Releasing equity from your home can be a great option if you’re looking for a large sum of money to spend while still being able to stay in your property.

There are various ways to release equity from your home that don’t involve remortgaging. Read on to learn what an equity release is and the options available to you.

Key Takeaways:

  • An equity release allows homeowners to release tax-free money from the value of their property.
  • You don’t have to remortgage to release equity. You can take out a second mortgage or a further advance with your current provider.
  • You can take out up to a 60 percent equity release from the value of your property.

What is an equity release?

Equity release allows homeowners (usually aged over 55) to release tax-free money from the value of their property. This money can be given in either a lump sum or regular payments.

The two types of equity release are:

A lifetime mortgage: This lets you receive a loan secured against your home. You still own and live in the house. Upon death or admission to long-term care, the home is sold, and the debt is settled.

Home reversion/ reverse mortgage: This is when you sell part of your home in return for a lump sum. You can still live on the property until your death.

Do I have to remortgage to release equity?

Although you can remortgage your property to release equity, other options are available. You can also take out a second mortgage or a secured loan, which is secured against your property.

You could also consult with your loan provider and ask for a further advance on your mortgage, i.e., when you borrow more money.

Rather than choosing to remortgage to release equity, you could take out an unsecured personal loan. However, there are downsides to this. You’ll likely pay more interest than if you release equity, and your provider will expect you to pay back the personal loan in a shorter period.

Personal loan vs. equity release: Which is better?

Whether remortgaging to release equity or taking out a personal loan is the best option depends on your personal and financial circumstances. Here are some instances where taking out a loan might be a better option.

You only require a small amount of money. If you want to release equity, you’ll have to take out a minimum amount of $10,000.

You don’t want to risk your home. Choosing to release equity can damage the value of your property. Though you’ll pay a higher interest rate on a loan, you’re guaranteed to receive the full market value of your property upon sale.

If you have a high credit score. If your credit score is higher than 749, you’ll be able to take out loans with lower interest rates rather than releasing equity and potentially damaging your property’s market value.

How much equity release can I take out?

How much equity you can take out depends on your age and the value of your property.

Generally speaking, you can release up to 60 percent of the value of your home, providing that your outstanding mortgage is almost paid.

If you still have an outstanding mortgage, talk to your mortgage broker to discuss a remortgage to release the equity you require instead.

Is it better to remortgage or release equity?

Releasing equity from your home requires no monthly repayments compared to remortgaging, meaning it can be a more cost-effective solution if you want to take out a lump sum. However, once you sell your property after releasing equity, you’ll receive far less than the market value of your home.

Whether it’s better to release equity or remortgage depends on your personal and financial circumstances. If you need to gather funds quickly and at a reduced cost, then releasing equity might be a better option.

Will my credit score affect how much equity I can release?

The short answer is no. A poor credit rating will not affect how much equity you can release. Your age and the value of your property will determine this.

Contact a Lendstreet mortgage broker for more financial advice.

If you’re interested in remortgaging to release equity but want to discuss your options, look no further than our experts at Lendstreet. We’re committed to helping our customers find the right financial solutions.

Contact Lendstreet for guidance and support on your remortgaging options.

What are other loan options available to me?

If a home equity release doesn’t sound suitable for your financial situation, various other options are available.

Pension loans scheme

The Pension Loans Scheme, renamed the Home Equity Access Scheme in January 2022, allows Australians over the age of 55 to take out a non-taxable loan from the Australian government to subsidise their pension. This differs from an equity release in that you use your home equity as security for the loan.

Once you’ve borrowed money, you can receive either a lump sum or a fortnightly amount.

Use equity in your home.

If you own a home, you’re likely to have built significant equity. Access your hard-earned money today and invest it in other areas of your life such as building your investment portfolio, carrying out a renovation, or building a worthy inheritance for your family.

For more professional advice on home equity release, contact Lendstreet.

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What is remortgaging to release equity

Remortgaging to release equity is when you take out a further loan on your home to free up tax-free cash and release money previously tied up in your property.

What is negative equity

Negative equity is the deficit present in a homeowner’s equity. This occurs when an asset used to secure a loan is less than the overall balance on the loan.

Will I pay interest on my equity release?

The amount of interest you’ll pay on your equity release depends on the type of loan you take out. If you take out a lifetime mortgage, the interest charged at the end of the first year is added to the original loan amount.

Will remortgaging to release equity affect my credit score?

No, remortgaging to release equity will not affect your credit score.

Will remortgaging affect my monthly repayments?

Remortgaging could lower your monthly repayments depending on your new plan and mortgage provider, as you could be offered a cheaper rate.

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