Remortgage to Capital Raise
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Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
29.10.2024
Written by:
Alison Gibson
Ascot Mortgage Expert
Last Updated:
29.10.2024
How Does It Work?
When you remortgage to raise capital, you essentially replace your current mortgage with a new one, which could be for a larger amount. The additional amount you borrow on top of your existing mortgage is released as a lump sum, which you can use for your financial needs.
Here’s how it typically works:
- Equity Assessment: The lender will assess the current value of your property and the amount of equity you hold. Equity is the difference between your property’s current market value and the outstanding mortgage balance.
- Loan-to-Value Ratio (LTV): The amount you can borrow through a capital raise mortgage depends on the LTV ratio. Lenders usually allow borrowing up to 80-90% of the property’s value, depending on their criteria and your financial situation.
- New Mortgage Deal: Once the lender approves the capital raise, your current mortgage is paid off, and a new mortgage is set up, including the additional amount you wish to borrow.
- Monthly Repayments: Your monthly repayments will be recalculated based on the total amount borrowed and the new interest rate. This could mean higher monthly payments, depending on the size of the capital raised and the terms of your new mortgage.
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Based on a mortgage of £300,000 at 75% LTV and 25 years
| Speak with Us | Interest Rate | Mortgage Type | Monthly Repayment Amount | Total Fees | Max LTV |
|---|---|---|---|---|---|
 | 4.14% | Fixed | £1,219 | £30 | 75% |
| 4.18% | Fixed | £1,216 | £1,025 | 75% |
| 4.18% | Fixed | £1,215 | £999 | 75% |
| 4.20% | Fixed | £1,220 | £1,403 | 75% |
How Much Equity Do I Need to Remortgage as a Means of Raising Capital?
The amount of equity you need to have will depend on how much you wish to borrow. For example, if your property is valued at £300,000 and you have an outstanding mortgage of £150,000, you have £150,000 in equity. If you want to borrow an additional £50,000, your new mortgage would be £200,000, resulting in a 67% LTV ratio. Most lenders prefer an LTV of 80% or less, meaning you need to have a decent amount of equity to be eligible for a capital raising mortgage.
What Can You Use the Money For?
The funds from a remortgage to raise capital can be used for a variety of purposes, including:
- Home Improvements: Many homeowners use the capital to renovate or extend their property, potentially increasing its value.
- Debt Consolidation: You can use the money to pay off high-interest debts, such as credit cards or personal loans, potentially reducing your overall monthly outgoings.
- Investment: Some homeowners use the funds to invest in another property or other financial ventures.
- Large Purchases: The money can be used for significant expenses, such as buying a car, funding education, or even covering wedding costs.
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Benefits of Remortgaging to Raise Capital
- Lower Interest Rates: Mortgage rates are generally lower than the rates on personal loans or credit cards, so remortgaging can be a cost-effective way to borrow money.
- Flexible Use: The capital raised can be used for a wide range of purposes, providing financial flexibility.
- Potential Property Value Increase: If the funds are used for home improvements, you might increase the value of your property, potentially offsetting the cost of the additional borrowing.
Get Prepared by Talking to an Adviser
Before proceeding with a remortgage to raise capital, it’s essential to talk to a mortgage broker Ascot Mortgages. We can help you understand the implications of increasing your mortgage, compare different mortgage deals, and find the best terms for your situation. We can also assist in calculating the impact of the new mortgage on your monthly payments and long-term financial health.
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Ascot Mortgages authorised and regulated by the Financial Conduct Authority and can be found on the FCA register (www.fca.org.uk) under reference 776062. The FCA do not regulate some forms of mortgages. The guidance and advice contained in this website is subject to UK regulatory regime and is therefore restricted to consumers based in the UK. There may be a fee for mortgage advice. The precise amount will depend upon your circumstances but we estimate it will be £599 per mortgage account. Ascot Mortgages Ltd give you the option to pay a non-refundable fee of £1299 payable with the application. If this option is taken, Ascot Mortgages Ltd will refund any procuration fee received by the lender.
Ascot Mortgages Limited is registered in England and Wales and have their registered office at 8 Webster Court, Westbrook, Warrington, WA5 8WD. The company’s registration number is 06764971.
We are a credit broker, not a lender. We work with the whole of the lending market. Typically; we will receive commission that will vary depending on the lender, product, or other permissible factors. The nature any commissions model will be confirmed to you before you proceed.
ICO Registration number is Z1842187
YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY DEBT SECURED ON ITtypically; we will receive commission
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