Releasing Equity Without Paying a Large Early Repayment Charge
The latest industry news and guides from Active Mortgages.
The latest industry news and guides from Active Mortgages.
A homeowner approached us looking to unlock equity in their property to fund a programme of home improvements and consolidate several unsecured debts into one more manageable monthly payment.
The client had taken out a five-year fixed-rate mortgage around two years earlier when borrowing at a higher loan-to-value. Since then, the property’s value had increased, improving their overall equity position.
While they knew there were now more competitive mortgage rates available, they wanted impartial advice on whether moving lenders was the right financial decision.
The client’s existing mortgage was tied into a fixed-rate deal with an early repayment charge of approximately £18,000.
Although a full remortgage could have secured a lower interest rate, the cost of leaving the current lender early significantly reduced the potential savings.
To complicate matters further, the lender was no longer offering additional borrowing on the client’s existing mortgage product, meaning a straightforward further advance was not available.
The client needed to raise around £120,000 while keeping their monthly commitments as affordable as possible.
Rather than recommending an immediate remortgage, we carried out a full review of every available option.
We compared the total cost of moving to a new lender – including the early repayment charge – against the long-term savings that could be achieved through lower interest rates.
We also explored a second charge mortgage, allowing the client to:
We produced a detailed comparison of both options, outlining the costs, monthly repayments and long-term financial impact so the client could make an informed decision.
Instead of rushing into a costly remortgage, the client gained a clear understanding of the financial implications of each option.
By considering a second charge mortgage, they were able to explore releasing the funds they required without immediately incurring a significant early repayment charge.
The client was left with a tailored strategy that balanced their short-term borrowing needs with their longer-term objective of refinancing onto a more competitive mortgage when the timing was right.
This case highlights the importance of looking beyond headline interest rates.
Although a lower mortgage rate may appear attractive, it is essential to consider the wider financial picture, including early repayment charges, borrowing costs and plans.
By carefully assessing every available option rather than recommending the obvious solution, we helped the client identify a strategy that could potentially save thousands of pounds while still achieving their financial goals.
At Active Mortgages, our advice is based on what delivers the best overall outcome – not simply the lowest advertised interest rate.
Book a call with one of our team to talk about your requirements.
