Releasing equity with bad credit is often possible. You remortgage for more than you currently owe and receive the difference as cash, but the amount depends on your property’s value, what you already owe, your income and the type and age of your credit problems. With adverse credit, some lenders set lower maximum loan to value (LTV) limits, so you may be able to raise less than someone with a clean file. It is also new borrowing secured on your home, so it has to be affordable for the whole term.
This page explains how the amount is worked out, what people commonly use the money for and what to weigh up before borrowing more. If you only need a new rate rather than extra money, a product transfer with bad credit may be simpler. For the mechanics of the process itself, see our guide on how releasing equity works.
On this page
In short
- The amount you can release is limited by the LTV a lender allows, your affordability and its view of your credit history.
- With adverse credit, some lenders cap LTV lower, which can reduce how much equity you can use.
- Lenders usually ask what the money is for, and some purposes are viewed more cautiously than others.
- Early repayment charges, fees and a longer term can all add to the real cost of borrowing more.
Your home may be repossessed if you do not keep up repayments on your mortgage. Think carefully before securing other debts against your home. Borrowing over a longer term can mean paying back more in total.
How much equity can you release with bad credit?
Two limits work together. The first is the maximum LTV a lender will allow for someone with your credit history. The second is affordability: whether the lender is satisfied you can manage the larger mortgage, including under a stress test at a higher rate. You can release up to whichever limit is lower, less any fees.
| Maximum LTV allowed | Largest possible new mortgage | Money released before fees |
|---|---|---|
| 85% | £212,500 | £62,500 |
| 75% | £187,500 | £37,500 |
| 65% | £162,500 | £12,500 |
For illustration only. Based on a hypothetical home worth £250,000 with £150,000 left to pay (60% LTV). These are not any lender’s limits, and affordability, fees and your credit history may reduce the amount further.
The example shows why a few percentage points matter so much. The same home can support very different amounts depending on where a lender draws its line, and with more serious or more recent adverse credit, that line is often lower. Our guide to how LTV affects a bad credit remortgage explains the bands lenders use.
What do people release equity for?
Lenders usually ask what the money is for, and some may want evidence, such as builders’ quotes. Common reasons include:
- Home improvements, such as an extension, a new kitchen or essential repairs. See releasing equity for home improvements.
- Helping a family member buy a home, often as a gifted deposit. See helping family buy with your equity.
- Buying another property, such as a buy-to-let or holiday home. See remortgaging to buy another property.
- Clearing other debts, which turns unsecured borrowing into debt secured on your home. Read about debt consolidation remortgages first.
- Paying off an IVA where the arrangement includes an equity clause. See remortgaging to pay off an IVA.
Some lenders may be more cautious about certain purposes, such as putting money into a business or lending it to someone else. Always give the real reason. Misdescribing what the money is for on a mortgage application can have serious consequences.
Why do lenders look harder at your credit when you borrow more?
Raising capital increases both the loan and the LTV, so the lender has more at stake and less of a cushion if the home ever had to be sold. That tends to mean closer scrutiny of your credit file than a like-for-like switch would bring. Each type of adverse credit raises its own questions:
- County court judgments. Age, amount and whether they are satisfied all matter. See releasing equity with a CCJ.
- Defaults. Lenders look at the default date and whether it has been settled. See releasing equity with defaults.
- Missed payments. Recent ones, especially on the mortgage, weigh most. See releasing equity with missed payments.
- An IVA or debt management plan. An active arrangement usually narrows options most. See releasing equity after an IVA or with a DMP.
Is a remortgage the only way to raise money from your home?
No. Depending on your deal and your circumstances, you may be able to compare several routes. Each one is secured on your home.
| Option | Who lends | What happens to your current deal |
|---|---|---|
| Remortgage with extra borrowing | A new lender | It is repaid and replaced. Early repayment charges may apply if the deal has not ended. |
| Further advance | Your current lender | It usually stays in place, with the extra borrowing on a separate product. |
| Second charge mortgage | A separate lender | It stays untouched. The new loan sits behind it. |
| Lifetime mortgage (equity release) | Specialist providers, for older homeowners | It is usually repaid from the money raised. This is a different product that needs specialist advice. |
A general comparison, not a recommendation. Each lender sets its own criteria, and costs vary between products.
A second charge mortgage or further advance can make sense to compare if leaving your current deal would trigger large early repayment charges. Our guide on equity release or remortgaging explains how lifetime mortgages differ.
What are the risks of borrowing more against your home?
Any extra borrowing is secured on your property. Your home may be repossessed if you do not keep up repayments on your mortgage.
- A longer term can cost more. Spreading borrowing over many years can mean paying more interest in total, even if the monthly cost looks manageable.
- A higher LTV can limit you later. If prices fall or your circumstances change, a larger mortgage leaves less room to move at your next deal.
- Rates for adverse credit are often higher than high-street rates, which affects the cost of the whole mortgage, not just the extra money.
- Fees and charges such as product, valuation, legal and broker fees may apply. Adding them to the loan means paying interest on them too.
If the reason you want to raise money is pressure from bills or other debts, speak to a free debt advice service first. MoneyHelper, StepChange and National Debtline can help you see options that do not involve your home.
When in your mortgage deal should you release equity?
Timing can change the cost considerably. Releasing equity when your current deal ends usually avoids early repayment charges, and many people can arrange a new deal a few months ahead, often 3 to 6 months, depending on the lender. Time also helps your credit file, because negative entries carry less weight as they age and drop off after 6 years.
- Find your deal end date and any early repayment charge on your mortgage offer or annual statement.
- Get your free statutory credit report from each agency and ask for errors to be corrected.
- Check you are on the electoral register at your address.
- Work out exactly how much you need, with quotes where you can, rather than borrowing a round figure.
- Avoid new credit applications in the months before you apply.
What may affect how much equity you can release
The amount available is set by the property, the lender’s limits and your own finances. These are the details that tend to matter.
| Factor | Why it matters |
|---|---|
| Property value | A current valuation sets how much equity there is. Recent improvements may help, but valuations are based on comparable sales. |
| Outstanding mortgage and other secured loans | Everything secured on the home counts towards the LTV, including any second charge mortgage. |
| Maximum LTV for your credit profile | Some lenders set lower limits for adverse credit, and lower still for recent or serious entries. |
| Type and age of credit issues | An old, settled default is usually viewed very differently from a recent CCJ or an active IVA. |
| Satisfied or unsatisfied entries | Some lenders may want unpaid judgments or defaults cleared from the money released. |
| What the money is for | Lenders ask about the purpose, and some may be more cautious about business use or lending to others. |
| Income and affordability | The larger mortgage must pass the lender’s affordability checks and stress test. |
| Existing credit commitments | Loans, cards and car finance reduce the amount a lender may consider affordable. |
| Employment type | Self-employed and contract income is assessed differently. See self-employed remortgages with bad credit. |
| Early repayment charges | Leaving your current deal early can trigger charges that eat into the money you release. |
These are general points, not lender rules. Each lender sets and changes its own criteria.
Information an adviser may ask for
You don’t need all of this to make an enquiry. It helps to know where to find it, because an adviser is likely to ask about most of it.
- How much you want to raise and exactly what it is for
- Quotes or estimates for the purpose, such as builders’ quotes
- Your current mortgage balance, deal end date and any early repayment charges
- Details of any second charge or other loan secured on the home
- An estimate of your property’s value and any improvements since you bought it
- Your credit reports from Experian, Equifax and TransUnion
- Proof of income, such as payslips, SA302s or tax year overviews
- Dates and status of any CCJs, defaults or debt arrangements
Specific situations
More detail for particular circumstances.
Releasing equity for your own purposes after an IVA
Raising money for your own use, such as improvements or helping family, once your IVA has ended, and how it differs from an IVA’s built-in equity release clause.
Remortgaging to buy another property with bad credit
Using a remortgage to raise money towards buying another property, how buy-to-let and second homes are assessed differently, and the extra costs to plan for.
Releasing equity to help a family member buy a home
What is involved in releasing equity to give a family member a deposit, gift letters, how it affects your own affordability, and alternatives such as being a guarantor.
Releasing equity for home improvements with bad credit
What lenders typically ask for when you remortgage to fund home improvements with adverse credit, and the practical risks of borrowing more to pay for building work.
Releasing equity when you have a CCJ
How a CCJ affects releasing equity for purposes such as improvements or helping family, why status and age matter, and what to expect from the application.
Releasing equity when you have defaults
How defaults affect releasing equity for purposes such as improvements or helping family, why the default date and status matter, and what to expect when applying.
Releasing equity when you have a debt management plan
How a debt management plan affects releasing equity for purposes such as improvements or helping family, and what lenders actually see on your credit file.
Releasing equity when you have missed payments
How missed payments affect releasing equity for purposes such as improvements or helping family, why recency matters most, and what to expect when applying.
Frequently asked questions
Do I have to tell the lender what the money is for?
Usually, yes. Lenders ask about the purpose of any extra borrowing, and some may ask for evidence such as quotes or a gifted deposit letter. Give the real reason. Some lenders may not lend for certain purposes, and an adviser can tell you which routes may fit what you want to do.
Can I release equity to give money to my children?
It can be possible, and it is a common reason. The borrowing is yours, secured on your home, so you need to be comfortable repaying it. The lender for your child’s mortgage may want written confirmation that the money is a gift. Large gifts can also have inheritance tax implications, which GOV.UK explains. See helping family buy a home.
Can I release equity from a home I own outright?
Yes, that is taking out a new mortgage on an unencumbered home, and the same credit and affordability checks apply. With no existing mortgage, the LTV is simply the new loan against the value. Our page on remortgaging a mortgage-free home with bad credit covers this in more detail.
Will releasing equity affect my credit file?
The application usually involves a hard search, which other lenders can see, and your mortgage balance will be higher afterwards. Neither is usually a problem on its own if you keep up the payments. Our guide on whether remortgaging affects your credit score explains more.
Is it worth waiting until my credit improves before releasing equity?
It depends on why you need the money and how soon. Waiting can mean older entries weigh less and more lenders may consider you, but it may also mean a deal ends and you move onto the standard variable rate in the meantime. An adviser can compare the cost of acting now with the cost of waiting.
Can we release equity if only one of us has bad credit?
On a joint mortgage, both of you usually need to apply, and lenders check both credit files. The weaker record often shapes the options. Our page on remortgaging when your partner has bad credit explains how joint applications are assessed.