Investing in new property, pursuing extensive home renovations or expansion or even helping someone out financially, there are many aspects that can make the prospect of releasing the equity you have built up in your estate property appealing. Remortgaging has become quite a popular approach nowadays, being a method used by many homeowners who wish to access the investment made in their current estate asset. Having the opportunity to get some cash in your bank account without actually being forced to sell your house can be an ideal solution in various scenarios.
If the entire topic is rather new to you, you may be wondering what does equity actually mean. Equity is the term used by financial institutions that refers to how much of the property you own outright. Considering the high expense involved when buying a property, resorting to a mortgage plan is usually the case many buyers opt for. Let’s say you have purchased a £150,000 home, and were required to hold a deposit of £15,000 and get the rest through a mortgage – this is usually the case when taking a mortgage at 90% loan-to-value. From this point one, you already own £15,000 in equity, and the amount will continue to increase as time goes by and more of your mortgage is being paid off. There are also cases when property value goes up, and a boost in equity will automatically be provided.
Why release equity in your home?
Remortgage – the method of paying off one mortgage by taking another – is the easiest and most convenient way of releasing equity. Now that you have some basic knowledge of the term equity, you may be wondering why so many homeowners decide to release equity in their home through a remortgage. While there is no exact definite answer here, each situation being unique and each homeowner having their own expectations and demands, there are a few frequently met scenarios that usually determine homeowners to consider a potential remortgage for equity release purposes.
- Pay off debts
Perhaps your current financial situation is affected by other repayments you need to stay on top of monthly, besides your mortgage. Equity release through remortgaging can help you pay off all your debts and remain with a single mortgage payment, which will also be more affordable.
- Your property has increased in value – reduce loan to value ratio
Perhaps the real estate market in your area has benefited from a boom recently, and your property has almost doubled in value. With a reduced loan to value ratio, why not tap into the amount of money you now have the right to thanks to the value increase of the estate? Because later in the future things might once again change, and the market might fluctuate triggering a reduction in value, it’s advantageous to act on this opportunity when you get it.
- Get financial support for your family
Many individuals make the decision to release equity simply for financial support. Being in need of financial assistance for family-related purposes could persuade you to release equity from our property, and remortgaging is the easiest way to do so.
These are usually the answers homeowners give when asked about the factor determining why they want to release equity – you can find out more about remortgaging at mortgagearrangers.co.uk, where there are further examples.
Should you remortgage with your current lender?
Once you weigh in all the pros and cons and decide to choose a remortgage plan, the next big decision you will be making is choosing between your current lender and a different option. Staying with your current lender might mean no legal fees, no credit card checks or affordability assessment, but, beside the apparent convenience involved, the odds are that your lender will only present you with a limited selection of deals, which might not be the most affordable or appealing for your situation. Comparing other lenders with the help of a broker will give you the possibility of finding out if there might be a better deal available for you. Your current lender might not stand at your disposal with the best offer, putting their own interest above yours and possibly taking advantage of your desire to benefit from a speedy and convenient remortgage process. Even the slightest more affordable rate can save you quite a lot of money in the long run, so don’t hesitate to start hunting for a more advantageous alternative.
How to get the best rates
Getting the best rates should be your primary goal when you are remortgaging. Besides releasing equity, and tapping into the cash value of your outright-owned part of the property, you probably want to get better rates on your future mortgage repayments. This is of course a normal expectation and the main factor that has made you analyse different lenders instead of sticking with your initial option. A quick search on the internet shouldn’t be the method used to decide here, considering what an important financial decision remortgaging actually is. Each lender comes with their own independent offer, and they are not obligated to provide you with the most advantageous rates. This means, you should first get a better perspective on your options with the help of a remortgage calculator, and then resort to a third party – a mortgage broker experienced with equity release cases and different lenders. A calculator will go through all the offers available at the moment and collect data on the best rates, and a broker will professionally advise you towards the right direction.
Being able to actually get a hold of some of your equity, without having to sell your property is an exciting prospect. Regardless of the reason that has determined you to look into this possibility in the first place, the benefits ensured are clearly highly appealing. The subject can be a complex one, and there are various aspects you will need to look into and consider, but the information highlighted above should provide you with a general idea on the matter, why releasing equity is beneficial, as well as how to handle things by the book in this department. Your estate property is probably your biggest asset at the moment, so why not enjoy some financial perks before completing your mortgage and without selling?