decisions, it’s wise to consult with a qualified mortgage advisor. They will assess your financial situation, your mortgage terms, and your reasons for releasing equity. They will also be able to help you to determine how much equity you can actually release based on the property valuation and mortgage outstanding.
  3. Mortgage Application: Based on your advisor’s recommendations, you’ll apply for a new mortgage. The application will be subject to approval, just like your initial mortgage application.
  4. Legal Process: The remortgaging process involves legal documentation. A solicitor will handle the necessary paperwork to transfer the new mortgage, and this may include additional fees.
  5. Releasing the Equity: Once the new mortgage is in place, the lender will release the agreed-upon amount of equity to you. This can be paid as a lump sum or in instalments.
  6. Revised Mortgage Terms: Keep in mind that your new mortgage terms will differ from your previous mortgage, and you’ll be paying off the increased balance over a longer period.
  7. Repayment: You’ll need to make monthly repayments on the new, larger mortgage, which will include the additional amount you released as equity. So, if you have borrowed more and/or taken a longer mortgage term your monthly payments will go up.

Remortgaging a Buy-to-Let to Release Equity

Over 50% of landlords increased rent

Over 50% of landlords increased rent (Source:

If you own a buy-to-let property, you can also explore the option of remortgaging to release equity. The process is similar to remortgaging a residential property, but there are some specific considerations:

  • Rental Income: Lenders may assess the rental income from your buy-to-let property to determine how much equity you can release. All buy-to-let mortgages are essentially assessed on the property’s ability to make money. If your rent is too low to sustain the mortgage and also make a profit, this will impact the ability to release equity.
  • Loan-to-Value Ratio: The loan-to-value ratio (LTV) is an important factor. Lenders often have specific LTV limits for buy-to-let properties. To regulate who owns and lets out property and reduce risk, lenders will normally ask for around a maximum 75% mortgage, with other needing less.
  • Tax Implications: Before proceeding, consider any tax implications, including capital gains tax and income tax on rental income. You must discuss all things like this with your solicitor to avoid any nasty fees and fines that could come your way further down the line.

Releasing equity from a buy-to-let property can be a strategic move to expand your property portfolio or invest in other opportunities, but it should always be treated with caution, and you should always consult with a qualified mortgage advisor, and a solicitor before attempting remortgaging to release money.

How to Release Equity When Remortgaging: Step-by-Step

Oportfolio’s team of mortgage experts

So how does remortgaging to release equity work? To help you understand the process better, here’s a step-by-step guide on how to release equity when remortgaging:

Step 1: Property Valuation

As mentioned earlier, the first step is to have your property valued by a professional appraiser. The valuation will determine the current market value of your property. If you are releasing equity by remortgaging, it is essential to know the value of your property.

Step 2: Seek Professional Advice

Consult a mortgage advisor to discuss your financial goals and options for equity release. They will provide guidance on the best course of action and recommend suitable mortgage products. You should also start speaking to solicitors to handle the legal side of things. Both will charge a fee for their services, just to set expectations. Fees differ from broker to broker and solicitor to solicitor.

Step 3: Mortgage Application

Based on your advisor’s recommendations, complete the mortgage application. This process involves providing financial documentation and undergoing a credit check. Normally your mortgage advisor will do all the paperwork and submitting of the application for you, but you will need to help by providing all documents that are needed in a timely manner.

Step 4: Legal Process

A solicitor will handle the legal aspects of the remortgage, including transferring the new mortgage and any required documentation. If you don’t have a solicitor lined up, your mortgage advisor can often recommend a solicitor to you.

Step 5: Release Equity

Once the new mortgage is approved, the lender will release the agreed-upon equity to you, according to the terms discussed during the application process. You can then use this money however you see fit.

Step 6: New Mortgage Terms

Be prepared for revised mortgage terms, including a longer repayment period and potentially different interest rates. As interest rates are particularly high in the UK right now, chances are that your payments will go up. Your mortgage advisor will have already discussed this with you and helped you choose the most competitive and sensible rate and product for your circumstances.

Step 7: Repayment

You’ll make monthly repayments on the new mortgage, including the additional amount released as equity. Remortgaging to release capital will definitely change how much you pay per month on your mortgage.

Remortgaging to Release Equity UK

The process of remortgaging a house to release equity is similar in the UK as it is in other parts of the world. However, it’s important to be aware of any country-specific regulations and tax implications that may apply. Most mortgage lenders in the UK will need you to be earning money in the UK and paying UK tax. Some lenders will accept income earned in other countries or paid in income other than pound sterling. If this applies to you, you should make your mortgage advisor aware of this before anything else proceeds, as they will need to factor this into their research and recommendations.

Remortgaging and Releasing Equity

Remortgaging and releasing equity can be a powerful financial strategy, but it should be approached with caution and professional guidance. Before proceeding, consider your financial goals, the costs involved, and the potential risks. Consulting with a qualified mortgage advisor can help you make an informed decision about whether remortgaging to release equity is the right move for you. Remember to explore alternative options as well and choose the one that best aligns with your financial objectives and long-term plans.

In the end, when it comes to remortgaging equity release is a very valuable tool but something that needs a lot of careful consideration. Whether you’re looking to make home improvements, invest in additional properties, or simply boost your retirement income, remortgaging to release equity could be the solution to help you achieve your financial goals. If you are thinking of remortgaging for equity release, call or email our team of mortgage experts at Oportfolio Mortgages today. We are here to help guide you through the process.

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