The number of homeowners taking on additional borrowing when switching their mortgage has increased by 9% in the space of a year.
New data from financial research firm UK Finance shows some homeowners are taking advantage of low mortgage rates to borrow an additional £55,700 when remortgaging.
Here, we explain the pros and cons of releasing equity in your home, and offer advice on alternative ways to raise cash.
New data from UK Finance shows 16,810 people borrowed extra when remortgaging in March, a 9% increase year-on-year.
On average, these homeowners borrowed an additional £55,700.
At the popular remortgaging level of 75% LTV, it's possible to get a rate below 1.6% on a two-year fix, as shown in the table below.
|Lender||Introductory rate||Revert rate||APRC||Fees|
Unlocking cash in your home can be a sensible idea for some homeowners, especially if you're looking to improve your property or gift a deposit to a loved one.
That said, there are plenty of risks involved.
First of all, borrowing extra means that you'll either need to pay more back each month, or extend the term of your mortgage - which would mean paying more interest in the long run.
And if you're borrowing at a high LTV, a fall in house prices could erode your equity.
If you choose to remortgage, it's best to wait until the end of your fixed term, as otherwise you might need to pay an early repayment charge (ERC), which in some cases can be as high as 5% of the loan.
There are several ways you can raise money as a homeowner without borrowing extra on your mortgage.
If you're thinking of remortgaging to get a better deal or to unlock cash in your property, it can help to get advice from a whole-of-market mortgage broker.
Your home may be repossessed if you do not keep up repayments on your mortgage.