Unencumbered Mortgage (A complete guide)

What is an unencumbered loan?

An unencumbered mortgage, or remortgage, is a mortgage that is granted on an unencumbered property.

Unencumbered property refers to a property that is not mortgage-free. An unencumbered house is another term.

A property cannot be held in any secured loans or mortgages to make it unencumbered.

There are many reasons why you might want an unencumbered loan, such as:

  • To purchase a holiday home
  • To release equity
  • Fund your children’s tuition at university
  • Home renovation
  • To purchase a property to rent
  • To purchase a second home
  • For debt consolidation

Can you get a mortgage that is unencumbered?

Remortgaging your house is an important decision. You will be putting debt on it and making sure that it stays in repayment. You could lose your home if you don’t pay your monthly payments. It is important to understand the risks and consider whether you will need an unencumbered remortgage.

Are you eligible for an unencumbered loan?

Unencumbered lenders will run the same affordability checks on borrowers seeking a normal mortgage as they will for borrowers with unencumbered loans

This means that you need to be able and able pay your monthly mortgage payments comfortably.

A mortgage stress test will be performed to determine if you are able to pay your monthly mortgage payments even if the mortgage rate rises on your unencumbered loan or your income falls.

Is it possible to get a mortgage without any restrictions if you have bad credit?

You may be eligible for an unencumbered loan even if you have bad credit, but it will depend on the lender and their lending criteria.

Based on the length of bad credit, many mortgage lenders will consider borrowers with bad credit.

Bad credit could include;

  • Late or missed credit repayments
  • A County Court Judgment
  • Ad debt management plan
  • An individual voluntary arrangement
  • Bankruptcy
  • Repossession of your home

What mortgage lenders offer unencumbered loans?

A list of unencumbered lenders may change from time to time. If you are interested in finding out which mortgage brokers offer unencumbered mortgages, a mortgage broker can help you.

There may be different treatment of unencumbered mortgages from one lender to the next.

Unencumbered mortgages are often treated as new mortgages by some mortgage lenders. This is because they don’t consider it a remortgage, since you don’t have a mortgage on your property.

Some mortgage lenders will also treat unencumbered mortgages as a remortgage.

Consolidating debt by consolidating your debt with a mortgage that is unencumbered

Although you may be eligible for an unencumbered loan to consolidate debt, not all mortgage lenders will accept this.

An unencumbered mortgage may be a good option for debt consolidation. It reduces the interest cost you might have to pay on all your debts.

For inherited property, you can get an unencumbered loan

There can be mixed emotions when dealing with the death of a family member. Sometimes there are disputes that lead to the estate being charged.

Most disputes occur when two people inherit the same property.

An unencumbered loan is a way to get capital out of the inherited property.

The funds can be used to purchase another property while you rent the unencumbered one.

For a property in poor condition, you can get an unencumbered loan

People often buy houses in cash, then seek out unencumbered loans to finance development costs.

You may also need an unencumbered loan to renovate your property if it has fallen into irreparable condition.

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