4 Steps to Releasing Equity by Remortgaging your Home

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If you have paid off a good chunk of your mortgage or the value of your house has gone up, you may have built up a lot of equity in the property. Equity is the share you own of the value of your home.

If you currently own a property and have been wondering ‘How does remortgaging work to release equity?’ then look no further. Here are your next steps to remortgage in order to release equity! 

Step 1: how do I know how much equity I have?

First up, equity is what you own in your home. It's the value of your house that you don't pay any mortgage on. The amount that 'you've paid off' so to speak. This includes the amount of deposit you originally put into the home when you purchased it.

You can work out how much equity you have by subtracting your remaining mortgage debt from the actual value of your home. 

For example, if your home is worth £200,000 and your mortgage is £150,000, your equity is £50,000.

In order to find out the value of your home, you could use tools like Zoopla's postcode valuation. Or you could keep an eye out for any similar properties that have sold recently in your area. 

If you then choose to proceed with equity release or a remortgage, the lender will carry out their own checks with a panel surveyor to confirm how much your property is worth in the present market.

Step 2: Why do I want to release equity from my home?

The second step to remortgaging in order to release equity is to understand why you want to. Not only will the banks want to know, but it's also important that you're making the right decision for your circumstances because it can be expensive (especially if you still in a fixed-term agreement). 

Some examples of the reason you may want to remortgage include:

  • Home improvements, rather than putting it on a credit card or personal loan deal
  • To help a family member financially
  • You may also be considering remortgaging to free up cash to pay off some debts

Step 3: Consider your costs

Look at how much your current mortgage repayments are and your other outgoing expenditures and work out an amount that’s manageable for you each month.

Be aware of any exit fees from your current mortgage; you may find there’s an early repayment charge to move away from your current lender and this amount could be considerable. A quick call to your mortgage lender will give you the answer you need. 

An Early Repayment Charge is generally calculated as a percentage of the outstanding loan and so can be a significant outlay.

For example, a 5% Early Repayment Charge on a £200,000 mortgage works out at a £10,000 penalty charge, which would erode some of the equity you could release by remortgaging.

In addition to the Early Repayment Charge (if applicable), you will often have to pay an exit fee to cover the administration of closing your account. This is much smaller, usually around £100.

There will likely also be other fees to consider. Many mortgages charge a product or arrangement fee just to get the loan, which will typically cost around £1,000 (though some fee-free products are available).

Step 4: Speak to your Mortgage Broker 

If you've weighed up all of the above and you have decided that releasing equity from your mortgage could benefit you, it's time to speak to a mortgage broker (or go to a bank directly if you're confident). 

A Mortgage Broker will be able to scan the entire market of banks and lenders and provide you with your best mortgage options.

Here are the typical steps to remortgaging with a Broker by your side: 

  1. Choose a broker. You should be told explicitly what advice will cost at what stage and how you’ll be expected to pay
  2. Discuss your circumstances with the broker. They’ll recommend a deal.
  3. Check direct-only deals. See if you can beat your broker with deals they can’t access. If you can discuss it with your broker.
  4. Select a mortgage from the broker’s recommendation. The broker should recommend a remortgage deal that meets your requirements.
  5. You (if you go direct) or your broker will make the application to the lender.
  6. Valuation and legal work. This should take up to about two months.
  7. Completion

You can start your journey to remortgage joy online with Mortgage Propeller. Complete your details and select an online FCA-approved mortgage broker in your area, you'll have your equity release remortgage completed in no time.  

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