Last reviewed: June 2026
TL;DR- Remortgaging to release equity means increasing the mortgage balance above the existing outstanding amount and using the additional funds for another purpose.
- The new, higher mortgage must pass an affordability assessment and the LTV on the increased amount must be within the lender's criteria.
- Common uses include home improvements, debt consolidation, helping children with deposits, funding education or business investment.
- The additional borrowing is secured against the property - the property is at risk if payments are not maintained.
How Equity Release Through Remortgage Works
Remortgaging to release equity - sometimes called a capital raising remortgage - involves taking a new mortgage for a larger amount than the existing outstanding balance. The difference between the new mortgage amount and the old outstanding balance is paid to the borrower as a cash lump sum. The new mortgage may be with the existing lender (a further advance) or with a new lender (a full remortgage including the capital raising element).
For example: a borrower has a property worth £300,000 with an outstanding mortgage of £150,000 (50% LTV). They remortgage to £210,000 (70% LTV) and receive £60,000 in cash, representing the difference between the new and old mortgage amounts.
Affordability on the Higher Amount
The new, higher mortgage must pass a full affordability assessment based on the new loan amount and the current or stressed interest rate. The borrower must demonstrate they can afford the higher monthly payment from their income. Where the existing mortgage was taken years ago at a lower income assessment, a new income assessment at current levels and rates may be more or less restrictive depending on how income and rates have changed since the original mortgage.
Permitted Uses
Lenders do not typically restrict what equity release funds are used for, provided the use is legal. Common purposes include: home improvements (which may increase the property value and thus the LTV recovers over time); debt consolidation (replacing higher-rate unsecured debt with lower-rate secured debt - note this converts unsecured to secured debt, putting the property at additional risk); family gifts (helping children with deposits); purchasing a second property or vehicle; funding education or business investment. Some lenders ask the purpose of the capital raising as part of the application but rarely impose restrictions.
LTV Limits on Equity Release Remortgage
The maximum equity release through remortgage is determined by the lender's maximum LTV. Most residential remortgage lenders accept up to 80-90% LTV. A property worth £300,000 with a maximum 80% LTV allows a maximum new mortgage of £240,000. If the existing outstanding balance is £150,000, the maximum equity release is £90,000 (taking the new total to £240,000). Equity release above these LTV limits requires specialist products such as a lifetime mortgage (for older borrowers) or a second charge mortgage.
Frequently Asked Questions
Is remortgaging to release equity the same as equity release?
The term "equity release" is used in two ways: informally, to mean any mechanism for accessing equity tied up in a property (including capital raising remortgage); and formally, to mean the FCA-regulated later life equity release products (lifetime mortgage and home reversion plan). A capital raising remortgage is not a formal equity release product - it is a standard mortgage with a larger loan amount. Formal equity release (lifetime mortgage, home reversion) is specifically for borrowers aged 55 and over who typically cannot make standard monthly mortgage repayments.
What are the tax implications of releasing equity through remortgage?
There is no income tax or capital gains tax triggered by releasing equity through a remortgage. The funds received are a loan (part of the mortgage debt) rather than income or a disposal of an asset. The tax implications arise if the funds are used in a way that creates a taxable event - for example, if the funds are lent to a company and generate income, or if they are used to purchase an asset that is subsequently sold at a gain.
Can I release equity if I have a fixed rate mortgage with an early repayment charge?
Releasing equity during a fixed rate period typically triggers the early repayment charge, as the existing mortgage must be redeemed and replaced by a higher-value mortgage. Alternatively, some lenders allow a further advance (additional borrowing from the same lender) without redeeming the existing mortgage, which avoids the ERC. A further advance is a separate loan secured as an additional charge alongside the existing mortgage. Not all lenders offer further advances - this should be checked before assuming a further advance is available.
Does releasing equity affect my monthly payments significantly?
Yes. The monthly payment on a mortgage increases with the loan amount. On a £60,000 additional borrowing at 5% over 20 years, the additional monthly cost is approximately £396 per month. This significant increase in monthly outgoing must be affordable within the borrower's income before the lender will approve the capital raising remortgage.
