How To Get an Unencumbered Mortgage

Unencumbered property refers to ownership without mortgages or legal constraints. This status simplifies sales or transfers, offering greater flexibility and control. The absence of financial burdens, such as loans or mortgages, makes this type of property attractive and easy to transact.

Given the attractiveness and straightforward nature of unencumbered properties, finding lenders willing to provide mortgages on such properties should not be too difficult. However, as with any home loan, various factors can impact eligibility.

Can you get a mortgage on an unencumbered property?

Yes, you can. Because you own 100% of the property, it puts you in a good position as it indicates to lenders that you’re financially stable, and arranging an unencumbered mortgage should be fairly stress-free. However, you’ll still need to ensure you pass the lender’s affordability assessment and eligibility criteria.

You’d also ideally want to keep your loan-to-value (LTV) as low as possible to give yourself the best chance of qualifying for the best interest rate offers.

Is it a mortgage or a remortgage?

Technically, as you’re not replacing a mortgage with another one, unencumbered mortgages are new mortgage deals. However, some lenders will treat them as unencumbered remortgages, and will only give you access to their remortgage range. Yet in reality, the rates available and the process of securing the mortgage will be broadly the same, regardless of what it’s called.

Reasons for getting an unencumbered mortgage

You’re likely in a good financial position if you own a mortgage-free property. You won’t be making any monthly repayments and have an asset you can use as security to borrow against. Below are a few reasons you might want to get an unencumbered mortgage to release some cash:

• Leverage Home Equity: Use the equity in your unencumbered property to access funds for other investments or expenses
• Home Renovations: Finance major home improvements or repairs without depleting personal savings
• Debt Consolidation: Pay off high-interest debts, such as credit card balances, with a lower-interest debt consolidation mortgage
• Business Investment: Fund a new business venture or expand an existing one
• Property Purchase: Use the funds as a down payment or to purchase another property
• Education Expenses: Cover the cost of higher education for yourself or family members
• Emergency Fund: Establish a financial cushion for unexpected expenses or emergencies

Getting an unencumbered mortgage is a big decision so before you take one out for any of the above reasons, there are a few questions you should ask yourself.

• Are you aware of the risks involved? Taking out a mortgage on a property you fully own is a risk. If you fail to keep up with repayments you could lose your home.
• Does it make sense to take out a mortgage now? Think about why you want to borrow against your property. Is it better to take out a personal loan rather than borrow against your home?
• Is your current financial situation secure? Taking out a mortgage means you’ll have more monthly expenses. Consider whether you can get these new expenses before you take out a mortgage.

How to calculate your mortgage

Wondering how much your mortgage will cost? Our unencumbered mortgage calculator can help. Just input a few details and get an idea of what your future repayments could be.

How to get a mortgage on an unencumbered property

If you’re thinking of getting a mortgage on an unencumbered property there are a few simple steps you can take to make the process much more straightforward. First, make an enquiry with us and we’ll arrange for a specialist mortgage broker to contact you who can help with:

• Working out how much you want to borrow, what your loan-to-value will be, and establishing a tangible reason for needing the mortgage which will satisfy the lender
• Optimising your credit reports and preparing all the necessary paperwork for your application
• Identifying the best mortgage lenders, with the most competitive rates, who have previous experience in this area of lending

What are the requirements?

Much like with standard mortgage applications, there are strict eligibility criteria that you’ll need to meet and you’ll be expected to pass the lender’s affordability assessment. Your credit history will be scrutinised, as will your income and outgoings, and you’ll need to prove that you can afford to cover the repayments.

However, one factor that’s arguably unique when it comes to unencumbered mortgages or remortgages is the length of ownership – or the length of time you’ve owned the property.

Often only coming into play if you’ve inherited or otherwise been gifted a mortgage-free home, most lenders will stipulate that you’ll need to have owned the property for a minimum length of time, typically six months.

However, there are exceptions and some specialist lenders will be able to modify this if you haven’t owned the property for long enough; speak to a broker for an idea of the best lenders to approach in this situation.

What interest rates to expect

The table below provides an indication of the typical mortgage rates currently available.

The rates quoted above were correct at the time of writing and are subject to change at any time at the lender’s discretion. Speaking to a mortgage broker is the best way to keep track of the rates available at any given time.

Which mortgage providers will lend for this property type?

There are plenty of unencumbered mortgage lenders out there. Because the lender is taking on less risk, it shouldn’t be too much of an issue to find the provider – or the rate – to suit your circumstances.

This means you should easily be able to secure a suitable deal through a high street lender – including Barclays, HSBC, Santander and Virgin Money – though you may find even better deals from a specialist. Just make sure to perform a thorough unencumbered mortgage comparison before you make your decision.

Get matched with an unencumbered property specialist

If you’re looking to mortgage or remortgage an unencumbered property, we can put you in touch with a specialist to help. Our unique broker-matching service will do the hard work for you – just tell us a few details and we’ll introduce you to the advisor who can help secure the mortgage you need. It’s free of charge and there’s no obligation; call us on 0808 189 2301 or make an enquiry to get started.