The COVID-19 pandemic has affected everyone in different ways, but maybe you have been thinking about Releasing Equity from your home. Here we discuss some questions that you might have about Releasing Equity in the strange time of the pandemic.
Equity Release or Releasing Equity?
Similar but not the same. Equity Release refers to a specific product, heard to people over 55 who are now generally mortgage free and would like to have some extra money. To get that money, instead of selling the home that they own, they borrow money, which is then paid back in full upon their passing.
Releasing Equity can be done by anyone who has built up equity in their home and are in a qualifying position to do so. Essentially you are remortgaging to borrow some more, but at the same time as getting the money, you will be giving that portion of the house back to the lender.
When and why should people look into Releasing Equity?
The most common reason for releasing equity from your house is to use for home improvements. Creating a loft extension, adding an en suite or extending your kitchen out will quite often add value to the house with the aim of getting back that lost equity by increasing the value.
Sometimes you can do a second charge mortgage, which is a loan secured against the value of your home. The money can be used for any legal reason in the UK, so is more flexible but that can often come at a cost.
So if I want to Release Equity, who do I speak to?
As with all mortgage related products, speak to your mortgage adviser and to your lender. Your mortgage adviser will be able to look over all the options available to you, which is the most cost effective and which will get you the most money.
When shouldn’t I think about Releasing Equity?
The time that it would be advisable not remortgage and to borrow more money, is if they are currently struggling financially. Firstly, it would be difficult for them to get it approved anyway and secondly it would be irresponsible. So if you have recently lost your job for example, this is probably not the best route to go down.
What if there are two people on the mortgage and only one has recently lost their job? Can we Release Equity then?
This totally depends on the situation. As an example, let’s say one applicant is responsible for 99% of the household income and mortgage repayment and the other works part time and pays the remaining 1%. If the second applicant has now lost their job, this could still be a perfectly good application.
If both applicants are responsible for 50% each of the mortgage repayments and one has lost their job, then this would likely be a little more difficult. Thats not to say its impossible though, as it really always depends on the individual situation.
How about if I am on a Mortgage Holiday, is it possible then?
Unlikely to be honest, but again, talk to your adviser, anything is possible and your situation needs to be assessed.
What about if I am furloughed? Can I still Release Equity?
Again, it is really unlikely; but never say never and speak to your adviser.
Releasing Equity is a big decision which you should consider in full before going in to. Talking to someone with experience and knowledge can always help when making your decision. The Mortgage Fit team are always available for a chat.
