How releasing equity works
Equity is the difference between your property’s value and the amount you still owe on your mortgage.
As you make repayments and property values increase, this equity grows — and can often be accessed by remortgaging.
A simple example
You purchased your home 10 years ago for £100,000 on a 20-year mortgage at an average interest rate of around 3%.
- Original purchase price: £100,000
- Mortgage balance today: approximately £57,000
- Current property value: £120,000
This means you now have around £63,000 in equity.
By remortgaging for £77,000 instead of £57,000, you could release £20,000 to use as a deposit towards another property.
What can the funds be used for?
Equity released through a remortgage can typically be used for:
- A Buy to Let investment property
- A holiday or second home
- Assisting a family member with a deposit
The purpose of the funds will influence which lenders and products are available.
Advantages of remortgaging to buy another property
In an ideal scenario, buyers would save a separate deposit while maintaining their existing mortgage.
However, releasing equity may be the only realistic way to access the capital required without waiting years to save.
- Access to funds without selling your current home
- Potential to build a property portfolio sooner
- Flexibility in how the released equity is used
Risks and disadvantages to consider
Increasing your mortgage also increases your financial exposure.
- Higher monthly repayments on your residential mortgage
- More interest paid over the life of the loan
- Greater reliance on rental income if buying an investment property
Even with Buy to Let properties, you must be prepared for:
- Void periods with no rental income
- Unexpected maintenance or repair costs
- Changes in interest rates or lending criteria
It’s essential to ensure you can comfortably afford both mortgages — even in less favourable circumstances.
Why advice matters
Not all lenders allow equity release for additional property purchases, and criteria vary depending on whether the second property is residential, Buy to Let, or a holiday home.
A mortgage broker can:
- Assess how much equity can realistically be released
- Confirm lender suitability before applying
- Structure borrowing in a tax and cost-efficient way
This ensures the strategy supports your long-term plans rather than stretching your finances too far.
If you’re considering remortgaging to fund another property purchase, a careful review of your finances is essential.
Speaking to a mortgage adviser early can help you understand your options, the risks involved, and whether releasing equity is the right move for you.