Remortgaging provides homeowners with access to more competitive interest rates, and it can also serve as a way to unlock the equity you’ve built up, ultimately giving you a flexible lump sum of cash or simply allowing you to borrow more.
This additional funding can be used in many ways, yet one of the most popular choices is investing in home improvements to enhance and add value to a property, which is an effective method to fund upgrades without relying on other types of credit.
That said, it’s integral to understand how remortgaging for home improvements works before making a decision. To help you get to grips with the details, we’ve compiled this guide covering everything you need to know.
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Can You Remortgage for Home Improvements?
In short, yes, you can remortgage to fund home improvements. When your mortgage term ends, you’ll be moved onto your lender’s standard variable rate. At this point, you have the option to either renegotiate a better deal or switch to a new lender for a more favourable rate. As such, it can both secure a better mortgage rate and provide access to funds that could increase your property’s value.
How Does Remortgaging for Home Improvements Work?
For instance, let’s say that your current mortgage stands at £100,000, and as your term nears its end, you want to install a new kitchen or add a conservatory. With renovation costs potentially reaching £20,000, not everyone has that kind of ready money.
In this case, you could opt to increase your mortgage amount through extra borrowing. This implies securing a new mortgage of £120,000, which would cover your existing balance while providing £20,000 as a lump sum. This additional borrowing would then be incorporated into your mortgage, with your monthly repayments adjusted accordingly.
What are my options?
Increasing Your Existing Mortgage for Home Improvements
This involves discussing the possibility of increasing your loan amount with your current lender. It can be a good choice if your current mortgage comes with competitive interest rates and you’re happy with your lender’s terms.
Another consideration are remortgage fees like an early repayment charge (ERC). If leaving your current mortgage deal early would incur a penalty, staying with your lender and borrowing more could be the better option cost-wise.
Releasing Equity for Home Improvements
Remortgaging to release equity is another way to finance renovations. It essentially allows you to access a portion of your property’s value as a tax-free lump sum. Unlike traditional borrowing, repayments aren’t required until the last surviving homeowner either moves into care or passes away.
However, it’s important to think about the impact, given that this option could reduce the inheritance you’re able to leave behind.
Taking Out a Second Mortgage for Home Improvements
If you have a sufficient enough income, you could keep your existing mortgage while taking out a second one. Though, with this approach, you’ll be making repayments on two separate loans, which increases the total amount secured against your property.
You have to look at your financial position carefully here, as second charge mortgages often come with higher interest rates. Therefore, making sure your income is stable and that you can comfortably manage the additional repayments is essential before deciding.
Taking Out a Personal Loan or Using a Credit Card for Home Improvements
If mortgage rates have gone up, then you might find a more competitive option through a secured loan. Although, falling behind on a loan that uses your home as collateral would put your home at risk of repossession. Similarly, using a credit card for renovations without a solid repayment plan can quickly lead to financial difficulties.
That said, remortgaging after home improvements has its advantages. Specifically, any enhancements which boost your property’s value will, in turn, increase your equity. This can work in your favour when remortgaging later by how securing a mortgage with a lower loan-to-value ratio usually results in more affordable monthly repayments.
How Much Can I Borrow to Remortgage for Home Improvements?
How much you can borrow for a remortgage to fund home improvements depends on:
- Affordability: Lenders will assess your ability to manage the new monthly repayments by comparing your income against your regular outgoings.
- Credit score: A strong credit history can increase your borrowing capacity, while bad credit marked by missed payments or high debt may limit how much you can borrow.
- Amount of Equity: The more equity you have in your property, the higher the amount you can borrow for renovations.
Should I Remortgage for Home Improvements?
Before deciding to remortgage for home improvements, there are a number of things you should consider. Namely, remortgaging is a big commitment, so make sure you’re confident about taking on the ongoing repayments. Think about how unforeseen events, such as a job loss or pay reduction, might affect your ability to keep up with them.
It’s likewise crucial to check whether you’d face an early repayment penalty if you’re on a fixed-rate deal. And finally, be sure whether the renovations you have in mind will genuinely add lasting value to your property.
Get Remortgaging Support
Choosing to remortgage for home improvements is a decision which requires careful thought. To guarantee you make an informed choice, it’s vital to explore all your options and seek expert guidance. Our user-friendly online platform lets you compare remortgage deals from across the UK, with real-time updates on the most competitive rates available.
Once you’ve found a deal that suits your needs, our team of experts is ready to provide personalised support. We take the time to understand your unique financial situation and goals, ensuring we help you choose the best remortgage option for you.
If you’re feeling uncertain or need some advice, don’t hesitate to get in touch. Our aim is to make the process as straightforward as possible, removing any confusion and helping you secure a remortgage which aligns with your financial future.
FAQs
Is it a good idea to remortgage for home improvements?
Remortgaging to make home improvements is a great way to increase your property’s value and release additional cash each month, especially if you have significant equity.
Can I remortgage for home improvements for a buy-to-let property?
Yes, lenders will allow you to remortgage a buy-to-let property to release equity for improvements, particularly if the work is likely to increase the property’s value or rental income.
Can I remortgage for home improvements if I own my property outright?
Yes, if you own your property outright then you can take out a remortgage to release some of its equity, a popular reason being to fund home improvements.