If you own a property which is worth more than the current mortgage plus any debts secured against it, that amount is known as releasable equity. It is possible to release that equity to free up a lump sum of cash which can be used to pay off existing debts. There are similarities to consolidation loan; you put all your debts together and pay them off leaving you with one smaller monthly payment secured against your property.
There are three main ways to release equity:
- Borrow further from your existing mortgage provider
- Get a new mortgage with a larger borrowed sum
- Keep you current mortgage and obtain a secured loan against the releasable equity in the property
It can be easier to borrow from your existing lender, as they will be familiar with you, and they will look to accommodate the needs as they will not want you to go to another provider. The lender will usually be required to revaluate the property, carry out a credit check and have authorisation from all parties attached to the mortgage to release the equity. When approved, the lump sum will be paid to the borrower and the monthly payment will be increased to cover the loan.
There are many different ways to go about getting a remortgage/secured laon. You can
- Search around yourself for the best deal
- Pay a broker to search for you
- Let Revival put you in touch with the right broker based on your circumstances
What to bear in mind:
In any cases of borrowing against your property you need to think carefully – Your home may be repossessed if you do not keep up with the repayments on your mortgage.
- Make sure you can afford the ‘new’ mortgage payment. Complete a monthly Income and Expenditure form BEFORE taking out any loan, making sure that you budget for rent, utility bills, food and emergencies/increase in living costs. We have all seen the price of living increase dramatically in the last 6-12 months.
- Do not continue to spend on unsecured borrowing like credit cards/loans etc. This will force you back into debt, risking your affordability of your mortgage payments and losing your home.
- The difference between secured and unsecured borrowing is that a secured loan is secured against your house.