• Chris Warner

Remortgage – Capital raising for various reasons

One of the most common reasons for wanting to remortgage a property is to release some capital that is currently locked up as equity in your home. This can be for a variety of reasons, I will try to cover some of the most common but ultimately, you can borrow money from your home for any legal purpose (subject to lenders criteria). I will also try to cover off some reasons why you may struggle to find a lender for certain scenarios. Sometimes a remortgage may not be the cheapest option for you as you may be in a long-term fixed rate for example and it may cost you to repay this early, in these scenarios you can still access the cash in your home by using a second charge mortgage. We cover these in more detail in another blog which you can find here.

The most common reason why you may want to raise capital from your home is to complete home improvements. Especially during the pandemic when people spent more time at home, either working or on furlough for example. All those plans that have remained outstanding for years were finally bought forward, either a new kitchen or bathroom, extensions and loft conversions. The list is endless, a big reason in 2020 was for garden improvements and overhauls, as we all spent so much more (enforced) time at home and the weather was amazing!

Another reason you may wish to release capital from your home could be to repay debts and get a handle on your finances. This could be so that you have one monthly outgoing to try to streamline your cashflow. There are drawbacks to doing this so this option should not be taken lightly or without expert advice. If you remortgage to repay unsecured debts, like credit cards or loans for example you will be putting short term debt onto a longer-term mortgage which over the course of the term of the new mortgage will increase the total amount you eventually repay on that debt. (If you are worried about debt or for any impartial advice regarding debt consolidation you can speak to me or I would also recommend the Money Advice Service which you can find here or Citizens Advice here.)

Bank of Mum and Dad sometimes come to the rescue when helping their children or other family members with their own home purchase. A remortgage to raise the deposit for this is also a very common occurrence.

A remortgage to pay off an ex-partner due to divorce or separation or cover legal bills for example is another example of where you may want to or need to release some equity from your home.

Lastly on my list would be to use the money as a deposit for or pay for a new property purchase outright, either to be used as a second or holiday home or a buy to let investment property.

Some of the reasons why lenders may NOT want you to release capital from your home by way of a remortgage can be to purchase stocks or shares (including cryptocurrency) as this is deemed too speculative. Funding a business start-up (unless you can demonstrate previous industry experience). Gambling debt repayment is also not allowed as this does not show prudent money management and lenders have to be seen to be lending responsibly. Repayment of a HMRC tax bill can be another reason why a lender may decline a remortgage application. Lastly, to use for proceeds of crime or as I have been asked for in the past to repay a Proceeds of Crime Act order (POCA).

There are still a number of other reasons why you may need to utilise the equity stored up in your home by way of a remortgage I have only listed the most common. You can always contact us to discuss your requirements in greater detail if it is not listed here.

Please remember, your home may be repossessed if you do not keep up repayments on your mortgage or any loan secured against it.

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