HOW CAN I RELEASE MOENY FROM MY HOUSE | 2024

 

How can I release money from my house?

This article looks at what options you have to release money from your house. These include a remortgage or equity release.

What is a remortgage?

remortgage deal is a form of refinancing, the difference being that you don’t change your current lender.

So rather than going to a new lender and risking having to re-do all your credit checks again, you simply take out a loan from your existing mortgage provider.

Topics that you will find covered on this page

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Remortgaging to release equity and cash from your home

Remortgaging to release equity means that you borrow money and use your house as collateral. 

Getting a remortgage deal means that you will be able to release some of the equity from your existing mortgage, allowing you to free up cash – which can then be used for whatever you like.

Remortgaging has a number of benefits. If you can get a good deal, you will be able to release a lot of equity from the property that is currently tied up in your mortgage. Remortgage deals tend to have fixed rates, meaning that your monthly repayments don’t change over time – which can also help with budgeting and planning for bigger expenses later on.

If you’re thinking about remortgaging, it’s important to work out how much equity you have. This calculation is very simple

Equity = House value – Mortgage balance

For example: Your house was valued at £200,000 and the outstanding amount on your mortgage is £140,000 this means that £60,000 (200,000-140,000) is the equity loan value.

Now that you have worked out how much home equity you have, it’s time to do some research into remortgage deals on offer. The best place to start is with a simple search of your postcode and home value on a mortgage website such as Money Saving Expert.

There are many different offers from different lenders all competing for your business so make sure you shop around before committing to anything.

You can use an equity release calculator to work out how much you could potentially release.

If you go for a repayment mortgage then a mortgage calculator will let you know what your monthly repayments would be. Remember the higher the ‘house deposit’ the lower the repayment.

How do I remortgage to release equity in my property?

The quickest way to remortgage your property to release equity is to speak to a mortgage adviser or ideally to a specialist equity release adviser.

They will run a no-obligation financial assessment on you and your property, then they’ll present some quotes from the various lenders that may be able to help. They may also be able to identify the best mortgage lender for your circumstances.

It’s important that if you do choose to remortgage, the new deal is set up correctly so you don’t end up paying interest on interest or lose any of your tax benefits – which is why it’s best to get an adviser involved who has experience dealing with equity release.

There are several reasons why someone might wish to remortgage in order to release their house equity:

  • To consolidate debts
  • buy a bigger property fund home improvements – which will increase the value of your home when you come to sell it;
  • To provide additional income in retirement;
  • To pay for care costs in old age.

This is where it gets complicated because there are no one-size-fits-all answers here. Your best option is to speak to an equity release adviser so that they can determine what the most suitable solution would be for your specific circumstances

What is equity release and how does it work?

Equity release is a way of borrowing money that doesn’t involve getting another loan or remortgaging your house.

Typically you would need to be over 55 years old. Most companies will do equity release deals for those aged between 55 and 65 years old, and sometimes older, especially if you have no dependents.

Additionally, most equity release companies won’t lend on properties valued at £130k or less, although this does change between equity release lenders.

The idea behind equity release schemes is that by releasing equity from existing homes, it can help older people with retirement planning, by giving them access to a lump sum cash amount they have accrued, but cannot necessarily use due to factors such as ill-health or limited mobility

If you want to unlock the value of your home using this method, then what happens is that the equity you have in your home is converted into a regular income. This money comes out of your estate after you pass away, therefore it means that while you are alive this cash doesn’t exist – so it’s seen as an investment.

This financial product works very differently from other forms of borrowing because when you die your outstanding equity will be paid back to your solicitor, minus any fees and charges that have been agreed upon.

The amount of cash that has been removed from your house via equity release schemes would then go towards paying for funeral costs or debts that may have accrued previously.

Once these costs are met the remaining funds can be passed on to family members – either in full or part depending on what was left by the deceased person.

If you do decide to go down the equity release route, then you will find that all the main providers are regulated by the Financial Conduct Authority and abide by the rules set out by the Equity Release Council.

The latest equity release interest rates as at 1 February 2024

The table below shows you the latest rates, as at 1 February 2024, for lifetime mortgages from some of the leading equity release providers in the UK.

ProductProviderInterest RateIncentives
5.26%
5.31%
5.46%
5.58%
5.60%
5.60%
5.61%
5.61%
5.63%
5.65%

How can I release money from my house?

There are a few ways in which you can release funds from your home, the two main methods being equity release and remortgaging.

Equity release is a way of borrowing money that doesn’t involve getting another loan or remortgaging your house. A lump sum of money is released from the value of your property, which can be used in whatever way you see fit.

Remortgaging has a number of benefits. If you can get a good deal, you will be able to release a lot of equity from the property that is currently tied up in your mortgage. 

Remortgage deals often tend to have fixed rates, meaning that your monthly repayments don’t change over time – which can also help with budgeting and planning for bigger expenses later on.

 

"A remortgage deal is a form of refinancing, the difference being that you don't change your current lender.''

2. Home reversion plan – for those aged 65+

home reversion plan is an equity release plan that involves the sale of the home, with the buyer taking over responsibility for making all future mortgage repayments. 

At a later date (normally after about 96 years) it will revert back to your estate and you will no longer be responsible for any repayments.

Home reversion plans can provide regular cash flow – which you cannot get from other forms of equity release such as enhanced lifetime mortgages ratesand home income plans. 

This is because you sell some equity in return for money now, then at a later date when the property has been sold on you receive more than originally invested once again. However, this does come with an element of risk.

The main disadvantage of using a home reversion plan is that if interest rates rise – or you have a lot of inflation – the purchaser may not be able to afford the repayments, and so to cover their costs they will sell up. If this does happen your estate could receive less money than expected.

how to release equity from your home

1. Lifetime mortgage – for those aged 55+

lifetime mortgageis the reverse of a home reversion plan – with the homeowner keeping ownership of their house and receiving regular cash payments throughout their lifetime in exchange for some equity and/or savings.

The drawback is that when they die, their estate will not receive any money back from the loan company.

This is because you will still own your home until death – which means it remains on the lender’s books.

It is also worth remembering that equity release is useful for inheritance tax planning because the property in which you live is exempt from inheritance tax. Of course, when you die the value of this property will be used to pay any outstanding taxes due on your estate before the remainder can be passed on to your beneficiaries.

A no negative equity guarantee

A no negative equity guarantee means that the home owner cannot owe any more than the value of their property, or if preferred – they can pay less than the value of their property. This means that even if the house has to be sold for less than it was valued at during an equity release plan, then the homeowner won’t have to pay back any shortfall.

This type of guarantee usually only applies to deals where money is released via drawdown lifetime mortgages or home reversion plans.

An Interest rate cap

An interest rate cap effectively sets a maximum interest rate on your loan so you know exactly how much you will need to repay each month based on the amount you wish to borrow and your overall strategy (such as buying a new car, paying off other debts etc). The lower end tends to be around 3% above the bank of England base rate, but this can go as high as 5-6%.

In some cases, fees will also be capped at a maximum level. This is normally to protect your interests and ensure you are aware of all the charges that may arise from using equity release.

The advantage of having an interest rate cap is that you can budget accurately for future repayments – which means if they do go up you will know about it ahead of time and have time to plan accordingly. It also means that your monthly payments should stay fairly stable over time – however, there is no guarantee here.

releasing equity from home

What are the reasons for remortgaging to release equity?

Home improvements

The main reasons for remortgaging to release equity are to provide short-term financial help, to fund home improvements, which will add value to your home when you sell it, or to access finance for retirement planning purposes or paying for your care costs.

Retirement planning

You can use equity release to provide a retirement plan for yourself and your partner. It sounds like a frightening prospect, but actually, you will be able to take care of each other financially – as well as getting the freedom to spend more time together during your later years.

Paying for care

If you do require long-term care provision, you can use an equity release product that doesn’t trigger any tax charges. This means that it will not affect or reduce any benefits received from the state or local authority funds so it won’t cost you anything extra in terms of fees or interest rates.

With a lifetime mortgage for pensioners, someone aged 55+ borrows a lump sum by selling their property and then continues to own it until death – at which point they no longer have to repay the loan.

This is an example of an equity release product that doesn’t trigger any tax charges.

Frequently Asked Questions

What is a remortgage?

A remortgage deal is a form of refinancing, the difference being that you don’t change your current lender.

So rather than going to a new lender and risking having to re-do all your credit checks again, you simply take out a loan from your existing mortgage provider.

How do I remortgage to release equity in my property?

The quickest way to remortgage your property to release equity is to speak to a mortgage adviser or ideally to a specialist equity release adviser.

What is equity release and how does it work?

Equity release is a way of borrowing money that doesn’t involve getting another loan or remortgaging your house.

How can I release money from my house?

There are a few ways in which you can release funds from your home, the two main methods being equity release and remortgaging.

Equity release is a way of borrowing money that doesn’t involve getting another loan or remortgaging your house. A lump sum of money is released from the value of your property, which can be used in whatever way you see fit.

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Disclaimer: Please be aware that this site is no longer under active management. As a result, we cannot assure the accuracy or relevance of the content provided. Visitors should use their discretion and consider the potential for outdated or inaccurate information before relying on any material found here.