Capital raising mortgages are a way of releasing the equity in your home to raise capital to spend on whatever you wish. Raising capital in this way can be a very cost-effective way of securing funds to spend on anything from investing in another property and paying off debt to renovating your home and buying a new car. There are generally few restrictions to what you can use the money for, so if you think a capital raising mortgage could help you, read on to find out more.
The Topics Covered in this Article Are Listed Below:
What Is a Capital Raising Mortgage?
Capital raising is a way that homeowners can generate funds against the equity in their homes. It's a form of remortgaging that releases equity from the property, which is the amount of funds between the current mortgage and the property's value. For 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 pay for the work. You apply for a capital raising mortgage, and your total borrowing increases to £150,000, equivalent to a 75% loan-to-value.
What Types of Property Qualify for a Capital Raising Mortgage?
Properties such as houses, bungalows, semi-commercial and commercial units can qualify for a capital raising mortgage. Capital raising on a mortgage-free property is also possible. The risk for mortgage lenders is very low, so borrowers often find it easier to get a mortgage on an unencumbered or mortgage-free property than buying a new one. If you want to expand the property in your portfolio, then capital raising buy-to-let mortgages are also available, typically for up to 80% loan-to-value.
What Can You Use a Capital Raising Mortgage for?
As we’ve mentioned, there aren't many restrictions on what you can use a capital raising mortgage for. Some borrowers use the funds for:
- Clearing or consolidating debts – capital raising can consolidate or pay off existing debts such as credit cards, personal loans, store cards, and legal bills
- Separation or divorce – you can use a capital raising mortgage to pay for a divorce or buy an ex-partner's share of the property
- Home improvements – capital raising mortgages can fund home renovations, whether simple redecorating or an extensive refurbishment
- Purchases – it's possible to use a capital raising mortgage to fund the purchase of a new car, deposit on another property, pay for a wedding, the holiday of a lifetime, or school or university fees
- Investment – the funds generated from a capital raising mortgage can be used for investments, from buying buy-to-let properties to a business expansion
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
Is a Capital Raising Mortgage Right for You?
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 0330 433 2927 or enquire online.
Compare the latest remortgage rates and deals with our comparison tool and discover how this type of mortgage works, the process and if it’s suitable for you.
9 Reasons to Remortgage
Read our nine reasons why you should consider remortgaging your home. You can save a lot of money on remortgaging, so make sure you get the best deal.
Remortgaging means to switch to a new deal with a different lender but stay in the same property. Learn about remortgage costs, valuations and see our advice.
Here you’ll find our free remortgage calculator which helps you work out how much you could potentially save each month if you remortgaged onto a new rate.
How to Find the Best Remortgage Rates and...
Learn how to find the best remortgage rates & remortgage deals here. We go through what to consider when comparing deals, which lenders there are & more.
How Much Can I Borrow on a Remortgage?
Find out how much you could borrow on a remortgage in our guide. We go through how lenders determine what to lend you, how LTVs work and more.
When NOT to Remortgage
Not sure whether now’s the time to remortgage? Find answers to all your remortgage questions.
Try our interest-only calculator to work out how much your monthly interest payments will be based on what you want to borrow and your mortgage rate.
On this page you’ll find our detailed mortgage terminology glossary. There’s a lot of jargon out there but we’re here to make it easy.
There are many valid reasons to remortgage. If you’re considering remortgaging your home but need help finding the right option for you, contact John Charcol. Our team of experienced mortgage advisers can recommend a range of remortgage options to suit you. Request a call back or call us on 0330 433 2927 to get in touch.
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