Remortgaging to borrow more might be a good way to make the most of your property’s increase in value if you need a lump sum of money now and are happy to make regular repayments against it.
You can choose to remortgage to borrow from your property whether you’ve fully or partially repaid your mortgage.
If you’ve fully repaid your mortgage already, and want to remortgage to release some of the equity, you’re in a strong position to do so, but your lender will want to know what you intend to do with the money, for example, whether you want to use it to make home improvements or to consolidate other debts. As you own the whole property, the rates you’ll be offered by lenders will really depend on how much you want to borrow, but they’ll often be more favourable than the rates they would offer someone who has only partially paid their mortgage.
If you’ve partially repaid your mortgage, when you remortgage to release equity you’ll be asking your current lender, or a new one, for more money than you currently owe.
It’s incredibly important to remember however, that this option isn’t just free money that you’ve taken out of your property. When you remortgage to release equity, you’ll essentially create a new mortgage that includes the extra money you’re borrowing. So while you may have a lump of cash now, you’ll be paying interest on this money, your monthly payments will likely go up and you’ll also drive down the amount of equity you own in the process.
If you are remortgaging to borrow more, and you’re already struggling to cover rising living costs, remember that mortgage providers carry out income affordability assessments which might restrict the availability of mortgages on offer and the amount you can borrow. They must also factor in any fall in income you might experience after you retire to check the repayments will still be affordable. Find out more in our guide Mortgages for over 50s: What you need to know.