How To Remortgage and Release Equity: Secure Financial Freedom in 2023
Remortgaging to release equity from your home can provide a cash boost for your finances. If you're a homeowner over 55 and have being paying off your mortgage for a good few years, you may have built up equity you could remortgage and release cash from. We explore how it works and how to get advice on your options.
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Remortgaging To Release Equity From Your Home
Author Paul Murphy Updated July 2023
As a specialist later life mortgage release broker, Later Life Finance are well positioned to provide a professional overview of how to remortgage and release equity from your house or flat.
Remortgaging with equity release is a powerful financial tool that allows homeowners to access the built-up equity in their property.
By refinancing or taking out a new mortgage, homeowners can release a lump sum or take regular payments based on your and age property’s current market value.
This strategy offers flexibility to raise tax free cash from your home.
However, careful consideration is necessary to balance the benefits and potential drawbacks of remortgaging for equity release; there are lots of options available to consider which we can help you navigate.
We explore how to safely remortgage and release equity from your home.
How Can I Release Equity From My Mortgage?
Releasing the equity in your home as cash via a mortgage can be done through several methods, each with its own advantages and considerations.
Here are some common ways to release equity from your mortgage:
1.Remortgaging with Equity Release
One of the most popular methods is to remortgage your property.
When you remortgage, you take out a new mortgage on your property, usually with a different lender or a new deal with your existing lender.
By doing so, you can borrow additional funds based on the increased value of your property. The difference between the new mortgage amount and your existing mortgage balance is the equity you release.
2. Lifetime Mortgages
If you are a homeowner aged 55 or older, you may consider a lifetime mortgage, which is a type of equity release product.
With a lifetime mortgage, you can borrow against the value of your home while retaining ownership.
The borrowed amount, along with interest, is repaid when the property is sold, typically upon your passing or moving into long-term care.
3. Home Reversion Plan
Another equity release option for older homeowners is a home reversion plan.
In this arrangement, you sell a portion or all of your property to a reversion company while retaining the right to live in the home.
The company will pay you a lump sum or regular payments, and when the property is sold, they receive the agreed-upon share of the proceeds.
4. Second Charge Mortgage:
Also known as a secured loan, a second charge mortgage allows you to borrow additional funds while keeping your existing mortgage in place.
This option can be suitable if you want to avoid remortgaging or if you have a favourable interest rate on your primary mortgage.
Before deciding to release equity from your mortgage, it’s crucial to consider the following:
- Financial Implications: Releasing equity will increase your overall debt, potentially leading to higher monthly repayments or an extended mortgage term.
Ensure that you can comfortably afford the new repayment schedule.
- Interest Rates and Fees: Compare interest rates and fees associated with different equity release options. Be aware of any arrangement fees, valuation costs, and early repayment charges that might apply.
- Impact on Inheritance: Equity release may reduce the value of your estate and the inheritance you leave to your beneficiaries.
Discuss this aspect with your family and seek professional advice.
- Professional Advice: It’s highly recommended to seek advice from an independent financial advisor or mortgage broker who specializes in equity release.
They can help you understand the options available, assess your suitability, and find the most suitable solution for your specific circumstances.
Remember that releasing equity from your mortgage is a significant financial decision, and it’s crucial to make an informed choice that aligns with your long-term goals and financial security.
How Does Remortgaging with Equity Release Work?
Remortgaging with equity release typically involves refinancing the existing mortgage or taking out a new mortgage on the property.
The lender assesses the property’s current market value and the homeowner’s creditworthiness to determine the new mortgage amount.
The amount borrowed is based on a percentage of the property’s value and can be used to release equity.
The equity release process offers flexibility, allowing homeowners to choose between a lump sum payment, regular income, or a combination of both.
The released equity can be used for various purposes, such as home improvements, debt consolidation, funding education, or supplementing retirement income.
It’s essential to carefully consider the implications of remortgaging with equity release, as it may result in higher monthly repayments or an extended mortgage term.
Seeking advice from our expert equity release advisers is crucial to ensure this option aligns with your long-term financial objectives.
Benefits of Releasing Equity through Remortgaging
Remortgaging to release equity offers several benefits for homeowners:
Access to Tax Free Cash: Equity release allows homeowners to access a cash without the need to sell your home. This can be invaluable for funding major expenses such as home improvements or to raise as cash injection.
Flexible Repayment Options: Homeowners can tailor their equity release to suit their financial needs. They can choose between a lump sum or drawdown plan, making regular payments or none at all, providing the freedom to structure the mortgage in a way that best meets their requirements.
Tax Efficiency: The funds released through equity release are generally tax-free, providing a tax-efficient way to access additional capital.
Retain Ownership and Residence: By remortgaging to release equity, homeowners can maintain ownership and continue to live in their beloved home, ensuring stability and peace of mind.
Pros and Cons of Releasing Equity via Remortgage Deals
Unlocking Financial Opportunities: Releasing equity can provide a gateway to investment opportunities, property improvements, or debt reduction, enhancing your overall financial position.
Debt Consolidation: Consolidating debts into one mortgage payment can simplify financial management and may lead to lower interest rates compared to other forms of borrowing.
Enhanced Retirement Income: For retirees, releasing equity can supplement retirement income, enabling a more comfortable and secure retirement.
Long-Term Commitment: Remortgaging may extend the overall mortgage term, resulting in more extended repayment obligations.
Potential Early Repayment Charges: Some mortgage deals may include early repayment charges or exit fees. Homeowners should carefully review the terms of the new mortgage to avoid unexpected costs.
Property Valuation Risks: The value of the property may fluctuate over time, impacting the equity available for release.
It’s crucial to weigh these pros and cons carefully, considering your financial situation and long-term objectives before proceeding with remortgaging for equity release. Professional advice can help you make an informed decision tailored to your specific needs.
End of Article Summary:
In conclusion, remortgaging with equity release provides homeowners with a valuable means of tapping into the wealth accumulated in their property. The ability to access funds without selling the property offers financial flexibility, enabling individuals to pursue important goals and aspirations.
Nevertheless, it’s essential to understand the implications and potential trade-offs associated with this strategy. Seek advice from a qualified financial advisor to assess whether remortgaging for equity release aligns with your long-term objectives.
With careful planning and consideration, homeowners can leverage the power of equity release to secure their financial future and make the most of their property’s potential.
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