If you have paid off a good chunk of your mortgage or the value of your house has gone up, you may have built up a lot of equity in the property. Remortgaging to release equity could be a way to accessibility extra cash perhaps for home renovation, repaying short-term debts or helping with your children’s education. If you are considering this, you will need to weigh up such benefits against the longer-terms costs of doing so, and also look to see if there are any better-value alternatives.

N.B. It is not just like equity discharge because the a source away from old age earnings. Find out about old-age guarantee launch.

What is guarantee?

Your own equity is the part of your house that you individual outright. This is the difference in the quantity remaining to pay on your own mortgage and the property’s market price.

Guarantee resembles mortgage-to-worthy of (LTV) ratio, which is the difference in the mortgage left to expend and you may the newest property’s well worth. Particularly, if you buy a house to have ?2 hundred,000 having a good ?150,100 financial and you can good ?50,100 put, the latest LTV was 75 percent as well as your security is actually ?fifty,one hundred thousand (how big is the put).

One another LTV along with your security will always change-over day. Such, in case your house’s value develops to help you ?250,100000 the collateral becomes ?one hundred,000 plus the LTV gets 60 per cent. If you have together with paid back ?ten,one hundred thousand of the that point, the fresh new LTV could well be 56 percent, and so on.

Your lender will use your LTV to discuss rates if you want to remortgage to release equity. A lower LTV (i.e. more equity) generally means better rates for you.