How does releasing equity work? (After renovations)

Capri84

Evening folks. Really inexperienced in this but hoping for a bit of guidance or insight 

Bought a house 3 years ago on a 95% mortgage. Paid £235k for the property, but then spent 30k (+lots of free labour from family in the trades) renovating and extending the property. 

Haven’t had it revalued yet, but it’s easily worth over £320k now (it’s a night/day transformation). 

Over past few years, financial situation changed a bit and I’m currently riding it out while we pay off the amount we spent renovating. Spending a fortune each month repaying loans, and wondered if there was scope to take a bit of equity back out the property - but don’t know anything about how it works. 

My loan to value amount would have changed hugely as well, so would probably want to get the place revalued before initial 5 year fix ends anyway, but a bit nervous about that now as I currently look laden with debt, which I’m paying off but it’s going to take another 3/4 years at the current rate

So yeah, what does the process for valuing look like? And would it be possible the bank (Coventry BS) would help release equity on a property to settle borrowing elsewhere? 

cardriver98

first advice...  dont get into debt... 
second..  avoid E.L..  like the plague. 

penners324

You increase your mortgage debt....

You can ask. So instead of 3/4 years paying off this debt, you take 20 years to pay it off 

TrickyDicky101

Has your income changed significantly from when you originally took out the mortgage?  You will still need to pass affordability checks on whatever increased loan size you can get.  If you were maxed out to begin with and no significant increase in earnings then irrespective of how much equity you have now you are unlikely to be granted a larger loan.

Capri84

Well that’s what I wondered, as my affordability would be amazing but it would be BECAUSE I was able to pay everything down with the equity release. 

So yeah, guess they’d say no because they’d base it on the now and not the ‘could be’ 

Capri84

cardriver98 said:

first advice...  dont get into debt... 

Thanks, very insightful 🤪

Hoenir

Capri84 said:

Well that’s what I wondered, as my affordability would be amazing but it would be BECAUSE I was able to pay everything down with the equity release. 

An affordability calculator will give you an indication.

https://www.coventrybuildingsociety.co.uk/consumer/mortgages/mortgage-calculators/affordability-calculator.html

BarelySentientAI

Capri84 said:

Well that’s what I wondered, as my affordability would be amazing 

Your affordability is only amazing if your income has gone up massively.  You say "financial situation has changed a bit" - is that what you mean?

You're basically saying to the lender "will you give me a mortgage for £260k on my salary?".

Capri84 said:

So yeah, guess they’d say no because they’d base it on the now and not the ‘could be’ 

They can, if they choose, base it on the 'could be' and put a condition on the mortgage to say that you must pay off loan X and credit card Y within 30 days etc.

General advice is usually not to convert unsecured debt to secured debt though.