I Own My House Outright, Can I Remortgage?

By Kristian Derrick

Last Reviewed: 18th January 2024

If you own your property outright, it means it’s mortgage-free and unencumbered.

Whether you inherited it, paid for it in full with cash or finished paying a mortgage, it puts you in a strong position for remortgaging.

Here’s everything you need to know about remortgaging a house you own outright.

Can I Remortgage A House I Own Outright?

Yes. You can easily remortgage a house you own outright and access a lump sum of money at low rates.

It’s usually called an encumbered remortgage because the property isn’t associated with any existing debts, restrictions, loans or charges.

Since you own 100% of the equity on the property, the house is mortgage-free, so you’re not really remortgaging, but most lenders refer to the process as remortgaging.

You’ll be in an ideal position for a remortgage and get a wide range of excellent deals, provided you meet the eligibility criteria.

How Do You Remortgage A House You Own Outright?

Remortgaging a house you own outright works in the same way as standard mortgages but with a few differences.

When applying for standard mortgages, you must put down a deposit and borrow the remaining balance to make a purchase.

The lender calculates the rates you’ll pay based on the property’s value and deposit size. The higher the deposit, the lower the amount you need to borrow and the lower your loan-to-value (LTV) ratio.

Unencumbered remortgages don’t require any deposit.

The lender will conduct standard assessments like affordability and income and offer you borrowing rates based on the LTV, which is influenced by how much money you want to release from the property.

For example, if you want to borrow £100,000 and your house has a market value of £500,000, you divide the loan by the property’s value and multiply the figure by 100 to work out the loan to value.

LTV = 100,000/500,000 x 100 = 20%

This means you can borrow up to 80% of the value of your home. The lower the LTV, the cheaper the rates you get from lenders.

Considerations When Remortgaging A House You Own Outright

Although you’re in a strong position when you own your property outright, raising capital by releasing some of the equity can carry some risks.

Some things you should think about include the following:

Reasons for Remortgaging

Your reason for remortgaging a house you own outright should make financial sense, and lenders will; want to know what you intend to do with the money.

The funds can be useful for purchasing other properties, home improvements or repairs, consolidating debt, paying legal fees and making necessary purchases and investments.

New Commitment

Remortgaging your house entails taking on a new financial commitment.

Lenders will assess your affordability, and you must ensure you’re comfortable with the monthly repayments.

Risk

All mortgages have a risk, and you can lose your home if you fail to keep up with repayments.

Even if you’re financially stable now, ensure you consider whether anything is likely to change in future that can make it difficult to repay.

Can I Remortgage A House I Own Outright With Bad Credit?

Yes. Although bad credit can limit the number of lenders willing to lend to you, it’s not impossible.

The type of credit problems you have and how long ago they occurred can determine the type of deal you get.

Defaults and late payments are less severe than repossession and bankruptcy, and the more recent the credit issues are, the more difficult it can be to get approved.

You’ll need a specialised lender who considers borrowers with bad credit, and you can access them through mortgage brokers.

The lender may charge a higher interest rate because of your credit issues, but having an unencumbered house as security can help reduce the risk for the lender and give you access to better terms.

Can I Remortgage An Inherited House?

Yes. If you’ve inherited an unencumbered house, remortgaging should be fairly straightforward, provided you meet the eligibility and affordability criteria.

You must ensure the process of transferring ownership has been completed, and there are no complications like charges on the house, restrictions or family disputes.

Most lenders will require that you own the property for at least six months before remortgaging.

Can I Remortgage A House I Own If I’m Retired?

Although your options may be limited, you can still remortgage a house you own when you’re retired. Many lenders are reluctant to offer loans when you’re near or over the age of retirement.

Lenders may be concerned about affordability unless your pension is sufficient to repay the amount you borrow.

You may want to consider an equity release, as it allows you to borrow and repay later instead of making monthly repayments.

The loan is usually repaid when the property is sold after death or moving into a care home.

A mortgage advisor can help you understand your options so you can choose the most favourable deal.

Eligibility To Remortgage A House You Own Outright

The deal you qualify for will depend on your circumstances, and most lenders will want to establish that you can comfortably repay by looking at the following:

Your credit history
Age
Debt to income ratio
Affordability based on your income and monthly outgoings, including any other debts
Income stability
The type of property you want to remortgage
The number of dependants

Process Of Remortgaging A. House You Own Outright

Start by consulting a qualified mortgage broker or advisor and determine how much you can borrow.
Have your broker compare different lenders and present you with the best options.
Prepare the documents you’ll need for the application, including proof of identification and income like bank statements, payslips or tax returns.
Once you find a suitable offer, ask the mortgage broker to prepare and submit the paperwork. The broker will also manage the process and ensure you meet your completion date.