# Home rebuild increase value, how does it work in terms of equity back?



## p1tse (Feb 4, 2007)

Say a house was bought for £150k
£100k spend from saved money, credit cards
Total spend £250k

Say house value £500k

How does it work in terms of releasing equity in this scenario?
What's the likely cash/ equity can be had?


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## Andyg_TSi (Sep 6, 2013)

Sale price/valuation less outstanding mortgage = realiseable equity?
Off which you take off CC debts/savings spend = profit from rebuild?

Sorry if I'm coming across as simplistic


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## staffordian (May 2, 2012)

p1tse said:


> Say a house was bought for £150k
> £100k spend from saved money, credit cards
> Total spend £250k
> 
> ...


Need more information to answer that.

Is it bought as investment, or is it bought to live in?

Improvements paid for on credit cards will cost a huge amount long term!

Clearly if bought to do up and sell, the answer is simple, sell it, settle the debts and trouser the profit, so I doubt that's what you are asking.

I'm guessing house is bought to live in.

If so, best bet is to look to remortgage, borrowing enough to cover any existing mortgage (including any fees for early redemption) plus amount borrowed to improve it, plus any more to cover the equity you want to release.

Bear in mind new mortgages aren't as easy to get hold of as they were a few years back and income has to be sufficient in the eyes of the lender, so it's not a foregone conclusion that you could borrow enough. Also, if you're on a good rate you might not be able to remortgage at such a good rate, although an inferior rate will probably be better than having £100k on credit cards!


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## p1tse (Feb 4, 2007)

I was being nosey and using plucked out figures

For simplistic the £100k to do up is mix of loans, credit cards, savings


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## p1tse (Feb 4, 2007)

Andyg_TSi said:


> Sale price/valuation less outstanding mortgage = realiseable equity?
> Off which you take off CC debts/savings spend = profit from rebuild?
> 
> Sorry if I'm coming across as simplistic


It's to be lived in

On this basis

Then £500k - £150k mortgage = £350k
Surely can't get that as realise able equity can you which means £350k can be used to pay off mortgage £150k less say build £100k
So net £100k in pocket, mortgage free?


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## baxlin (Oct 8, 2007)

p1tse said:


> It's to be lived in
> 
> On this basis
> 
> ...


Sorry, I don't follow. Where are you going to live, because as I see it the only way you can release all the equity is to sell.

On the other hand if you are releasing the equity by borrowing against the value, you wouldn't be mortgage free.

Are you thinking about equity release mortgage where you don't service the loan, but the interest rolls up? If so, the minimum age is usually 60, possibly 55, but the maximum % released is around 30 - 40% of the value, and you have to be 70+ to get this%. Oh, and that would include the £150k existing mortgage.


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## fatdazza (Dec 29, 2010)

You "release" the equity in a house in one of two ways:

1. You sell the house. That way you have nowhere to live and a pile of cash.
2. You borrow against the value of the house. That way you have somewhere to live, a pile of cash, plus an outstanding mortgage on the house.


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## f4780y (Jun 8, 2015)

To put it simply, what you release in equity you add on to your mortgage. 
So you have 150K mortgage, and release the other 350K equity, then you have a 500K mortgage.


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## Bero (Mar 9, 2008)

You will not be able to release all the equity while retaining ownership, hopefully the following is clear.

In your example: -



> Purchase/Initial mortgage £150k
> Refurb £100k
> Total spend £250k
> 
> Refurbed value £500k


If you're going to have a 75% LTV (loan to value) you could remortgage for £375k, or @ 60% LTV for £300k.

So you would be releasing £225k or £150k equity (over and above the initial £150k mortgage)


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## p1tse (Feb 4, 2007)

Ah right

Makes sense


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## staffordian (May 2, 2012)

The only way to get mortgage free in a scenario similar to the one you are suggesting would be to buy cheap, improve, sell for more (hopefully!), and repeat a few times.

Not easy or risk free, but possible if you have the determination and don't mind moving regularly.


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