Remortgage to release equity (for other investments, not retirement)

systemparadox

I am 39. We have made substantial overpayments to our mortgage over the years (currently with First Direct, who allow unlimited overpayments), such that our LTV is now less than 10%.

We have recently come to the conclusion that this was probably a mistake - rather than putting all our savings into overpaying the mortgage we should have diversified a bit more. Especially given the current economic climate.

So we're trying to remortgage to effectively "undo" some of the overpaying. The idea would be to invest this money elsewhere. Maybe at some point this might include buying some land or a rental property or something else.

However, this is proving to be much more difficult than I was hoping. Lenders want to know what the money is for and then they either decline to lend on that basis entirely or start asking for evidence.

When I initially contacted First Direct to ask about this they said that remortaging for the purpose of investing was fine, but then when I tried to actually do it they said it wasn't ok. But they refused to give me the list of valid reasons, which I find completely ridiculous.

I tried with L&C mortgage brokers and they dragged their feet and then basically gave up saying that lenders all wanted more information.

Equity release for over 55s is a thing, so why can't I do it?

I find it particularly infuriating given that none of this would have been a problem if we'd just kept the money in savings instead of overpaying it. But having done this it's now impossible to go back?

Does anyone have any experience with this or any suggestions on how to proceed?

Thanks.

sheenas

I guess they consider investing as gambling. I would review your options,

• fund home renovations
• put your kids through university
• repay short-term debts
• start a business
• fund care services and needs

I the issue you have is that your want to release money, but don't seem to have a clear idea of what you want to do with the money. IMHO I leave thing as they are until you have a plan in place.

retiredbanker1

How much would your monthly mortgage payment be if you got the loan?

Take off the amount you pay now - use the remainder to start investing??

No extra mortgae payments and if you need to stop investing at any time no penalties?

MWT

https://forums.moneysavingexpert.com/discussion/6677727/remortgage-to-release-equity-for-other-investments-not-retirement

But they refused to give me the list of valid reasons, which I find completely ridiculous.

I guess they are asking what exactly you want to do with the money rather than giving you a list of valid answers so you can just pick one of those instead of what you really want to do with it…

I tend to agree with the point about having a genuine actionable plan for the funds before trying to remortgage.

poseidon1

I suspect that along with the vast majority of the population your original intention in overpaying was to become mortgage free as quickly as possible.

In so doing you likely neglected the opportunity to diversify income and capital to significantly improve pensions and building up a tax free ISA resource, thereby locking up a significant amount of capital in your non income producing home.

Now you are finding main stream lenders have a general embargo against extracting house equity for general investment purposes.

I managed to get around this year's ago by having a separate withdrawal facility attached to my original interest only mortgage that allowed no questions asked withdrawals of cumulative mortgage overpayments. I exploited this facility during the pandemic to make stock market investments. Unfortunately that mortgage product ran its course, and under the now much tighter mainstream lending criteria the no questions asked withdrawal facility ( with Barclays) has been terminated never to return.

It remains possible to extract house equity for investing via the private banking lending sector. However you have to meet their high net worth criteria to qualify - example of such a lender below -

https://www.investec.com/en_gb/focus/intermediary-mortgages/how-to-help-clients-raise-capital-by-remortgaging.html

ritz55

What you are trying to do is very much possible and I have done similar on a number of occasions previously. What you probably just need is a good mortgage broker who can help you navigate the system (not the large organisations) probably a local broker with a good reputation, they may charge for arranging the mortgage but they will know which lender to use and which reasons would be considered acceptable.

We recently did a remortgage to renovate our house. Needed to provide quotes from 2 different builders for the work in order to remortgage, in the end was approved and funds released.

kingstreet

Equity release and a standard remortgage to raise funds for investment purposes are two different things. Here, for example, is what Halifax is prepared to consider as acceptable reasons for remortgaging;-

The following reasons for capital raising are acceptable:

• Home improvements
• Debt consolidation
• To gift to relative – e.g. to give to a family member towards the deposit for a property purchase. NB – on a new mortgage application where the deposit has been gifted confirmation may be required that the gift is 'not repayable' and the person(s) gifting the deposit 'will hold no interest in the property following completion of the mortgage'
• Deposit for purchase of another property, or outright purchase – second home or buy to let
• To add/remove a party to the mortgage e.g. buying out joint applicant who is leaving property and to be removed from mortgage
• Purchase consumer goods, weddings, holidays
• Buy additional land adjacent to property
• Purchase freehold/lease extension
• Purchase additional share/final tranche on shared ownership scheme
• Repay part/all of equity loan on shared equity scheme
• Repay a second/subsequent charge
• Investment purposes – however speculative purposes including high risk investments e.g. purchase of shares and gambling etc. are not acceptable
• Payment of fees/early repayment charges with existing lender.

As has been suggested, a decent broker would be able to handle this with little problem. However, expect some additional questions about the investment details for compliance purposes.

systemparadox

The fact that "purchase consumer goods" and "holidays" is on the approved list but investment purposes often isn't just seems completely insane to me.

Tried a different broker and I seem to be getting somewhere now. Looks like L&C wasn't up to the job.