Want to learn how to release equity from your home, or decide whether it is the right choice for you? In this article, we’re explaining how to release equity from your home step by step, and will discuss the pro’s and cons.

Equity release is a term that describes a range of financial products that are used to access the equity that’s tied up in your property. There are many reasons to utilise equity release ranging from funding home improvements and paying off debts to helping family members or increasing disposable income. Whatever the reason might be, this guide on how to release equity in your house will guide you through the options and process.

Remortgaging: what does it mean?

Remortgaging is a term that simply means switching to a different mortgage. It could be a new product from your current lender or a mortgage offered by a different lender. When you remortgage, you take out a new home loan to cover the cost of the old one before clearing the balance on the new loan as per the repayment plan.

By remortgaging, it may be possible to unlock a better interest rate as your loan-to-value will be improved as a result of your property’s value increasing. Remortgaging could unlock better-borrowing terms from your perspective by releasing capital and potentially extending the mortgage term to suit your situation.  

What is equity?

In its simplest terms, equity is defined as “the difference between the amount you owe on a mortgage and what the home is worth”. In other words, the property’s current value minus the money you still owe.

If you are several years into your mortgage, you may have built a good amount of equity courtesy of your monthly repayments as well as any increase in the property’s value. If this sounds like you, learning how to release equity on your home could be an effective way to secure a cash injection.

What are the reasons for remortgaging to release equity?

What are the reasons for remortgaging to release equity?

Before completing your research on how to release equity from house assets, you should confirm that it is a suitable solution for your intended purpose. Homeowners remortgage to release equity for several reasons, including but not limited to;

•    Home renovations - this is the most common reason outside of getting better terms.
•    Paying off debts - the average Brit has unsecured debts of over £4,000
•    Providing financial support to loved ones.
•    Starting a business.

It should be noted that equity release for retirement is another option for the over 55s. This is when you take out a loan against the property, which will then be repaid after your death or when you move into a care home. As well as the loan amount, any compounding interest must be repaid.

How do I remortgage to release equity in my property?

When remortgaging to release equity from your home, working closely with a solicitor who understands the legal and financial aspects is vital. TBI Solicitors is the perfect partner to make the process ahead far smoother, 

Nonetheless, familiarising yourself with the process of how to release equity on your house is vital. Here are the typical steps you will face;

•    Contact one of our conveyancing solicitors who can support you through the process.
•    Ask for a redemption statement on your current mortgage to know the true closing balance including fees.
•    Use a mortgage broker to find the type of mortgage you want and analyse the best lenders on the market.
•    Provide documents for eligibility checks - including ID, bank statements, proof of income, address details, and outgoing statements.
•    Get a mortgage in principle to see how much the mortgage lender may be prepared to lend you.
•    Get the property revalued, which will then give you a new loan-to-value ratio.
•    Officially apply for the mortgage and receive the finalised offer.
•    Instruct your solicitor to pay off the old mortgage using the new mortgage funds while also registering the new mortgage with the Land Registry.

The good news is that many of the steps can now be completed online, or by us. Leaving you without the hassle and stress.


Types of equity release

When asking “How can I release equity from my house?”, you must familiarise yourself with the different financial products available. The main options are detailed below:

Lifetime Mortgage

Lifetime mortgages are a popular choice when looking at how to release equity from your home through equity release. It is when you take out a mortgage secured against the property while retaining ownership as stated above. This means you repay it after death, moving to a care home, or selling the property. 

For example, if you borrow £100,000 with a 5% interest rate before dying in 10 years, you will have to repay a total of £164,700.95. It should be noted, though, that it is possible to pay off the interest as you go. This will result in reduced overall interest while keeping the future loan repayment to £100,000.


Home Reversion Plan

Home reversion plans are another option for how to release equity from your property. This is when you sell a part of the property to a home reversion provider but continue to live in the home. You then maintain ownership of the remaining share of the property. When the home is sold, after death or going into long-term care, the sale proceeds as per the percentage shares.

For example, if you sold 50% of a £200,000 property and the property is then sold at a later date for £250,000, you will retain the £125,000. 

Interest-Only Mortgage

This is essentially a lifetime mortgage, with the added condition of paying monthly interest rates as explained above. Ultimately, this reduces overall interest payments. The fact that the balance owed never increases can provide an extra sense of security.

Drawdown Lifetime Mortgage

A drawdown lifetime mortgage is another form of equity release in which you borrow a set amount but do not access it all at once. The lender will give you an initial lump fee while the remainder of the capital borrowed can be released as required. 

The main benefit of this option is that you only pay compound interest on the money you’ve drawn. Any funds kept in reserves will not incur interest. 

Enhanced Lifetime Mortgage

Enhanced lifetime mortgages offer another equity release plan that potentially offers increased tax-free cash releases or lower interest rates depending on your health conditions. So, the fundamentals of the lifetime mortgage are very similar, but the financial outcomes may be vastly different - and better, depending on your situation.

As with similar plans, the loan is paid off when you die or sell the home to move into care.

best way to release equity from your home

What is the best way to release equity from your home?

When considering “How do I release equity from my home?”, it’s vital that you make the right choice. While a lifetime mortgage is the most common equity release for over 55s, it’s vital that you find the right product for your circumstances.

If you are committed to retaining a large inheritance for beneficiaries, though, remortgaging may be a better option. This is particularly true if your current mortgage terms could be improved, your home has increased in value, and your earnings are at a suitable level.

When unsure about which route to take, booking a consultation with a financial advisor is the best solution.


How much equity could I release from my home?

When asking “How do I release equity from my house?”, you must consider whether you can access enough money. Ultimately, this will depend on what type of product is selected and how much money is tied up in the home.

For equity release retirement plans, the rule of thumb is between 20% and 60% of the property (or how much of it you own). For remortgaging, you can technically release as much money as possible without surpassing a lender’s loan-to-value requirements. However, it should be noted that you’ll have to meet other criteria as you would with any mortgage in relation to your earnings. Lenders need to know that you can meet the repayments. 

Considerations before releasing equity

Knowing how to release the equity in your home is one thing, but you should consider the potential drawbacks. 

Firstly, you’ll be in more debt as a result of remortgaging. However, reduced interest rates will soften the blow while cash flow can be supported by reduced monthly payments. 

Whether remortgaging or using equity release, beneficiaries will likely have less inheritance from your will. This is because you will have to repay the equity release loan after death or will have used money from remortgaging for living.

With this in mind, downsizing and using other savings or credit should be analysed as possible alternatives.


Is releasing equity the right option for you?

Whether researching how to release equity from property through equity release retirement or remortgaging, the key is to analyse your circumstances. 

You may be a suitable candidate if you;

•    Have built up a healthy amount of equity,
•    Need to access extra cash, 
•    Could reduce monthly payments in remortgaging with low interest rates,
•    Can not secure a better way to secure capital,
•    Wish to remain in your current home.

Before taking any concrete steps, though, you should always speak to a conveyancer about your options.

What are the costs of remortgaging to release equity?

What are the costs of remortgaging to release equity?

When you remortgage, the deeds release fee is only around £250. Arrangement, booking, and surveying fees may add an extra £2,000 to the costs. The most notable charge is an early exit fee, which you will be liable for in a fixed-rate mortgage. It is calculated as a percentage of the remaining balance before you make an early repayment while most lenders reduce that percentage figure with each passing year of the fixed rate agreements.  

Conversely, lifetime mortgage equity release can cost up to £3,000 on average for fees. This covers arrangement, survey and valuation, and legal fees as well as advice and completion fees.

What are the risks of remortgaging to release equity?

The big question is “Can you lose your house with equity release?”, and the answer is technically yes. Or at least you can when remortgaging as failure to keep up with payments may lead to repossession. This doesn’t happen with equity release for retirement as the loan is paid off after you die or enter a care home. 

However, the average life expectancy is now around 80. If your loan’s compound interest spirals due to living a long time, you may feel forced to sell to cover the loan and interest without leaving yourself in negative equity.

What are the alternatives to remortgaging if you need cash?

While equity release is the best solution in many situations, it is not a decision that should be taken lightly. Before delving any deeper into how to release equity on your property through remortgaging, you should consider these alternatives;

•    Using an equity release plan for over 55s. 
•    Researching government grants and schemes that may be available.
•    Selling your property to downsize to become mortgage-free.
•    Taking out a personal loan or using a credit card for cash flow issues.
•    Getting an interest-only retirement mortgage.

If none of the above are suitable, you can consider further options or contact an expert on how to release equity from your house with 100% confidence that you’re making the right choice.

Remortgaging to release equity – FAQs

How easy is it to remortgage to release equity?

While it is a complex procedure that involves closing your existing mortgage before taking out another, the process is made fairly simple with an expert conveyancing solicitor on your side. It is the best way to release equity from your home in many situations.

How long does it take to release equity through remortgaging?

When asking “Can I release equity from my home?”, you also need to consider the timeframes. Assuming there are no problems during the process, you can expect to release funds to your account in 4-8 weeks. 

is it a good idea to remortgage to release equity?

Is it a good idea to remortgage to release equity?

Remortgaging can be a good option as you will receive the full cash injection as soon as the application process is finalised. If extending the term of your agreement, you may find that monthly repayments remain the same.

Is it better to remortgage or release equity?

If you are over 55, equity release may be an option too. It means that you will not pay anything back until after the home is sold, but the compounding interest will cost you dearly. This will either take a toll on you if you move into a care home or beneficiaries after death.

Can I rent out my house if I have equity release on it?

Equity release may stop you from renting out the entire property. However, most lenders allow you to rent out a part of the property informally. If you think this might be the best way to release equity, you must first confirm the lender’s situation.

Can I release equity to get a deposit for a buy-to-let property?

Yes, you are allowed to use the equity released from one property to make a deposit on another, including buy-to-let properties. However, this option is only viable when you have a high level of equity tied up on the home.

Can I sell my house if I have equity release?

Absolutely. However, when selling the property in these circumstances, you will be required to clear the outstanding equity release loan, including any compounding interest, before seeing any of the proceeds yourself.

Is it safe to release equity from your home?

Remortgaging and equity release are both safe solutions as long as you select an ERC member. In the case of remortgaging, you must be in a position to satisfy the repayment terms of the new mortgage too.

What are the downsides of releasing equity from your home?

The downsides of releasing equity include reducing the inheritance that your loved ones receive following your death and the fact that you will incur compounding interest until the loan is repaid. When remortgaging, your overall debt increases.

How we can help

When thinking about how to release equity from your home, it should be clear that professional advice is required. After all, it is a huge financial decision that will impact the future of your loved ones as well as your situation. 

TBI solicitors can provide impartial guidance based on your circumstances to find the right product for you. Wether this is equity release, or an alternative to equity release, we’ll put you on the right financial pathway.

To find out more or start the process of releasing equity, get in touch with our friendly experts today.