Can I remortgage to release equity?

Yes, you can remortgage to release equity. If your home has risen in value since you bought it, or you have paid off a good chunk of your mortgage, you may have built up equity. Remortgaging allows you to borrow against that equity and take out a larger loan, with the difference paid to you as cash.

This is a common reason people remortgage. The money can be used for home improvements, to pay off other debts, or for a range of other purposes. This guide explains how it works, what you can use the money for, and what lenders look for when you apply.

This information is for general guidance only. A capital raising remortgage increases the amount you owe and is secured against your home. Always speak to a qualified mortgage adviser before making a decision.

How does remortgaging to release equity work?

Equity is the difference between what your home is worth and what you still owe on your mortgage. For example, if your home is worth £300,000 and you owe £150,000, you have £150,000 of equity.

When you remortgage to release equity, you take out a new, larger mortgage. The extra amount above what you owe is released to you as cash. You then repay the larger loan over the remaining term of your mortgage.

Most lenders will not let you borrow up to the full value of your home. They will set a maximum loan to value (LTV), often around 80% to 85%. This means you need to leave some equity in the property.

For a broader look at your options, read our guide on how to release equity from your home.

Calculating your available equity

Here’s a simple way to work out how much equity you may be able to release:

This is an illustrative example only. The amount you can release will depend on your lender’s criteria, your income, and the value of your property.

The remortgage process timeline

Remortgaging typically takes between four and eight weeks from application to completion. Here’s a rough guide to what is involved:

• Week 1: Speak to a broker and get an agreement in principle from your new lender.
• Weeks 2 to 3: The lender arranges a valuation of your property.
• Weeks 3 to 5: Your solicitor handles the legal work and checks the title.
• Weeks 5 to 8: Completion. Your old mortgage is paid off, your new mortgage starts, and the equity is released to you.

If you’re coming to the end of a fixed rate deal, it’s worth starting the process two to three months before your current deal ends to avoid moving onto your lender’s standard variable rate.

Why you might consider remortgaging to raise capital

There are many reasons people choose to release equity from their home. The most common ones are covered below. Lenders will ask what you plan to use the money for, and some may have restrictions on certain uses.

Funding home renovations and improvements

This is one of the most straightforward uses, and lenders are generally comfortable with it. Using equity to fund an extension, a loft conversion, or a kitchen renovation is common. It may also add value to your home, which may improve your equity position in the long run.

It’s worth getting quotes before you apply so you know exactly how much you need to borrow, and factor in a contingency budget for the work. Borrowing more than you need increases your mortgage and your monthly repayments.

Debt consolidation and financial restructuring

Some people remortgage to pay off other debts, such as credit cards, personal loans, or car finance. Because a mortgage rate is usually lower than the rate on unsecured debt, this can reduce your monthly outgoings.

However, this needs careful thought. You’re moving unsecured debt onto a loan that is secured against your home. If you cannot keep up with repayments, your home is at risk. You’re also likely to pay more interest overall if you spread the debt over a longer mortgage term.

Our guide on whether you can remortgage to pay off debt covers this in more detail, including the risks involved.

Other reasons people release equity include:

• Helping a family member with a deposit
• Funding a large one-off cost, such as a wedding or medical treatment
• Buying another property. Read our guide on whether you can remortgage to buy another property for more information.

Will I qualify for a remortgage?

Whether you qualify depends on your income, your credit history, how much equity you have, and the lender you apply with. Each lender has its own rules. Some are more flexible than others.

The key things lenders check are:

• Affordability. Can you afford the new, larger mortgage based on your income and outgoings?
• Loan to value. Is there enough equity in the property to meet the lender’s LTV limit?
• Credit history. Do you have a record of managing debt responsibly?
• Purpose of the borrowing. What do you plan to do with the money?

Applying with a non-standard credit history

If you’ve had credit issues in the past, such as missed payments, defaults, or a CCJ, a standard lender may turn you away. But this doesn’t mean you have no options.

Specialist lenders like Pepper Money look at your full financial picture. We take into account how long ago any issues occurred and how your situation has improved since. If you have equity in your home and a stable income now, there may still be a route open to you.

The key is to work with a broker who has access to a wide range of lenders, including specialist ones. Applying to the wrong lender and being declined can leave a mark on your credit file, which can make future applications harder.

The role of an accurate property valuation

Your lender will carry out a valuation of your property as part of the remortgage process. This figure is used to work out your LTV and how much equity you have. If the valuation comes in lower than expected, it may reduce the amount you can borrow.

It’s worth having a realistic idea of what your home is worth before you apply. You can get a rough estimate from online tools or by asking a local estate agent. But the lender’s own valuation is what counts.

If your home has risen significantly in value since you bought it, a new valuation could unlock more equity than you might expect.

Ready to explore your options?

Remortgaging to release equity can be a good way to put the value in your home to work. But it’s a big financial decision. The right move depends on your personal situation, your plans for the money, and how the new mortgage fits into your long-term finances.

Whether your situation is straightforward or more complex, find a broker to talk through your options.