Remortgage of an Unencumbered Property
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Remortgage of an Unencumbered Property
Adam Nunn and Jon Porter explain the process of remortgaging an unencumbered property.
What is an unencumbered property?
It basically means you’re debt free. You have no financial burdens or charges registered against the property.
Can you remortgage an unencumbered property?
Yes, you can and I’ve recently done this for a client. Most people remortgage to raise capital for property investment, which was the aim in my recent case.
You also release the money for home improvements, gifting monies to family – such as for a property deposit – or clearing unsecured debts. There are lots of reasons you might do it.
Why would you need to remortgage an unencumbered property? How do I know if I qualify to remortgage an unencumbered property?
You’ll probably have specific needs or financial goals which require you to borrow money. Whether you’re eligible will depend on your individual circumstances and the type of property that you’re remortgaging.
Is it a residential property or an investment Buy to Let? The way lenders assess those types of mortgage requirements will slightly differ.
Can I remortgage a property in poor condition?
The key thing is that property does need to be habitable, which means it’s got a usable kitchen, bathroom and utility supplies.
There’s a reasonable chance you can remortgage a property that’s in poor condition. You basically need to be able to wash, eat and sleep in the property. Mortgage lenders will instruct a valuation to check that the property is safe as security and acceptable for lending purposes.
If property is in a bad state and uninhabitable, you’re potentially going to be declined for a standard mortgage. But there are mortgages available for renovations or conversions – which fund you to renovate the property and get it into a habitable condition.
Can I remortgage an unencumbered property if I’m retired?
Yes. To obtain any mortgage, you must have a sustainable income. If you’re already retired, then the likelihood is you’ve got a pension, and you might have other retirement or investment incomes like property in the background.
You’d then be in a position to prove a sustainable income. As always, a mortgage lender will assess your overall ability to afford the mortgage and your credit history.
Age will also be a factor. Certain lenders just don’t lend beyond the age of 70, but others out there can go to age 80, 85 and even 90. Some lenders actually don’t have age limits on a mortgage term, so in theory, you could have a mortgage until death.
There is also what’s called a Retirement Interest Only mortgage. You’ll again need to prove your ability to afford this with your retirement income, but there is no term. You can have that mortgage until death and there’s no set time to repay the mortgage.
Another thing to consider if you are at retirement age if you cannot get a mortgage is Equity Release. So there are a few options to look at.
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Can I remortgage an unencumbered property if I’m self-employed or freelance?
Yes, you can. As long as your self-employed income fits the lender’s criteria, you’ll have the same options as anybody else.
Can I remortgage an unencumbered property with a bad credit history?
Potentially, yes. It very much depends on the history of the bad credit, the type, whether it’s still active or it’s been cleared – and if so, how recently. They’re all key considerations, but potentially there will still be mortgage options available to you.
What are the benefits and the risks when remortgaging an unencumbered property?
The big benefit is that you can borrow a larger amount than you might on an unsecured loan.
It’s secured against the property, which normally means you can spread the mortgage over a longer term, making the monthly payments more affordable.
Mortgage rates are normally lower than unsecured debts like loans, so payments can be a lot better for you. The drawback of a longer term, though, is that you’re paying more interest in total.
There are also the risks of securing a debt against the property. If you stop making your payments, as with any mortgage, you could have the property repossessed.
How can a mortgage broker help here? Is there anything else you’d like to add?
With any mortgage situation, whether it’s a remortgage on an unencumbered property or not, just for you or for you and a partner, you’ll need to be placed with a specific lender.
Using a broker saves you time in finding the right mortgage – and makes the transaction a lot smoother.
We will help you from the moment we meet you. We’ll explore what your goals are, what you’re looking to achieve and why. We then recommend the most suitable lenders. A typical remortgage of an unencumbered property, if everything’s running smoothly, should take about four to six weeks.
You’ll then receive a mortgage offer for up to six months and you decide how quickly you need the money. We’re in a volatile market where interest rates have been up and down for a number of years – most recently, these have been coming down rather than going up.
A key benefit in using a broker is that we will monitor rates throughout the process. If you had a six month mortgage offer and you don’t need the funds immediately, rates might fall. We will be actively looking at the market to get you a lower rate if one becomes available.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME.
YOU MAY HAVE TO PAY AN EARLY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.
YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP WITH YOUR MORTGAGE REPAYMENTS.