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Applying for a Remortgage on an Unencumbered Property

Applying for a Remortgage on an Unencumbered Property

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If you own an unencumbered home, it means that you don't have any debt secured against the property. A residence with no mortgage, loans, or charges registered is not being used as an asset to secure any kind of borrowing.

That could be because:

  • Your mortgage has been paid off.
  • You bought your property for cash.

Many homeowners will look to remortgage at some point, and could be for a variety of reasons:

  • To release equity to buy a second home.
  • To cover the costs of renovations or redecorating.
  • To finance a holiday, car, or wedding.
  • To consolidate debts.
  • To raise cash as a deposit for a new property.

When looking for a remortgage for a debt-free property, there are some essential things to bear in mind when comparing rates and terms.

For any questions not answered in our guide, contact the Revolution Finance team at any time on 0330 304 3040 or drop us a message to info@revolutionbrokers.co.uk.

If I Take out a Mortgage on an Unencumbered Property, is it a Remortgage?

This seems like a minor point, but it is essential as different lenders have specific terms and criteria about how they classify lending, and therefore what sort of terms they can offer.

A remortgage and a purchase mortgage are two different products, with different fees and rates attached.

Remortgages are designed for applicants who already have a mortgage, and want to refinance it.

By definition, this means that the borrowing is an extension of an existing loan, secured against the same asset, in which case criteria will apply such as:

  • Meeting affordability requirements.
  • Maximum lending calculations based on your income.
  • Credit history checks.
  • Analysis of other debts and outgoings.
  • Applying the maximum Loan to Value ratio.

However, a purchase mortgage is different, and when you are securing lending against an unencumbered property, you will still be asked to meet minimum income requirements, or comply with the affordability policy. Still, other conditions are less likely to apply.

Is it Possible to Mortgage a Property I Own in Full?

Yes, if you own an unencumbered property and wish to remortgage, you can take out borrowing. Lenders will want to know:

  • What the remortgage is for - e.g. to purchase a buy-to-let property, to invest in shares, to cover a financial cost or to renovate the home.
  • Your income, used for affordability calculations.
  • Any other debts in place such as loans, mortgages and credit cards.
  • Whether you have any bad credit issues, including bankruptcies, CCJs, IVAs or arrears.

Online calculators can be useful, but only look at the monetary figures, so are not a reliable indicator as to whether a lender would be able to accept your application on eligibility terms.

It is, therefore, crucial to consult with a mortgage expert to ensure you proceed with the right lender.

Using Inherited Property to Raise a Mortgage

Many unencumbered properties are held by owners who have inherited them from a family member.

With limitations that some lenders place on unencumbered properties, it can be complex to take out lending, particularly if you have owned the residence for a short period of fewer than six months.

Specialist lenders have a more flexible approach when it comes to lending policies. If you wish to remortgage an unencumbered inherited property, contact us today on 0330 304 3040.

Can an Unencumbered Property Mortgage be Taken Out to Buy Out a Partner?

When a married couple divorces or a partnership comes to an end, the property can be a complicated issue.

Lots of married couples own a property they have bought together, and therefore, have equal ownership of their home.

There are a few different options in this scenario:

  • Sell the property, and split the proceeds.
  • One partner buys out the other, transferring ownership of the other 50% of the property and now owning all of the equity.

If you own a property and wish to remortgage to buy out an ex-partner, get in touch with the team, and we'll get the ball rolling.

What are the Eligibility Criteria for an Unencumbered Mortgage?

Every lender will look at a range of factors, to decide whether they can offer to lend, such as:

  • The Loan to Value ratio.
  • Your income.
  • The type of mortgage in question.

For most lenders, the maximum LTV is up to around 85% for buy-to-let investments, regardless of whether the applicant is employed or self-employed.

The typical average LTV for a residential home is 90%.

Unencumbered Property Mortgages for Bad Credit Applicants

People with low credit scores or adverse credit history can find it impossible to secure a competitive remortgage in the mainstream sector, with bad credit mortgages being a niche product.

However, you will find a growing number of lenders who have expanded their criteria to incorporate bad credit applicants.

The terms will depend on several factors:

  • When the adverse credit issues occurred - the longer ago, the better.
  • The values involved.
  • How severe the issues were.

If you have bad credit but also a good value of equity in your property, there is a higher chance of approval than applying for a high LTV alongside credit issues.

More severe issues can have more of an impact, in which case an expert broker is vital to finding the right lending - these include:

  • CCJs
  • IVAs
  • Repossession
  • Bankruptcy

The Revolution team works with a vast network of respected lenders who offer flexibility around bad credit, so whatever the scenario it is still possible to secure a mortgage through a specialist broker.

Can I Remortgage an Unencumbered Property to Repay Debts?

You can - many people choose to take out a remortgage as one of the lowest cost ways to refinance debt, reduce their interest costs, and collate smaller debts into one manageable payment.

Remortgages can be purposed for any number of things:

  • Consolidating debts - mortgage interest is usually considerably lower than you would pay on loans, credit cards and short-term debt. Some lenders may cap the maximum LTV they can lend for debt consolidation remortgages.
  • Business debts and taxes - although most mainstream lenders will not extend personal borrowing to cover business debts or tax liabilities, specialist lenders can help. Contact Revolution if you'd like to look at remortgaging options to assist with business finances.

Both of these scenarios are not related to the property itself - as opposed to a renovation project.

This, therefore, reduces the number of lenders who can accept this type of remortgage application, and it is highly advisable to use an experienced broker to ensure you apply to the right mortgage providers.

Can I Remortgage an Unencumbered Property in a Bad State of Repair?

A popular investment strategy is:

  • To purchase a property in a bad state of repair very cheaply.
  • Remortgage to raise finances for renovation works.
  • Resell the property at a higher value, to repay the mortgage and gain a profit.

Another common scenario we see is where clients have inherited a lump sum of capital, and decide to invest that inheritance in a property as a stable, long-term investment.

In some cases, a lender has specific criteria around property development mortgages and may require you to have owned the property for at least six months to a year before they will consider a remortgage application.

However, many niche lenders are experienced in the property investment market and can offer remortgages from the first day of ownership.

If the property is in poor condition, you may find that remortgage approvals are limited depending on the scope of the repair work required. Another factor is whether the property is considered 'habitable' - a property that cannot be lived in needs a different sort of mortgage.

To be deemed habitable, a property must:

  • Be weatherproof - i.e. have a roof and be watertight.
  • Have running water and electricity.
  • Provide at least a basic kitchen.
  • Include a working bathroom, with toilets located inside the property.
  • Be self-contained and considered safe.

Even if you have invested in a dilapidated property that isn't habitable, you can secure short-term bridging finance to carry out repairs. This can be at a higher cost but can be a quick alternative to a mortgage.

Before purchasing a low-value property at auction for cash, if you know it is uninhabitable and therefore will be difficult to mortgage through a high street provider, give the Revolution team a call on 0330 304 3040.

Our team can advise on mortgage options, and how to structure your investment to ensure a profitable redevelopment.

Seeking a Mortgage on an Unencumbered Property?

For more information about any of the topics covered in this guide, contact us at info@revolutionbrokers.co.uk or give us a ring on 0330 304 3040.

Remortgages can be a cost-effective and quick way of raising affordable finance, and seeking expert support from a whole-of-market broker ensures you have access to the best rates and most suitable terms available.

Check out our handy calculators

Our quick mortgage calculators are designed to give you an indication of how much you can borrow and allow you to consider the different mortgage options available to you.

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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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