Basically, this means using a portion of the value of your home that is greater than the value of your mortgage in order to access some capital.
For example, if your home is worth £150,000 and your mortgage balance is £70,000, you will have equity of £80,000. You may be able to draw on this equity by increasing your mortgage balance through re-mortgaging or taking a further advance from your current lender.
An alternative may be a secured loan or Second Charge mortgage.
Your reasons for releasing equity could be to consolidate debts; to provide a deposit for another property; to provide a Gifted deposit for a child or to make a capital injection into a business.
Whatever your reasons, you will need to be certain that this is the right way to proceed and that you have the best product to meet that need.
Call LEA FS to discuss your options.
Depending on the agreement you currently have with your mortgage lender, it may be prepared to release further sums of money to meet your objectives. This would be called a further advance as it is an additional release by your existing lender.
There are advantages in this approach in that there will be no additional legal charges and there may not be any other fees, if th elender is satisfied with the amount of equity and the affordability of the proposal.
You probably will not be able to obtain a further advance if you already have a second charge on the property or there have been problems with your payment history on the mortgage.
If you have a significant number of unsecured debts, especially credit card debt, on which you are making the minimum payments, it may be sensible to consider consolidating those debts into a First or Second Charge mortgage.
There are many things to consider here, such as extending the term over which you would be repaying and the reduction in the equity in your home.
Nevertheless, this strategy might be the best solution and we recommend that you call us to discuss your situation, your concerns and what you are trying to achieve so that we can advise you appropriately.
When should you consider a Second Charge or Secured Loan?
Firstly, you would be seeking to draw down on the equity on your home for one of the reasons described before, for example debt consolidation.
If, however, your First Charge is on a very low interest rate or you have incurred some adverse credit history since taking out that mortgage, it may not be wise or even possible to remortgage.
In that event, the additional required borrowing could be taken as a Secured Loan leaving the existing mortgage in place.
The amount that you can borrow will still be determined using the Second Charge lender’s affordability and status criteria.
Call us to explore the options available to you if you think a Second Charge is appropriate.