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Is it Sensible to Release More Equity?

Written By On 10/05/2014

Temptation is rising once again for homeowners to release extra equity from their homes by borrowing more against the cost of their mortgages.

Countrywide estate agents inform us that six out of every ten home buyers who purchased their first home previously to 2007, owed more on the loans than their properties were worth within a year. That figure has now decreased significantly to less than one in ten.

But is adding to the cost of a mortgage a sensible solution? Many experts have various opinions, maybe owing to the particular profession they are affiliated with.

The typical figure that a property owner across Britain may have in equity to release is around £14,000 according to Haarts estate agents. However they say the figure increases to more than six times that amount within the London area.

Mark Harris, from mortgage broker Savills advises that,

Remortgaging to repay expensive debt such as credit cards and personal loans is sensible as mortgage rates are lower than unsecured borrowing.

However the chief executive adds,

If you are converting short-term debt to long-term, you need to think carefully, as you could end up paying back more in the long run.

London & Country Mortgages' David Hollingworth feels one could naively put themselves into a precarious position by adding extra to a loan. Their Head of Communications says:

The danger is that having cleared the other debts there is a temptation to slip back into old habits.

However Mr Hollingworth believes it may be practical if

increasing the mortgage to carry out improvements such as an extension or loft conversion could add value to the property and avoid the need to move to a bigger home at a higher price and with all the expense of buying and selling such as agent fees, stamp duty, legal costs etc.