Updated: February 16, 2022

Unencumbered Mortgages

Own your house outright and thinking about remortgaging? Unencumbered mortgages are the answer! Find out the pros, cons and exactly how to get one!

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Pete Mugleston

Author: Pete Mugleston - Mortgage Expert

Updated: February 16, 2022

If you’re considering remortgaging a property you already own outright, it’s important you understand the full process involved and all the options available to you.

This guide covers everything you need to know about the remortgage process for an unencumbered property. Read on to find out the exact steps you can take, how the right mortgage broker can help, and what criteria you will have to meet.

What is an unencumbered mortgage?

An unencumbered mortgage involves taking out a loan on a house you already own outright. Meaning the property is currently mortgage-free with no outstanding loans or restrictions. This can give you a certain level of freedom, but it’s important that you thoroughly consider the way in which you remortgage a paid-off property.

One key definition that lenders will disagree on is whether, under these circumstances, the process is a remortgage or simply a purchase mortgage. Technically speaking, a remortgage should involve refinancing a home with an existing mortgage. Taking out a purchase mortgage when the house is paid off may involve a slightly different process.

Regardless of how a lender defines the exact procedure, there are some key ways you can prepare your application in order to find the best deals. Having an experienced broker by your side can certainly make a big difference, saving you a lot of time and, potentially, some money too.

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Why you might want to remortgage an unencumbered property

Your reasons for wanting a mortgage/remortgage for an unencumbered property can be fairly diverse, and everyone’s situation will be different.

Some common scenarios for organising a remortgage for a house that’s been paid off include:

  • Buying someone else out of the house
  • Inheriting a property and refinancing before you’ve owned it for 6 months
  • Using the finance to pay-off or consolidate other debt
  • Upsizing or moving to a more expensive location
  • Looking to buy your dream holiday home
  • Helping your children or grandchildren with university costs or a deposit for their own house
  • Generating capital to start a new business
  • Carry out renovations or home improvements
  • Getting hold of money for buying a big ticket item like a car
  • Accessing funds to purchase a buy-to-let (BTL) property

How to remortgage an unencumbered house

In order to remortgage an unencumbered property, there are some key steps to follow which should help make the process much more straightforward:

Step 1: Calculate your equity and home’s value

Before you begin the remortgage process, it’s important to know exactly where you stand with your finances. This will include understanding how much your home is worth and therefore how much equity you’re able to access.

You can get a fairly reliable estimate by comparing your house against similar properties in the same area that have sold recently, checking the government database, or speaking to a local estate agent.

Step 2: Work out how much you need to borrow

The next step in the process involves knowing how much money you need access to. Your plans for the funds and reasons for remortgaging will dictate the amount you need to borrow.

There’s no perfect answer and the right path to take will be the one that best suits your personal circumstances. Some lenders may offer more favourable terms than others based on your individual situation. So you need a solid plan in place if you’re hoping to find the best mortgage deal for your unencumbered home.

Step 3: Speak to a broker

An expert broker who has experience with this process is going to be able to assess your whole financial situation swiftly, and direct you down the most secure route.

The advisors we work with will be able to find you the best mortgage deal and pair you up with the lender who has the most appropriate offer for your circumstances. This clarity and guidance will make the whole process much more straightforward, allowing you to make fully informed decisions with all the correct information to hand.

If you make an enquiry we can arrange for a specialist in this area to contact you straight away.

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Factors that impact your eligibility

The lending criteria for unencumbered properties can vary depending on the lender and your specific situation. So, it’s really important that you have full access to all the available options.

Most eligibility requirements are comparable to those of a regular mortgage, and include:

  • Loan-to-value (LTV): Typically, if you’re an employee in a (PAYE) role, you can often expect up to 90% LTV for a residential mortgage and a limit of 85% for a buy-to-let mortgage. Generally, the lower the LTV, the better the deal you might get. But the exact LTV requirements and offers available will differ greatly between lenders.
  • Income and affordability: Your current earnings will be used in the affordability calculations, so make sure you have your proof of income to hand. Lenders will also look at any outstanding debts. This will include balances and repayments for loans, credit cards, and other forms of borrowing. If you’re self-employed, using a broker will be the best way to speak with the lenders who are more comfortable with non-standard income.
  • Credit score: Lenders will look at your credit history as part of the application. So, it’s vital you download your latest credit reports because these scores can affect your remortgage application. Once you have all your reports to hand, your broker can help evaluate them. And then, instruct you on where to make improvements. This will result in a more attractive application and increase the likelihood of getting the best deal.
  • Length of ownership: This will largely apply to properties you are gifted or inherit. Most lenders will not allow you to remortgage an unencumbered property unless you’ve owned it for a minimum of 6 months. However, there are some specialist lenders out there who will consider other scenarios. The brokers we work with can give you tailored advice on which lenders to approach.

You can find out more about general mortgage eligibility in our guide to mortgage applications. One of the key differences for this situation will be that lenders will want to know exactly why you plan on pressing ahead with a remortgage for an unencumbered property.

Can you get a buy-to-let (BTL) mortgage on an unencumbered property?

Yes, it’s possible . The eligibility and affordability requirements can differ between a residential and buy-to-let mortgage. For a buy-to-let property a lender’s main concern will centre around the projected rental yield and whether this can comfortably cover the mortgage repayments.

Get the right advice from a remortgage specialist

Our free broker-matching service means that we’ll pair you up with a specialist advisor who can assess your needs and guide you through the whole process. If you’re looking to remortgage a house that’s paid off, we’ll introduce you to a broker who has existing relationships with lenders and experience securing similar loans.

Just call 0808 189 0463 or make an enquiry online and we’ll arrange a free, no-obligation chat between you and your ideal mortgage broker today.


Can you get an unencumbered mortgage with assets but no income?

It is difficult, but you can sometimes get a mortgage using your assets instead of a standard income. However, there are very few specialist lenders out there who will consider this arrangement. So it’s best to get the help of an expert broker for a complex situation like this.

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We can help! We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Remortgages Ask us a question and we'll get the best expert to help.

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Pete Mugleston

Pete Mugleston

Mortgage Expert

About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

FCA Disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms that are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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