Capital Raising Mortgage

A capital raising mortgage, capital raise mortgage or capital raising remortgage is a way for homeowners to generate funds against the equity in their homes. It’s essentially a remortgage to raise capital by releasing equity from a property you already own. This additional equity comes from the difference between the current mortgage and the property’s value. You simply remortgage for an amount greater than that outstanding on your existing mortgage. 

Remortgage to raise capital example

Your home is valued at £200,000 and you have a £50,000 mortgage. You want to redecorate your property and need to raise £100,000 to cover the costs. You decide to remortgage with capital raising.  

You apply for a capital raising mortgage to increase your total borrowing to £150,000, which equates to a 75% LTV (loan to value). This new mortgage takes the place of your original mortgage.

To remortgage and raise capital, start by assessing your property’s equity. To do this: subtract your existing mortgage balance from its current value.  

Then consult a mortgage broker to explore suitable deals, as they can help find lenders offering competitive rates. Your eligibility will depend on factors such as income, credit history and the amount you wish to borrow. 

Check out how much you could potentially borrow with our remortgage calculator.

The fees for raising capital through a remortgage typically include: 

• Arrangement fee – charged by the lender for setting up the new mortgage 
• Valuation fee – covers the cost of assessing your property’s current value 
• Legal fees – solicitor costs for handling the remortgage process 
• Broker fee – if using a mortgage broker, a fee may apply for their services 
• ERC (early repayment charge) – if you’re leaving a fixed rate deal early, your current lender may impose a penalty 

Properties such as houses, bungalows, semi-commercial and commercial units can qualify for a capital raising mortgage.

Capital raising buy-to-let mortgage

You can get a capital raising mortgage on a buy to let property, allowing you to release equity tied up in the property. This is essentially a buy to let remortgage, where you replace your existing buy to let mortgage with a new one, often at a different rate and potentially with a higher loan amount. The additional funds raised can be used for various purposes, such as purchasing another investment property, carrying out renovations, or consolidating debts. However, eligibility will depend on factors such as rental income, LTV and your overall financial position.  Capital raising buy to let mortgages are typically available for up to 80% LTV.

Yes, capital raising on a mortgage free property is possible, and a key benefit from doing this is that there are no ERCs from an existing mortgage. Since the property is unencumbered, you have the maximum amount of equity available, giving you greater borrowing potential. In many cases, lenders view this as lower risk, making it easier to secure a mortgage compared to purchasing a new property. The process works similarly to a standard remortgage, but without the need to replace an existing loan. 

Most mortgage lenders do not offer capital raising mortgages to fund:

• A business start-up
• Buying stocks and shares
• Repaying tax bills
• Repaying gambling debts

This kind of mortgage can be a very cost-effective short-term solution to raising funds. Thanks to the lower interest rates, you can expect to pay less than if you were to get an unsecured loan when you increase your mortgage. However, you’ll face larger monthly mortgage payments and a longer repayment term. Your lender may also charge you early repayment fees on your existing mortgage. It’s a good idea to speak to one of our experts at John Charcol before taking out a capital raising mortgage to ensure that it’s the right decision for your personal circumstances. Get in touch today on 0808 239 9021 or enquire online.