Remortgaging can do more than replace an existing mortgage with a new deal. If your home is worth more than the amount you still owe, you may be able to take a larger mortgage and receive the difference as cash. In the UK, this is a mainstream way to access property equity without selling, but the extra money becomes additional borrowing secured against your home.
How much you can release depends on more than the equity figure. A lender will look at the new loan-to-value ratio, your income and spending, credit profile, property value and whether the larger mortgage is affordable.
How remortgaging to release equity works
Equity is the part of your home’s value that is not covered by your mortgage. If your property is worth £350,000 and your outstanding mortgage is £175,000, you have £175,000 of equity before allowing for any other secured borrowing.
Suppose you apply for a new mortgage of £225,000. Around £175,000 would repay the existing mortgage and, subject to fees and completion adjustments, the remaining £50,000 could become home equity cash for your chosen purpose.
This is different from later-life equity release products such as lifetime mortgages. With a standard release equity remortgage, you normally continue making monthly repayments and the lender assesses the new loan under mainstream mortgage criteria.
Why your LTV changes when you release cash
Loan-to-value, or LTV, is the mortgage balance as a percentage of the property’s value. Releasing equity increases the mortgage balance, so it also increases the LTV.
In the example above, £175,000 owed on a £350,000 home is a 50% LTV. Increasing the mortgage to £225,000 raises the LTV to about 64.3%. That matters because lenders commonly use LTV bands when deciding which products and rates are available.
Before applying, estimate your property value conservatively, check your latest mortgage balance and calculate the LTV both before and after the planned borrowing. For more detail, see our guide to mortgage LTV explained.
What lenders may assess
Having enough equity does not guarantee approval. When you ask to borrow more, the lender will normally assess whether the larger loan is affordable and meets its criteria.
Income and household spending
Lenders can consider earnings alongside household bills, childcare, loans, credit cards and other regular commitments. The property may provide security, but the lender still needs to be satisfied that the payments are manageable.
Credit history and existing debts
Your credit record can affect eligibility and pricing. Recent missed payments, high unsecured balances or heavy use of available credit may make an application more difficult. If the aim is to repay unsecured debts, remember that a lower mortgage rate does not automatically mean a lower total cost if the debt is repaid over many more years.
Property valuation
The lender will usually rely on its own valuation rather than your estimate. If the property is valued lower than expected, your proposed borrowing could fall into a higher LTV band or exceed the lender’s limit.
Term and age
A longer mortgage term can reduce monthly payments but may increase the total interest paid. Lenders can also consider your age at the end of the term and, where relevant, expected retirement income.
Check the full cost before switching
A remortgage can involve product or arrangement fees, valuation charges, legal or conveyancing costs and broker fees. Some deals include selected services, while others charge separately.
Also check for an early repayment charge on your current mortgage. Leaving a fixed or discounted deal before its penalty period ends can make switching expensive. Sometimes waiting until the deal is closer to ending is cheaper; in other cases, a different form of additional borrowing mortgage may be worth comparing.
Remortgage, further advance or second charge?
You do not always need to replace your whole mortgage to access equity. A further advance is extra borrowing from your current mortgage lender and may have a different rate from your main mortgage.
A second charge mortgage is a separate secured loan behind the first mortgage. It can be worth investigating if remortgaging would mean giving up a particularly competitive existing rate or paying a large early repayment charge.
Compare the rate, fees, monthly payment, term and total amount repayable for each option. Our guides to further advances on a mortgage and remortgaging costs are useful next steps when comparing the alternatives.
Borrow for the purpose, not the maximum
A practical way to plan a remortgage is to start with the amount you actually need. If a renovation is expected to cost £30,000, borrowing £50,000 simply because the equity is available creates extra secured debt without a clear purpose.
Model the new mortgage at several borrowing levels and compare the resulting LTV and payment. If the money is for improvements, obtain realistic quotes before deciding on the loan amount. It is also sensible to compare a remortgage with savings, an unsecured loan, a further advance or delaying part of the project.
Frequently asked questions
Can I remortgage to release equity during a fixed deal?
Potentially, yes, but your existing mortgage may have an early repayment charge. Compare that cost with the benefit of switching now. A further advance or second charge mortgage may also be worth considering if you want to keep the existing deal.
How much equity can I release?
There is no single percentage that applies to everyone. The amount depends on the property value, mortgage balance, lender’s maximum LTV, affordability assessment, credit profile and other lending criteria. The usable amount can therefore be much lower than your total equity.
Will releasing equity increase my monthly payment?
Borrowing more usually increases the amount that must be repaid, but the exact monthly payment also depends on the interest rate and term. Extending the term may reduce the monthly figure while increasing the overall interest cost.
Is this the same as equity release?
No. A mainstream remortgage with extra borrowing is generally a conventional mortgage with ongoing repayments. Later-life “equity release” commonly refers to products such as lifetime mortgages, which work differently and have specialist rules and advice requirements.
Look at the before-and-after mortgage
Remortgaging to release equity can provide useful cash without selling your home, but the cash becomes debt secured against the property. Compare the mortgage balance, LTV, interest rate, fees, monthly payment, term and total cost before deciding.
If the numbers remain affordable and the purpose justifies long-term secured borrowing, remortgaging can be a practical route. If replacing the existing mortgage is costly, comparing a further advance, second charge or non-mortgage alternative can help you avoid paying more than necessary.
