A guide to Remortgaging for Home Improvements
Selling your property and looking for somewhere new to meet your needs can seem like an easy option.
However, most property experts will tell you that staying in your current home and making improvements is usually a far more cost-effective solution.
Remortgaging can release equity in your home, allowing you to do so.
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- Possible home improvement costs
- Can I remortgage for home improvements?
- Try our Mortgage Affordability calculator
- How to remortgage to release equity for home improvements
- What home improvements can be made?
- Calculating home improvement costs
- Home improvement loan vs. remortgaging
- Advice for funding home improvements
You might look to remortgage for an extension, a complete redecoration, or for new windows and roofing. Or, you might simply want to add value to your property.
Raising finance through remortgaging can be the most efficient, and often the least expensive, option to obtain the money for home improvement work. Below, we’ll go through everything you need to know.
Possible home improvement costs
Selling your property and looking for somewhere new to meet your changing needs can seem like an easy option, but most property experts will tell you that staying in your current home and making improvements – such as adding a bathroom or extra bedrooms – is usually far more cost-effective than buying a larger house.
However, despite being perhaps cheaper and keeping you close to your familiar community, home alterations and improvements do come at a cost. Depending on the extent of the work you plan to carry out, this could amount to many thousands, or in fact tens of thousands, of pounds. Taking out a remortgage on your property can be a fast, efficient way to raise a significant amount of money.
Can I remortgage for home improvements?
Yes, providing you have built enough equity in your home, and you can keep up with the new monthly payments.
Despite being perhaps cheaper, home improvements still do come at a cost. Depending on the work you plan to carry out, this could amount to many thousands, or even tens of thousands of pounds. Therefore, it’s essential to plan and budget before jumping into a remortgage.
How to remortgage to release equity for home improvements
Unless you have other personal assets to cash in, there are generally two ways that you can raise the large sum of money.
You can either take out a personal secured loan or a remortgage for home improvements. Like anything, both options have their pros and cons.
A remortgage for home improvements entails taking out a new mortgage on your property. You can then take advantage of the value already in your home, which is the difference between the value of the property (which may have increased over the years) and the remaining balance on your existing mortgage.
How much can you remortgage for home improvements?
If the value of your home is £350,000 and the remaining balance on your current mortgage is £150,000, then you have £200,000 of equity in your home.
However, you should note that lenders will not be prepared to let you borrow the entire value of your home. Like a conventional mortgage, you will likely get a maximum loan value of 90% of the property value. Lenders will then make calculations based on the current value of your home.
As with a mortgage, a secured loan is secured against your property, meaning your home is used as a guarantee of repayment. So, if for whatever reason you are unable to meet the repayments in the future, your home could be at risk.
When considering a secured loan, it is vital to get an accurate figure for the monthly repayments. Therefore, you can ensure that you are able to repay them. If you fail to keep up with the payments, then not only could you potentially lose your home, but your credit rating will be adversely affected.
Finding the best terms and rates for a personal secured loan is fairly straight forward. There are various loan comparison websites available, but it is advisable to talk to a professional for guidance. They’ll be able to run through your situation with fresh eyes and perhaps suggest options you hadn’t thought of.
What home improvements can be made?
It’s essential that you decide what improvements need to be made, well before you even consider applying for a remortgage. Some of the common house improvements made are:
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Calculating home improvement costs
If you have a clear idea of the work you want to carry out, then the first thing you need to do is make an accurate calculation of the costs involved. You may have to obtain several quotes from various contractors, suppliers, and craftsmen, or find a company that can manage everything for you.
Whichever route you take, you should ensure you have taken everything into account. Then, depending on the scale and nature of your improvements, the elements to consider could include:
- Architect’s plans and services
- Planning permission application fees
- Material costs
- Labour costs – builders, plumbers, electricians, and other specialists
- Waste disposal or collection
- Building regulation inspection
- VAT
- Money put aside as a contingency against unforeseen extra costs
Once you know how much money you will need to complete the project, you can begin to look at the possible options to obtain it.
Should I get a home improvement loan or remortgage?
There are a couple of main differences between remortgaging and secured loans. The first is that with a remortgage, your loan remains all with one lender rather than with two sources, one of which might have a higher interest rate. Mortgage interest rates are typically a little lower than loans, and with it all in one place you can be certain of the rate and repayment amounts.
Secondly, a personal loan provider will usually assess a loan’s affordability using different, and often more favourable, methods, whereas those used by a mortgage provider can be stricter. This could make the difference between borrowing the amount you need or not. While this may make obtaining the loan easier, it might mean you are taking an improperly calculated risk.
If you are unsure on what route to take, talk to a qualified expert. They will know the market and all its pitfalls and benefits when looking to take out a significant loan.
Advice for financing home improvements
If you have decided remortgaging your home is the most suitable option, there are a few steps you should take:
- Firstly, make a thorough plan for the improvements you want to make, however extensive or basic they are. Then you can draw up a budget that is as accurate as possible.
- Secondly, research the market and find out what plans and rates are available to you. Look at both new remortgage lenders and your current provider. After doing so, you might find that the most cost-effective solution is with a different provider. However, you could also find it’s better to take out a new mortgage for home improvements with you current lender.
Whichever route you choose to take, it’s vital that you examine your options. Doing your own research will return information available in the public domain. Bear in mind that there are remortgage deals and products available that are not advertised on the high street or online.
This is why it’s important to work with a specialist mortgage broker such as The Mortgage Centres. Our team not only has a profound knowledge of the mortgage market, but we are also able to access deals not commonly available to the public, often on an exclusive basis.
To get more information on how we can help or to book a free, no-obligation chat with an advisor, do not hesitate to get in touch today.
Phil Scott
Director
About the author
Phil has worked in the financial services industry since 1992, having started with a large insurance company. He went self employed in 1996 as an Independent Financial Adviser before setting up his first company, Needham Market Home Financial in 1999.
After four years, he decided to concentrate solely on mortgages and related insurances, and The Mortgage Centres was born. Since then, Phil has been influential in the opening of several new offices as the business continues to grow.
Qualifications
Financial Planning Certificate: 1,2 & 3
Year Attained: 1992
Certificate in Mortgage Advice and Practice (CEMAP)
Year Attained: 2001
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