What Is Capital Raising? How To Raise Money on Your Home

Important to know

A mortgage is a loan secured against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. You may have to pay an early repayment charge to your existing lender when you remortgage. Think carefully before securing other debts against your home.

A remortgage with capital raise will let you release money from a property that you already own.

For example, if you have a property value £400,000, and a mortgage of £250,000 on it, it means that you have £150,000 equity tied in the property.

You may be able to release some of this equity, so that you can use for a number of purposes.

We are going to talk about the reasons why you may consider capital raising, highlight some of the differences by lenders, and also what are the strategies for how you may capital raise.

Please remember that a mortgage is a loan secured against your home. Your home may be repossessed if you do not maintain repayments on your mortgage or any other load secured against it. You may have to pay an early repayment charge to your existing lender when you remortgage. Think carefully before securing other debts against your home. And it is always a good idea to speak with an experienced mortgage broker who can talk you through the process and understand the options and what they mean for you

Why would you capital raise?

A mortgage lender will typically let you raise capital on your property for a number of legitimate reasons such as: home improvements, debt consolidation, or to buy another property, as well as for other personal or business reasons. The reason has to be legit, and not all lenders will consider all these reasons. Also, bear in mind that some lenders may let you raise more money than others, and that product rates will also vary by lender. Let’s take a look at these purposes in a little more detail.

Home improvements:

Whether you have a big or a small project on your home, such as installing a new kitchen, new flooring, a loft extension, a new bathroom, you may be able to release the equity that you need to pay for these improvements. The alternative to raising money with the mortgage is with a personal loan. Personal loans are typically for 5-7 years. With a mortgage you can spread the amount you borrow over a longer period of time, and generally on a lower rate. Therefore, if you raise money with a remortgage, your monthly payment will typically be lower.

Debt consolidation:

If you have debts on things like credit cards and personal loans, this debt can end up on very expensive rates, especially for credit cards. With a debt consolidation remortgage you can consolidate this more expensive debt onto your mortgage. The mortgage generally has a lower rate than say credit cards. In addition, by spreading the debt on a longer term with a mortgage, you will reduce your monthly debt payment.

And so your aim is to improve your monthly budget and get into a better financial health.

To raise money to buy another property:

With a remortgage you can also raise cash to use as a deposit towards the purchase of an additional property, such as the purchase of a a buy-to-let property or of a second home. Or you may even decide to move, and buy a new home; and put your current property up for rental, instead of selling it.  So a remortgage with capital raise can also be a good way to build your property investment portfolio.

For personal use:

Personal use are things like buying a car; or paying for your children education, or gifting money to a family member or even paying for a dream holiday that you had always put off all these years. However, not every lender will accept this form of capital raise, and eligibility criteria vary.

For business purposes:

Some lenders will let you capital raise on your home in order to get funds for your business, for example if you are self-employed. However, not many lenders will consider this form of capital raise, and as this is a specialist field, you would want to seek guidance from a mortgage broker.

How to raise money with a mortgage:

There are essentially two ways to raise money with a mortgage. A first option is with a full remortgage, and a second option is with a further advance.

If you are coming to the end of your initial mortgage deal, such as the end of your fixed rate, you may consider to remortgage to a new lender.

However, if you are still in your initial mortgage deal, you may want to do a further advance instead, as otherwise you may pay an early redemption charge to leave your current mortgage deal early.

A mortgage broker can advise you on the best course of action, check any exit penalties, and guide you through the options and the rates available across lenders.

How much can you borrow for capital raise and what are the mortgage rates?

The amount that you can borrow will depend predominantly on two things:

1) How much you earn, and so your affordability

2) How much equity you have in your property. Mortgage lenders will typically let you borrow up to 90% of the property value, some may still consider 95% LTV, but criteria and mortgage offering change regularly based on the state of the economy and the property market.

A mortgage broker can point you in the right direction, they will assess your affordability to establish how much you can borrow across different lenders, review the options available with product rates and terms, and advise you on the most suitable course of action.

How can Your Mortgage Experts help?

Your Mortgage Experts have plenty of experience helping people remortgage for capital raise. They know exactly what you’ll need at each stage of the process so that you’re as prepared as possible when you submit your application – thereby increasing your chance of success. Contact us today to speak with an advisor on 020 8154 1111 or drop us a question hello@yourmortgageexperts.co.uk

Luca Bertolino

Mortgage Expert

Your Mortgage Experts is led by Luca Bertolino with 20 years experience in financial services and in the property market. Through Luca’s wealth of knowledge and expertise, Your Mortgage Experts have become a trusted adviser that clients have come to rely upon for all their mortgage and protection needs.

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