Remortgage of an Unencumbered Property
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Remortgage of an Unencumbered Property
Exploring remortgaging an unencumbered property with Hemat Natha.
What is an unencumbered property?
An unencumbered property has no mortgage to pay on it. There are no loans, charges or any restrictions in place on the property. You’ve completely paid off the mortgage or you purchased it outright, so you don’t have that monthly mortgage payment.
Why would you need to remortgage an unencumbered property? How do I know if I qualify to remortgage?
Let’s imagine your property is worth £300,000. That’s a lot of cash that you have locked away in your property. There are lots of reasons why people would remortgage to release some money. They might want to use it to get a Buy to Let property and generate some income from that.
You may want to consolidate your debt or borrow money to start a new business. We had someone that remortgaged to open up a sandwich bar; they had a mortgage free property and used it to change career. That sandwich bar has now become a coffee shop and he’s very happy.
You can borrow money for almost any purpose. We had someone that had paid off their mortgage and wanted to buy a £60,000 car. Another client wanted to do a year-long world cruise.
We’ve dealt with quite a lot of unencumbered remortgage properties. You can borrow on a mortgage as long as you can afford it. It could mean you can purchase one-off big items at a fairly decent rate – but remember you will be paying it back over a certain period of time. But we’ll advise you on that when you come to us.
Can I remortgage a property or an unencumbered property in poor condition?
It depends what type of remortgage it is – is it a remortgage on your own home or on a Buy to Let? Some property investors and landlords have properties without mortgages on them.
There are new government regulations coming into place now where Buy to Let properties have to be a certain EPC energy standard. That means checks have to be made, so the property can’t be in too poor a state to get a mortgage.
On your own home, generally the rules with lenders are that the property must be habitable. Are you able to live in it? It doesn’t matter about cosmetic issues, but it needs to have running water, for example. Those would be the things we would double check before actually remortgaging.
Can I remortgage an unencumbered property if I’m retired?
If it’s a Buy to Let it may be simpler, because you’re earning rental income, which would potentially cover the monthly payments. The term can be extended past retirement without needing further proof.
If you are retired and want to do this on your own home, you will probably need a certain type of mortgage. The route you go down will depend on your income or, if you’re already retired, your pension and any other sources of income are used for affordability. We’ll direct you to the right channels.
Can I remortgage an unencumbered property if I’m self-employed or freelance?
Yes, definitely. If you’re self-employed and freelance we follow the standard process. Have listened to any of our other podcasts on self-employment – it’s the same approach. We will understand the structure of your income and the reasons why you want to borrow money on a property that has been paid off.
You can borrow an amount based on your income on a residential property. If it’s a Buy to Let you just need to meet the eligibility criteria. Your self-employed income may or may not be taken into account, depending on the lender.
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It doesn’t cost anything for a chat, it’s free and we never charge a fee until we’ve got a mortgage offer. So pick up the phone and let us take it from there.
Can I remortgage an unencumbered property with a bad credit history?
You can, although it depends on the extent of the bad credit. We would take time to understand what the issue is – is it a CCJ, an arrangement to pay, a missed payment?
We will also look at your income. The interest rates can be affected with bad credit, and you may pay more. So we will look at your credit profile to understand your bad credit before making a recommendation.
We often find that people with bad credit have buried their head in the sand and think they have no options – but it’s best to speak with us. Let us understand your circumstances and why you’re borrowing the money, and we can find a suitable lender.
What are the benefits and risks when remortgaging an unencumbered property?
The benefits are that you can raise a lump sum of money for various purposes. It might be holidays, cars, to build an extension or make a Buy to Let investment. You’ve got an asset that has value, so this is a way to unlock that money to spend on things that are going to make you happy.
The key risk is that when you remortgage you have to pay the debt back. You spent all that time paying the mortgage off, and you’re going to have to repay it again. It needs to be comfortably affordable.
One of the examples we discussed is using the money to start a new business. But what happens if that business doesn’t do well? Perhaps you have raised £60,000 for this lifelong dream. But if it doesn’t go well, you’re left with a mortgage and a change in your income circumstances, and you still need to pay back that money on your own home.
Ultimately, if you can’t pay the mortgage back, your property could be repossessed. We don’t want you to be put into that situation. So we need to sense check the purpose of your borrowing.
What else do we need to know about remortgaging an unencumbered property?
Just come to us and let us understand the main reasons for the borrowing. We will advise accordingly. We like to play Devil’s Advocate, to explore things you might not have thought about or consequences that could happen. A mortgage isn’t just for two or three years, it’s for the long term.
We want to make sure you can afford it and that it’s the right decision for you. We can help in all different circumstances, so just pick up the phone or email us and we’ll be happy to take you through the process.
Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up with your mortgage repayments.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Hemat Natha, trading as Mortgage Advice Point, is an Appointed Representative of HL Partnership Limited which is authorised and regulated by the Financial Conduct Authority.
A fee for our service is charged. This is typically £495 but the exact amount will be dependent upon your circumstances and we will discuss this with you.
Useful links
- Remortgage Explained
- Remortgaging for Home Improvements
- Remortgaging for Debt Consolidation
- Bad Credit Remortgage
- Remortgage With Credit Card Debt
- Buy to Let Remortgage
- Remortgage when Self-employed
- Product Transfer
- How soon can you remortgage before fixed-rate ends?
- Remortgage of an Unencumbered Property
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