If you bought your home without a mortgage or if you’ve paid off your mortgage you own your property outright, which is known as owning an ‘unencumbered’ property. This is generally considered to be a financially stable situation to be in, however, it may mean that the majority of your money is tied up in your home. If you wish to access some of your equity, you can apply for an ‘unencumbered remortgage’ to release tax-free cash from your home. Some lenders treat these as a remortgage and others treat them as a new purchase, which can make offers vary greatly between lenders. As impartial mortgage advisors, we have access to thousands of products and we can work out which one is right for you during your FREE consultation. In this guide, we’ll explain why people take out an unencumbered remortgage, whether or not you’re eligible, how much equity you could release, and whether it’s the right choice for your situation.
Why Do People Remortgage a Property if They Own It Outright?
It’s fairly common to remortgage an unencumbered property to release equity as tax-free cash. If you don’t have enough savings to fund certain projects or your desired lifestyle, then remortgaging your fully-owned property may be cheaper than other forms of borrowing. Some of the common reasons homeowners take out an unencumbered remortgage are to buy a second property or holiday home, fund home improvements, make financial gifts to friends or family, or fund holidays and travel. Lenders will usually want to know what you will be using the money for and they can reject your application if they deem your plans to be too risky – for example, you may not be able to release equity to invest in a new business.
Am I eligible for an Unencumbered Remortgage?
You’ll have to own your home outright and pass affordability and credit checks to be eligible for an unencumbered remortgage. You’ll essentially be taking out a new mortgage, so the application process will be very similar. However, as you own 100% of the equity in your home, lenders will generally consider you to be low risk (providing you meet their other criteria) and therefore you should have plenty of good options available to you. To find the perfect deal for your circumstances you should speak to an impartial mortgage broker, as they can search thousands of products to find you a great rate. If you’re unlikely to pass your lender’s affordability or credit checks, or if you’d rather not take on the financial commitment of a new mortgage, you may be eligible to take out an Equity Release plan instead. With Equity Release, you can still release tax-free cash from your home but you won’t have to pay any monthly repayments or interest. Find out more about the differences between an unencumbered remortgage and an Equity Release below.
How Much Equity Can I Release if I Own My Home Outright?
You can generally release up to 80% of the equity in your home, but exactly how much will depend on other criteria, such as your affordability and credit score. How much you’ll be able to borrow and at what rate will vary from lender to lender, which is why it’s important you come and speak to our specialist advisors for free before applying for your unencumbered remortgage.
Should I Remortgage or Take Out Equity Release?
If the youngest homeowner is 55 or over and your UK property is worth at least £70,000 then you should be eligible for Equity Release. With Equity Release, you can release up to 60% of the equity in your home as tax-free cash and you’ll continue to own and live in your property. The benefit of choosing Equity Release over a remortgage is that the interest can roll up into the loan which doesn’t have to be paid back until you die or move into permanent care and your property is sold – meaning you don’t have to worry about monthly repayments or affordability checks. Therefore, this could be a better option for you if you think you’ll be unable to afford the monthly repayments of a standard remortgage, or if you would prefer to spend more of your retirement income on things you love. To find out whether Equity Release could be right for you please visit Michael Usher Equity Release.
The Bottom Line
If you own your home outright, you can remortgage to release equity as tax-free cash to be used for many purposes, such as funding home improvements or buying a second home. Providing you have good credit and you’re able to afford the monthly repayments you should have plenty of deals available to you. Alternatively, you may want to consider other options such as Equity Release, if you are eligible, and our advisors can help you make the right choice based on your situation.
We’ve been helping our local community with unencumbered remortgages and Equity Release for over 30 years! As impartial mortgage brokers, we have access to thousands of great products and we understand the criteria of each lender – meaning we should be able to find you a great deal that suits your needs perfectly. We’ll also guide you through the process and liaise with your lender and solicitor to ensure the process goes smoothly.
Book your FREE consultation with one of our friendly advisors to get going quickly. We have offices in Frimley and Basingstoke, or we can help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
