If your property has grown in value or you have been steadily paying down your mortgage, you may be sitting on a significant amount of equity. Remortgaging to release some of that equity can provide a lump sum for home improvements, helping family members, or other major expenses. This guide explains how the process works, how much you could release, and the important factors to consider.
For a complete overview of the remortgage process, see our complete guide to remortgaging.
What is Equity and How Does It Build Up?
Equity is the difference between the current market value of your property and the outstanding balance on your mortgage. For example, if your home is worth £350,000 and you owe £200,000, you have £150,000 in equity.
Equity builds up in two main ways. First, as you make mortgage repayments, the balance you owe decreases over time. Second, if property values in your area have increased since you bought your home, the value side of the equation goes up. Both of these work in your favour and increase the amount of equity available to you.
How Does Remortgaging to Release Equity Work?
When you remortgage to release equity, you take out a new mortgage for a higher amount than your current outstanding balance. The new lender pays off your existing mortgage, and the difference is paid to you as a lump sum.
For example, if you owe £180,000 and you remortgage for £220,000, the first £180,000 goes to pay off your old mortgage and you receive the remaining £40,000 as cash. You then repay the new, larger mortgage over the agreed term.
The process is essentially the same as a standard remortgage, but the lender needs to be satisfied that you can afford the higher repayments and that the combined borrowing does not exceed their maximum loan-to-value (LTV) ratio.
How Much Equity Can You Release?
The amount you can release depends primarily on two factors: how much equity you have, and the maximum LTV the lender will allow. Most lenders cap the total borrowing at 85–90% of your property’s value, though some may go up to 95% in certain circumstances.
Here is a worked example. If your home is valued at £400,000 and your outstanding mortgage is £200,000, that gives you an LTV of 50%. If the new lender allows up to 85% LTV, you could borrow up to £340,000 in total, meaning you could potentially release up to £140,000 in equity. However, you would also need to pass the lender’s affordability checks at the higher borrowing level.
On a £400,000 property with £200,000 outstanding, moving from 50% LTV to 85% LTV could release up to £140,000 in equity — but you must pass affordability checks at the higher borrowing level.
What Can You Use Released Equity For?
Most lenders are flexible about how you use the funds. Common reasons include:
- Home improvements: Extensions, renovations, or refurbishments that could add value to your property
- Helping family: Gifting or lending money to children or other family members for a property deposit
- Debt consolidation: Paying off high-interest unsecured debts such as credit cards or personal loans
- Large purchases: Funding significant expenses such as a wedding, school fees, or a new vehicle
- Investment: Funding a buy-to-let purchase or business venture
How Does Releasing Equity Affect Your LTV and Payments?
| LTV Band | Rate Competitiveness | Typical Use Case |
|---|---|---|
| Under 60% | Best rates available | Long-term homeowners with significant equity |
| 60–75% | Very competitive rates | Most equity release remortgages land here |
| 75–80% | Good rates, slightly higher | Moderate equity release amounts |
| 80–85% | Higher rates, less choice | Larger releases — affordability checks stricter |
| 85–90% | Premium rates, fewer lenders | Maximum release — specialist lenders may be needed |
Releasing equity increases the total amount you owe, which in turn increases your LTV ratio. A higher LTV generally means less competitive interest rates, because the lender is taking on more risk. The sweet spots for rates tend to be at 60%, 75%, and 80% LTV, so it is worth understanding which band you would fall into after releasing equity.
Your monthly payments will also increase because you are repaying a larger loan. It is essential to factor this into your budget and make sure you can comfortably afford the higher repayments over the long term. Use our mortgage calculator to estimate what your payments might look like at different borrowing levels.
Alternatives to Releasing Equity via Remortgage
If a remortgage is not the right option — for example because you are locked into a competitive rate with early repayment charges — there are other ways to access your equity. A second charge loan allows you to borrow against your equity while keeping your existing mortgage untouched. You might also ask your current lender about a further advance, which adds to your existing mortgage without requiring a full remortgage.
A specialist broker can compare all the options and recommend the most cost-effective route for your circumstances. Get started by completing our short online form.
- Equity is the difference between your property value and outstanding mortgage — it grows as you repay and as prices rise.
- You release equity by remortgaging for more than you owe; the surplus is paid to you as a lump sum.
- Most lenders cap total borrowing at 85–90% LTV — staying below 75% LTV unlocks the best rates.
- Releasing equity increases your monthly payments, so make sure the higher repayments fit your budget.
- Alternatives like second charge loans or further advances may suit you if breaking your current deal is costly.