Remortgage Cash-Out Calculator
Financial Summary
Tip: Most lenders have an LTV ceiling of 85-90%. If your new LTV exceeds this, you may be unable to secure the lump sum. Always maintain a buffer to avoid negative equity.
Can you actually get cash when you remortgage?
The short answer is yes, but it doesn't just happen automatically. You don't simply sign a new deal and find a check in the mail. To get a lump sum, you have to specifically request what's known as remortgage lump sum, or more technically, borrowing more than you currently owe on your home. If you only switch deals to get a lower interest rate, your bank just pays off your old lender, and that's it. To get cash in your hand, you need to tap into the equity you've built up in your property.
Think of it like this: if your house is worth €300,000 and you owe the bank €200,000, you have €100,000 in equity. If you decide to remortgage for €230,000, the bank pays off the original €200,000 debt, and the extra €30,000 is handed to you as a lump sum. It's a powerful tool, but it's essentially taking out a larger loan against your home, which means you'll be paying interest on that extra money for years to come.
Quick Summary: How it Works
- The Basics: You borrow more than you owe; the difference is paid to you.
- The Requirement: You must have sufficient equity in your home.
- The Cost: Your monthly payments will increase because the loan is larger.
- The Risk: You are increasing the debt secured against your primary residence.
The role of Loan-to-Value (LTV)
Before you can grab any cash, lenders will look at your Loan-to-Value (LTV). This is a percentage that compares the size of your loan to the total value of your home. For example, if you want a loan of €250,000 on a house worth €500,000, your LTV is 50%.
Lenders usually have a ceiling on how much they'll lend. Most won't let you go above an 85% or 90% LTV. If your home has dropped in value or you've already borrowed heavily, you might find you can't take any extra cash out. For instance, if your house is worth €200,000 and you owe €170,000, your LTV is already 85%. In this scenario, most banks will say no to a lump sum because the risk is too high for them.
Keep in mind that LTV doesn't just affect whether you get cash; it affects the interest rate you're offered. Generally, the lower your LTV, the better the rate. If taking a lump sum pushes your LTV from 60% to 80%, you might actually end up paying a higher interest rate on the entire loan, not just the extra bit you borrowed. This can sometimes make the "cheap" cash quite expensive in the long run.
Ways to get a lump sum: Remortgaging vs. Further Advance
You have two main paths when you want extra money from your home. You can either do a full remortgage or ask for a further advance. A full remortgage means you leave your current lender entirely and move to a new one. This is often the best route if you want to snag a much better interest rate while adding extra funds to the loan.
A Further Advance, on the other hand, is when you stay with your existing lender but ask them to lend you more money. This is usually faster and involves less paperwork because the bank already knows you. However, the interest rate on the extra bit of money might be different (and often higher) than the rate on your main mortgage.
| Feature | Full Remortgage | Further Advance |
|---|---|---|
| Speed | Slower (new application) | Faster (existing customer) |
| Interest Rate | Potentially lower (market rate) | Variable (often separate rate) |
| Costs | Valuation and legal fees | Lower or no setup fees |
| Effort | High (full underwriting) | Low (simplified check) |
What should you use the money for?
Since you're essentially turning your home equity into a long-term debt, the purpose of the money matters. Using a lump sum for home improvements-like adding an extension or upgrading a kitchen-is generally a smart move because it can increase the property's value, effectively "paying back" the loan through higher home equity.
Using it for Debt Consolidation is another common route. If you're juggling three different credit cards and a personal loan all with interest rates over 15%, rolling them into a mortgage at 4% looks great on paper. Just be careful: you're moving short-term debt to a 25-year loan. If you aren't disciplined, you might find yourself paying for a holiday from ten years ago well into your retirement.
Avoid using a remortgage lump sum for "lifestyle" spending-like fancy cars or luxury vacations. These are depreciating assets. If you borrow €20,000 for a car, in five years the car is worth €8,000 but you still owe the bank the full €20,000 plus interest. That's a recipe for a financial headache.
The hidden traps of borrowing more
It's easy to look at a lump sum as "your money" because it's in your house. But remember, the moment the bank gives you that cash, it's a liability. You have to consider the Early Repayment Charge (ERC). If you're switching lenders to get your lump sum but you're still in a fixed-term deal, your current bank might charge you thousands of euros to leave. This can completely wipe out the benefit of the new, lower rate.
Then there's the risk of negative equity. If you borrow up to the maximum LTV and house prices suddenly drop by 10%, you could owe more than the house is worth. This makes it impossible to sell the property or move without paying the bank a massive sum of money out of your own pocket. It's why most financial advisors suggest leaving a "buffer" of at least 15-20% equity in the home.
Step-by-step: How to get the cash
- Calculate your equity: Get a realistic idea of your home's current value. Don't just trust Zillow or online estimators; look at actual sales in your neighborhood.
- Check your current deal: Look at your mortgage offer to see if you have an ERC. If you do, calculate if the cost of the penalty is lower than the savings from a new rate.
- Determine your target LTV: Decide how much you want to borrow. If your home is worth €300k and you want €30k cash on top of a €150k loan, your new LTV will be 60% (€180k / €300k).
- Shop around: Talk to a mortgage broker. They can tell you which lenders are currently most generous with equity release and who has the best rates for your specific LTV.
- Apply and Value: The lender will send a surveyor to confirm the home's value. If the surveyor values the house lower than you expected, your lump sum might be reduced.
- Completion: Once the new mortgage is signed, the lender pays off your old balance and deposits the remaining cash into your account.
Can I get a lump sum if I have a low credit score?
It's much harder. While the house acts as security, lenders still care about your ability to pay the new, higher monthly installments. If your credit is poor, they may limit the amount you can borrow or refuse the application entirely, even if you have plenty of equity.
Does taking a lump sum affect my monthly payments?
Yes, almost always. Since you are increasing the total amount you owe, your monthly repayments will go up. The only way they wouldn't is if you significantly extended the term of your mortgage (e.g., from 20 years to 30 years), but that means you'll pay much more in interest over the life of the loan.
Is it better to get a personal loan or remortgage for cash?
For small amounts (under €10k-€15k), a personal loan is often better because it doesn't involve legal fees or house valuations. However, for larger sums, remortgaging is far cheaper because mortgage rates are significantly lower than personal loan rates.
Will the bank ask what I'm using the money for?
Yes, most lenders will ask for the purpose of the funds. Some are happy with "home improvements," while others are more cautious about "debt consolidation." Some lenders may even refuse to lend extra cash if they feel the purpose is too risky.
How long does the process take?
A full remortgage typically takes 4 to 8 weeks, depending on how fast the valuation and legal paperwork move. A further advance from your existing lender can be much faster, sometimes taking only a couple of weeks.
Next Steps and Troubleshooting
If you've run the numbers and realize your LTV is too high to get a lump sum, don't panic. You have a few options. You can focus on paying down the principal of your current mortgage for a year or two to build more equity. Alternatively, if you've made significant improvements to the home that aren't reflected in the bank's old valuation, you can request a new appraisal to potentially unlock more cash.
If you're worried about the increased monthly costs, look into an "offset mortgage." This allows you to keep your savings in a linked account that reduces the interest you pay on the mortgage, giving you a safety net while still accessing the capital you need.