Unencumbered Remortgage - How to Remortgage an Unencumbered Property

Introduction 

Here we dive into the concept of Unencumbered Remortgages.

If you’re a homeowner in the UK, here you will discover how you can leverage the equity in your property by completing a Remortgage on an Unencumbered (Mortgage free) Property.

As homeowners, we often find ourselves in situations where we need access to cash for various purposes, from home improvements to debt consolidation and retirement planning.

Unencumbered Remortgages are for those who own their homes outright or have paid off their existing mortgages.

This will be your guide to understanding Unencumbered Remortgages, advantages, eligibility criteria, application process, and much more.

Coming up

1) What is an Unencumbered Remortgage

2) Advantages of Unencumbered Remortgages

3) Eligibility Criteria

4) Applying for an Unencumbered Remortgage

5) Risks and Considerations

6) Frequently Asked Questions

7) Conclusion

What is an Unencumbered Remortgage?

Simply put it is the process of completing a Remortgage on a Property which doesn’t currently have a Mortgage or other financial charge against it.

This is known as releasing equity. 

The Mortgage Lender will ask the reason you want to release equity from your property, and most reasons are usually acceptable. Such as to purchase another property, Debt Consolidation and Home Improvements etc.

Some purposes which won’t be acceptable to every Lender are; releasing monies for Business Purposes, Tax Liabilities and speculative investments.

Unencumbered remortgages offer several benefits to homeowners looking to tap into their property’s equity. Let’s explore these advantages in detail:

Advantages of Unencumbered Remortgages

1) Unlocking Equity 

One of the most significant advantages of unencumbered remortgages is the ability to access the equity built up in your property over the years. This equity can be a valuable financial resource for various purposes, such as funding home improvements, covering unexpected expenses, or investing in other ventures.

2) Consolidate Unaffordable Debt 

If you have multiple high-interest debts, such as credit card balances or personal loans, an Unencumbered Remortgage can help you consolidate these debts into a single, more manageable loan with a lower interest rate.

This can simplify your financial obligations and reduce your overall monthly expenditure.

3) Improving your Home

Many homeowners use Unencumbered Remortgages to finance home improvements or renovations.

This can not only enhance your living space but also increase the value of your property, making it a smart investment in the long run.

Eligibility Criteria

1) Property Valuation

To be eligible for an unencumbered remortgage, your property’s value, construction type and condition must meet the lender’s minimum requirements. 

2) Creditworthiness and Affordability 

Just like with traditional mortgages, lenders assess your creditworthiness and financial situation.

They will review your credit history, income, expenses, and outstanding debts to determine whether you can afford the remortgage.

3) Age Restrictions

Each Lenders have their own age restrictions.

Meaning the Mortgage will have to be repaid by a certain age.

This is an important consideration, especially for older homeowners.

Applying for an Unencumbered Remortgage

This section will walk you through the key steps and processes involved in obtaining an unencumbered remortgage:

1) Application Process

To start the process you will need to contact a specialist such as a Mortgage Advisor.

They will make a recommendation to you based on the best Lender for your circumstances and let you know exactly what the Mortgage Lender will need.

During the application, you’ll provide detailed information about your financial situation, including your income, expenses, and outstanding debts.

The lender will also assess your creditworthiness.

2) Valuation and Assessment

To determine the current value and acceptability of your property, the lender will conduct a valuation.

This involves a surveyor visiting your property to assess its condition, location, and market value.

The valuation is crucial, as it plays a significant role in determining how much equity you can release.

At the same time the Lender will check your income documents and Bank Statements, completing a financial assessment on you to ensure the new Mortgage is affordable.

3) Conveyancing 

A Solicitor will need to be appointed to complete the Conveyancing side of things.

With Unencumbered Remortgages, Lenders will usually provide you with a free Solicitor or sometimes provide you with Cashback if you want to use your own.

4) Releasing Equity  

It’s essential to carefully review the terms and conditions of the remortgage agreement before proceeding.

Ensure that you fully understand the interest rate, repayment schedule, and any associated fees.

If you have any questions or concerns, don’t hesitate to seek clarification from your Mortgage Advisor.

Providing you are happy with all of this, the Lender will now release funds to your Solicitor who will the finalise the Remortgage.

Risks and Considerations

1) Repayment obligations 

While unencumbered remortgages provide access to cash, it’s crucial to remember that they are loans that must be repaid.

Failing to meet the repayment obligations could lead to the repossession of your property.

2) Impact on Inheritance 

If you plan to leave your property to heirs or beneficiaries, an unencumbered remortgage can affect your inheritance plans.

The loan will need to be repaid, potentially reducing the value of the property passed on to your loved ones.

3) Securing a Debt against a previously Mortgage Free Property 

You previously had a finance free secure asset that no one could take away from you.

Before committing, explore alternative financing options, and see if these could work instead.

These may include personal loans or downsizing to a smaller property.

4) Seek Professional Guidance

Given the complexity and long-term implications of unencumbered remortgages, it’s highly advisable to seek professional advice.

Consult with a mortgage broker or financial advisor who can provide tailored guidance based on your unique circumstances.

Unencumbered Remortgage Scenario

Sarah, a homeowner with no existing mortgage, wants to finance a home renovation project. 

She explores the prospect of an unsecured loan as well as completing a Remortgage on her unencumbered property by speaking to a local Mortgage Advisor.

She chooses an unencumbered Remortgage to access the equity in her property over an unsecured loan.

Due to the longer term available via a Mortgage and therefore lower monthly repayments.

FAQ’s

a. Can I get an unencumbered remortgage if I have a poor credit history?

Unencumbered remortgages, like traditional mortgages, will require a credit check to be completed.

Some lenders are more lenient than others, and there are specialist Lenders specifically for applicants who have a less than perfect, or even poor credit history.

If you have a poor credit history, it’s essential to consult with a mortgage broker who can help you find lenders that are more likely to work with your specific circumstances.

b. How long does the unencumbered remortgage process typically take?

The duration of the unencumbered remortgage process can vary depending on several factors, including the lender, property valuation, and the complexity of your financial situation.

On average, it can take 2-4 weeks to complete the Mortgage side. And a month or so for the Conveyancing.

It’s advisable to start the process well in advance of any deadlines or financial needs.

c. What happens if I cannot repay the loan?

If you cannot meet the repayment obligations of your unencumbered remortgage, it can lead to financial difficulties and, in extreme cases, repossession of your property.

It’s crucial to assess your ability to repay the loan before committing, and to have a backup plan in place if unforeseen financial challenges arise.

d. Can I use the released funds for any purpose?

Funds can be used for various purposes, including home improvements, debt consolidation, investments, or any other financial need.

However, it’s essential to communicate your intended use of the funds with your Mortgage Advisor, as the Lender will have specific requirements or restrictions based on the purpose of the remortgage.

Conclusion

We’ve explored the world of unencumbered remortgages in the UK, shedding light on what they are, their advantages, eligibility criteria, application process, and potential risks.

Unencumbered Remortgages can be great for homeowners looking to leverage the equity in their properties.

However, they come with responsibilities and potential risks.

It’s crucial to conduct thorough research, seek professional guidance by way of a Mortgage Advisor, and carefully evaluate your financial situation before proceeding.

We hope this has helped give you a clearer understanding of whether an unencumbered remortgage aligns with your financial goals and circumstances.

What’s next?

Speak to a whole of market Mortgage Brokers which can provide you with the specialist Mortgage Advice you need.

We have a range of reputable Mortgage Advisors waiting to take your enquiry, regardless of the complexity of your case.

So, get in touch and see how we can help you.