1 April 2024

I Own My House Outright, Can I Remortgage In 2024

Even if you do not have an existing mortgage, you might find yourself in a situation where you need to get extra capital by remortgaging. There are all sorts of reasons for doing this that you have to weigh up against the merits of having a property with no debts. It is worthwhile to get financial advice before taking this step.

I own my house outright can I remortgage?

You can, and the lender will use similar criteria to any other remortgage application, alongside asking what you intend to do with the money. A home without a mortgage is called an unencumbered property.

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What does owning your home outright mean?

This is where it does not have any charges, loans or restrictions on it. This will apply if you have already paid off your mortgage or bought it with cash at the outset.

What criteria are there for remortgaging?

Lenders will consider your property value, how much you want to borrow and how likely you are to be able to repay the mortgage debt. They will also ask you why you want to get a mortgage on your unencumbered property.

What do lenders look at when put in your mortgage application?

Your credit score, as bad credit illustrates you will not make the mortgage repayments
The type of property you are purchasing, such as if it is new build or non-conventional
Age, as you generally must be over 18 and under 75
How many dependants you have
Debt to income ratio
Your income as compared to your outgoings
The stability of income

If there is a criteria you are regularly not meeting, a mortgage broker can give you financial advice and help you find a specialist lender.

What is meant by remortgage affordability?

This is basically a calculation by lenders as to how likely it is that you will be able to afford a remortgage. They will look at your personal information, credit history and the sum of money you are attempting to access.

How does the type of property impact whether you are eligible for an unencumbered mortgage?

The property type is key to determining whether you are eligible for borrowing money. If the property is a non-standard construction, typically lenders will increase the interest rates or refuse to grant a mortgage, even if it is a house owned outright.

What are common reasons for remortgaging?

Purchasing a buy to let property
Home improvements or refurbishment
To buy a holiday let or second home
Raising capital for personal financial commitments, like a new car or university fees
To pay off any outstanding debts
To help out a family member or support a first time buyer with making a deposit

What reasons will lenders accept for remortgaging a house you own outright?

Lenders are likely to accept reasons like that you want to renovate your current house, or if you want to get a second home. They are unlikely to accept reasons like wanting to invest money into your business or if you want a sum of less than £25,000.

Why would I want to remortgage?

Remortgaging will mean that you get access to a lump sum of money which otherwise is tied up in the equity of your property. Further, the interest rate is likely to be lower than any other loan because it will be secured against your property.

How much can you get from remortgaging an unencumbered property?

Generally, the highest Loan to Value (LTV) you can get is 80%. For example, if the property is worth £100,000, they might release funds of £80,000. Not everyone will get this hight an LTV, and the lender will consider your personal circumstances and what they think the risk is of you not being able to pay the loan back.

"Lenders will consider your property value, how much you want to borrow and how likely you are to be able to repay the mortgage debt. They will also ask you why you want to get a mortgage on your unencumbered property. "

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Is a remortgage deal different from equity release?

Yes, it is. An equity release product relies on home reversion plans and lifetime mortgages. You make monthly repayments for a remortgage, whereas for equity release you are given a lump sum of cash, which is paid back when you die or the house is sold. It is worth being aware that some forms of lifetime mortgage do allow repayments on the interest.

How do you remortgage a property that you own outright?

You can remortgage a property with no mortgage in the same way as you apply for any remortgage. You can do it either through the old lender who granted you the original mortgage, or find a new one. Lots of websites let you compare different mortgage deals, so you can compare which is the most suited to your own circumstances.

What are the steps for remortgaging where you own your house outright?

Find a mortgage broker
Prepare the documents you will need
Check how much you can borrow without impacting your credit score- this will be impacted by your financial circumstances
Get tailored advice from a broker as to which unencumbered mortgages are best for you
The broker can manage the process

Is it difficult to remortgage a property without a mortgage?

It is more likely that you will get a mortgage on a property without a mortgage than with a mortgage. It is less risky for lenders because you have already illustrated you can pay back a loan, and having 100% equity grants a higher level of security than if there is a first mortgage.

Will I get the best mortgage deal if I have an unencumbered property?

It depends on the credit score of the borrower, but hypothetically a remortgage on an unencumbered property is more attractive to lenders so you would get a better deal than someone applying for a second mortgage.

What should you consider before remortgaging?

There are lots of factors to consider before remortgaging and you might want to get professional advice. The factors may include:

Why you want a mortgage- this should make sense financially.
Whether you are willing to take on the added risk- your home is quite secure when you do not have mortgage, but late payments can lead to your home being repossessed.
Whether you are willing to take on a new financial commitment- are you willing to make monthly repayments
Whether you have any debt- it might be a bad idea to remortgage if you have a lot of debt.

What documents are required in a remortgage application?

You need:

Latest P60
The last three months of bank statements
The last three months of payslips
Proof of address
Proof of identity

Can I get a mortgage where the property is in a state of disrepair?

Yes, you can. It is common for investors to cheaply buy a rundown property, and then remortgage the property so they can afford to renovate it to sell it or rent it out. Also, you might buy a property cheaply then get a mortgage so you can improve it.

Why would an investor buy a property outright instead of with a mortgage?

The extent of the disrepair means they would not be able to get a mortgage
They plan on selling the property in under six months
They are buying it in time-sensitive conditions, and they need to quickly exchange contracts, like at an auction

The idea is that the investor will then add value, then remortgage to release cash to fund their next project.

Is it possible to get a residential remortgage on a rundown property?

If it is habitable then this should be quite easy. If it is inhabitable you are likely to struggle, and should consider options like refurbishment and bridging finance. You should get mortgage advice if you are not sure if your house is habitable.

Can you remortgage an unmortgaged property where you are retired?

You can, but you might have less of a choice as to mortgage lenders because they might not understand how you will pay a mortgage out of your pension. In this circumstance, it might be worth considering equity release.

Can you remortgage where you are freelance or self employed?

Many lenders view being freelance or self employed as riskier because they will not know how you will pay if you lose work. Most lenders will have a way for dealing with self employed applicants, but they might charge a higher rate of interest. Further, they might offer a deal with a reduced loan to value ratio.

Can I apply for an unencumbered mortgage when I am on furlough?

You can apply, but the lenders might question your ability to raise capital while on furlough. If your furlough is scheduled to end soom, you will have less options, even if you have a mortgage free property, so you should consider speaking to a mortgage advisor or using a mortgage broker.

Can I remortgage when my mortgage is nearly paid off?

You can get a new mortgage if you are nearing the end of your mortgage contract. The greater the equity you have in the home, the more likely lenders will grant you another mortgage. A mortgage broker can compare the rate of repayments for a new mortgage, and weigh up any early repayment fees or charges.

Is it possible to be offered a buy to let mortgage on an unencumbered property?

If you are getting a property as an investment so you can rent it out, you will be applying for a buy to let mortgage. Generally, this will mean you have to deposit more equity, as lenders will view it as riskier, even if you are mortgage free.

Generally, this type of specialist lenders will want a 25% deposit, and will charge a higher mortgage rate and fees. You will also need to prove the rental income is high enough for you to cover the repayments.

Should you apply for a remortgage yourself?

You can apply yourself or use a qualified mortgage broker. Mortgage brokers will further advance your mortgage application and find the best mortgage deal for you.

If you have no credit issues and have the time and skill to fill out an application to yourself, this is cheaper, but it is worth noting some mortgage lenders only offer remortgage deals through brokers.

Can I remortgage if I have a bad credit history?

If you have adverse credit, it will be hard but not impossible to get equity released. There are adverse credit lenders who specialise in borrowers with a poor credit rating, and you should get mortgage advice to find out if you are eligible to use one of these.

Can I remortgage an inherited unencumbered property?

Inheritance can be challenging, especially where there are unknown restrictions or charges, or there is family dispute. If you inherit a house outright, you might want to remortgage it so you can buy yourself a home to live in, while renting out the property you inherited.

This is called let to buy.

Should I use my current mortgage lender or get a new one for an unencumbered mortgage?

Where you own the property outright, there is no reason for sticking with the existing lender on your original mortgage. You should get financial advice from a mortgage advisor or remortgage broker to find out which lender criteria you fulfill, and what the best deal is for you.

What are the other options?

You could get an unsecured loan, which is a personal loan not secured on your property, They generally have higher rates than a loan secured on a property, but it is easier to get, and might be attractive if you do not have any other debts.

You also can get a secured loan on a property, which is a cheap form of loan, but if you default you might lose your home. You should speak to a mortgage advisor before making this decision.

Why would you consider a secured or unsecured loan instead?

Most mortgage lenders will not release equity of less than £25,000. For smaller purchases, you might prefer to keep the security that comes with owning your property outright by getting a smaller loan rather than a mortgage.

Article author

Katy Davies

I am a keen reader and writer and have been helping to write and produce the legal content for the site since the launch. I studied for a law degree at Manchester University and I use that theoretical experience, as well as my practical experience as a solicitor, to help produce legal content which I hope you find helpful.

Outside of work, I love the snow and am a keen snowboarder. Most winters you will see me trying to get away for long weekends to the slopes in Switzerland or France.

Email – [email protected]

Frequently Asked Questions

What does owning your home outright mean?