How does home equity release work?

Hi there,

We bought our home 2 years ago for €271,500. Borrowing 90% of that value.

Our mortgage balance is somewhere around 236k - Is it possible to release equity in our home to renovate?

If it is possible to release equity, what are some downfalls or things to look out for in doing so?

Thank you in advance.

It's called borrowing money and will be based on your repayment capacity.

Have you both had a significant jump in income?

DannyBoyD said:

It's called borrowing money and will be based on your repayment capacity.

Have you both had a significant jump in incomw?

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Hi Danny, my income has increased by 90% since we mortgaged and we didn't max out our borrowing ability when we bought our home.

you can get a home improvement loan for sure, depends on the bank, harder to get as a mortgage top up especially if you borrowed at high LTV.

durkin01 said:

We bought our home 2 years ago for €271,500. Borrowing 90% of that value.

Our mortgage balance is somewhere around 236k - Is it possible to release equity in our home to renovate?

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Say, your home is worth €300k today
A lender might give you up to €270k, although I suspect that they probably have a limit of 80% or €240k.

The best thing to do is to ask your lender. If you are with Avant for example, they don't do top-up loans.

You might have to defer the renovations and save aggressively in the meantime for them.

Brendan

I once looked into this. Lenders have a dedicated team to talk you through this. Give them a call.

My experience was that it seemed pretty bureaucratic and wouldn’t have been worth it for anything less than €60k.

A credit union may be less hassle.

Equity release (extra borrowing!) usually needs a certain amount of equity, if you borrowed 90% 2 yrs ago then unless your house has appreciated an awful lot it's a non runner. Most Top Ups which is what I presume you would be looking for are limited to 80% LTV, you only get 90% when buying initially. Top Ups are usually limited to amounts under 60/65k depending on lender as they are done with minimal paperwork compared to new mortgage and don't usually need legal fees.

Now it depends what you are doing to the house, if the renovation including extension for example that will increase the value of your property then you could look for a full remortgage to take into account the o/s mtg, the new funds needed and based on the finished value on completion of renovations. The value though would probably need to be high enough so that the total borrowings are below the 80% LTV. If this was a runner then the extra funds would only be paid out in stages or at the end of the work when the value was in the property.

If you are just replacing kitchen/bathrooms/decorative work then it's unlikely that will have any major impact on value which would facilitate a remortgage.

A straight forward home improvement loan (higher rate than mortgage) from bank or CU might be only option.

durkin01 said:

my income has increased by 90% since we mortgaged and we didn't max out our borrowing ability

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So don't max it out now.

You should be well able to save up for your renovations from your income.

At the very least save 1/2 now & see about a CU loan for the rest if you have to.

I would not like your odds of successfully negotiating an equity release. I looked into it two years ago when refinancing existing pdh mortgage and there was no appetite at that time from mainstream lenders. Ltv at that point for me was <70%