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What Is a Remortgage: Example

How much can I remortgage my house for UK relies on the property valuation. Still, it's also essential to work with an experienced, independent broker to ensure you know when to start the remortgage process and pick the best fixed-term deal at the lowest possible interest rate.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

Almas Uddin2024-07-17
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Remortgaging Examples

Here at Revolution Finance Brokers, we’re often asked when to start the remortgage process, how remortgage works UK depending on your lender, and how to remortgage and release equity – we’ve put together this guide to what is a remortgage, with an example case study, to show how it all works.

What Is Remortgage House Benefits?

If you’re deciding how much can I remortgage my house for UK, you’ll likely have a reason to be considering when to start the remortgage process, for example:

  • How to remortgage and release equity to pay for home improvements, a wedding or other costs.
  • How to remortgage and buy another property increasing the balance borrowed as a deposit.
  • How far in advance can I remortgage before my fixed-term deal ends and my interest rates rise?
  • When to start the remortgage process to consolidate debts or repay other obligations.

These are all viable reasons to remortgage, and we’ll show how the application might work through our what is a remortgage example case studies.

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Most lenders will let you borrow 4.5 times your annual salary so, as long as you have a standard 10% deposit, you should be able to borrow this much.

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Lenders usually cap the amount they lend at 5.5 times your salary, so it’s unlikely you’ll be able to borrow more than this.

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1. What Is Remortgaging UK to Release Equity?

Equity is the amount you own – you can work out your equity by taking the property value and subtracting the balance on your current mortgage. What is remortgaging UK to release equity? If you own a property worth, say, £400,000 and you have a mortgage of £300,000, you could increase your mortgage borrowing by remortgaging to £320,000 – you release £20,000 of equity.

Lenders will accept applications to remortgage and release equity for various reasons. However, because of how remortgage works UK, some lenders might be keener on certain applications than others.

For example, if you’re investigating when to start the remortgage process to improve your property or construct an extension, a lender might offer better interest rates than if you want to release equity to pay for a new car.

That is because, if you’re exploring how remortgage works UK for improvements, the property will be worth more once the work is complete, making the lender’s assurances better – if they have to repossess the house at any time, they will be confident they can recoup the full value of the debt.

What Is a Remortgage Example of Equity Release

  • You bought your property for £300,000 four years ago on a three-year fixed-term deal at 90% LTV.
  • It is now worth £380,000, and you have repaid £30,000 of the original mortgage balance.
  • You need to borrow £20,000 to finance a loft conversion.
  • Your current LTV is 63% – you borrowed £270,000 and have brought that down to £240,000.
  • You can remortgage for £260,000 to release £20,000 of equity, and the remortgage will be at an LTV of 68%, well within the normal maximum of 90%.

Of course, working out how much can I remortgage my house for UK depends on the proportion of the mortgage you have paid back and whether your home has appreciated. However, looking into how to remortgage and release equity is normally simple if your property is worth more than when you first bought it and you have kept up with the mortgage repayments.

2. How to Remortgage to Buy Another Property

How to remortgage to buy another property depends on the equity calculations we looked at above. You can use a remortgage to increase your borrowing, releasing equity as a deposit on a second property purchase.

There may be caveats because what is remortgaging UK for a buy-to-let differs considerably from a residential purchase. Lenders might also apply higher interest rates for second homes, holiday lets or investment properties due to how remortgage works UK.

What Is a Remortgage Example of Financing a Property Purchase

We’ll stick with our above case study and assume you want to purchase a buy-to-let apartment for £180,000 and need a deposit of 25%, or £45,000.

This is another question of how to remortgage and release equity, but it is still possible. You own a home worth £380,000 and have a mortgage of £240,000. A remortgage lender might offer up to 90% of the property value – or £342,000 as a max remortgage.

Therefore, how to remortgage and release equity as a deposit could work, remortgaging to £285,000 and using your £45,000 capital as your deposit.

3. How Far in Advance Can I Remortgage Ahead of a Fixed-Term Deal Ending?

Remortgaging before a mortgage reaches the end of a fixed-term deal is the most common scenario. What is remortgaging UK at the end of a fixed contract? Lenders often set up a fixed rate for two to five years, charging a stable interest rate, and your monthly payments are static.

When the fixed term ends, they switch you to their Standard Variable Rate, a much higher interest cost. When to start the remortgage process is important because changing too early might incur steep early exit penalties.

How far in advance can I remortgage also depends on your contract terms, but it’s often wise to remortgage on the date your fixed-term deal ends.

What Is a Remortgage Example of Remortgaging Before a Fixed-Term Deal Ends

Let’s replicate the case study above and say that our £240,000 mortgage was originally on a three-year fixed rate of 1.4%, but for the last year, you've been paying the SVR, which is 5.4% a month on average.

Interest rates fluctuate, and you can't budge for your mortgage payment because it changes quickly. 

Another lender is offering a remortgage for the £240,000 balance at a fixed three-year term at 4%. Because of how remortgage works UK, you could reduce your monthly payments on the same mortgage value and property from an average of £1,594 a month to £1,409 – and will know the exact amount every month.

How much can I remortgage my house for UK relies on the property valuation. Still, it's also essential to work with an experienced, independent broker to ensure you know when to start the remortgage process and pick the best fixed-term deal at the lowest possible interest rate.

Another lender may offer similar terms but a 3.1% interest rate fixed for two years. That means you'll need to check how much can I remortgage my house for UK 12 months earlier but bring your monthly cost down to £1,297 for the next two years – by which time general interest rates may have fallen.

4. How Much Can I Remortgage My House for UK to Consolidate Debts?

When to start the remortgage process to consolidate debts also depends on whether you're in a fixed-term deal, but assuming you are not, you can save a considerable amount of money if you're struggling to keep up your repayments.

Debt consolidation works much the same way as how to remortgage and release equity, although not all lenders will accept debt consolidation remortgage applications.

What Is a Remortgage Example of Debt Consolidation

Our homeowner has the same mortgage as we first looked at but also has a credit card debt of £15,000. They pay interest of 21.46% and the minimum every month, which adds £393 to their outgoings, on top of their mortgage.

How remortgage works UK is that the homeowner remortgages from £240,000 to £255,000 and clears the credit card balance. Now, they are paying 4% on a fixed term, which means their mortgage increases from £1,409 to £1,497 – an outgoing of £88 for the extra £15,000 of debt instead of £393.

However, there are still 21 years left to run on the mortgage, so although how to remortgage and release equity to repay debts is simple, over the long term, they will pay roughly £22,176 in total against the £15,000 debt.

If they had repaid the debt through the credit card, it would have cost £39,298 in total over 41 years – so in this case, learning how to remortgage and release equity would be highly favourable.

Almas Uddin
Almas Uddin

Founder and Mortgage Advisor

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Frequently Asked
Questions

Remortgaging means you take out a new mortgage with a different lender or a different product with the same lender. This new mortgage repays the old loan, and you effectively move on to a new mortgage contract.

The best time to begin the remortgage process depends on the circumstances. For example, if you are locked into a fixed-term deal, it may be wise to wait until the end of the contract to avoid paying steep early repayment penalties.

Most lenders will retain a remortgage offer for up to six months. Therefore, you can start the remortgage process a few months before the end of your fixed-term deal and implement the remortgage on the day your current agreement ends.

Lenders will normally need to see an up-to-date valuation to verify the market value of your property, particularly if you took out your mortgage some years ago. They often lend up to 90% of the property value as a maximum, so you will need to know what the property is worth now to get a rough idea of how much you can borrow.

Remortgaging to release equity means you increase the amount you are borrowing against the value of your home. Equity is the difference between what you own and what you owe, so if you have a property worth £500,000 and an outstanding mortgage of £250,000, you own equity of 50% or £250,000.

This remortgage option works the same as any other equity release remortgage – you increase the value of your mortgage and use the capital raised as a deposit or even full payment for a subsequent property purchase. However, not all lenders will agree to a remortgage for this reason, particularly if they aren't familiar with buy-to-let property investments.

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The content included in our articles, blogs, web pages and news publications is based on information accurate at the time of writing. Note that policies and criteria can change regularly throughout the UK mortgage lending market, and it remains essential to contact the consultation team to receive up to date guidance. The information included on the Revolution Brokers site is not bespoke to any circumstances or individual application scenarios and therefore is not intended to be used as financial advice. The content we share is designed to be informative and helpful but cannot be relied upon to provide individual advice relevant to your mortgage requirements. All Revolution team members are fully qualified, trained and experienced to provide mortgage advice of an independent nature.

We collaborate with lenders and providers who are regulated, authorised and registered with the Financial Conduct Authority (FCA). Should you require specific mortgage borrowing types, some products such as buy to let mortgages may not be FCA regulated. The Revolution team can provide further information about regulated and unregulated lending as required. Please remember that a mortgage is a debt which is secured against your home or property. Your home can be at risk of repossession if you do not keep up with the repayments or encounter any other difficulties in managing your mortgage borrowing responsibly. This also applies to any remortgage or home loan secured against your property, including equity release products.

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