Remortgaging for Home Improvements – Frequently Asked Questions
Listen below as Chris Needham talks all about Remortgaging for Home Improvements .
In less than 10 minutes, you’ll know a lot more about getting your remortgage sorted.
How does remortgaging for home improvements work?
If a client is coming to the end of their existing mortgage deal, especially if they are in a fixed rate deal, they will often contact us. They aren’t looking to move house, but would like to release some of the equity in the property to fund the cost of improvements.
We’ve done quite a few recently, including loft conversions and fitting new kitchens. Remortgaging can release cash to pay for that. We look at how much you owe currently on your property and how much it is worth: the difference is the equity. So what we’re talking about here is remortgaging and using some of that equity to pay for the home improvements.
What do you need to have to remortgage for home improvements?
A lot of people decide not to move house because of the costs involved. It means paying an estate agent, a solicitor plus stamp duty costs. Plus, now that a lot of people are working from home, they’re looking to adapt their existing property rather than move. Whether it’s to create space for growing children or a designated space to work from home, we’re getting a lot of these enquiries at the moment.
Obviously you need to own your own house, and have enough equity in the property to be able to release some of that to do the work. So if you bought your property quite recently and you only put down a 5% deposit, you wouldn’t necessarily have enough equity to cover your home improvements.
You also need to meet the affordability requirements for the lender to allow you to borrow more money.
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Is it a good idea to remortgage for home improvements?
Every case is different, which is why it’s so important to get in touch with us so we can just go through the options with you. We’ll work with you to understand how much equity you have in the property and give you an idea of how much you could release – and of course how much that’s going to cost.
As I said, this is an alternative to moving – so if you’re considering moving home to gain more space, you could also look at converting your loft for extra bedrooms or to extend the kitchen and make it a more usable space. Raising extra money to improve the property you’re in can be a lot more cost effective and rewarding than moving to a new property. But every case is different.
Are there any alternatives to remortgaging for home improvements?
If we see a client who has savings, one option is that they could use that money to do the work. Or, depending on how much you want to raise, you could look at a personal loan or a secured loan – which is effectively like a second mortgage on your property.
Sometimes we see a client and they’ve still got three years left on their fixed rate. If they remortgage to a different lender at that point, they’d have early repayment charges to pay – but instead we can look at a further advance from their existing lender. If you’ve got enough equity and the affordability numbers work, we can ask your existing lender to lend you some additional funds. That extra money would be on a new scheme with the same lender.
So there are various options, which is why it’s good to talk to a mortgage broker and understand what’s the most suitable way for you.
How much can you remortgage for home improvements?
Everyone’s different, and the amount you can borrow will depend on the value of your property, your existing mortgage balance, your income and expenditure. That’s how lenders will decide how much you can borrow.
Obviously improving your property by adding an extension or a new kitchen can add value, but lenders don’t take that into account at the start of the process. The value isn’t added to your property until the work’s all done.
All lenders are different in what percentage loan to value they will go up to. Some lenders would only let you remortgage up to 85% of the value of the property. We’re here to crunch all those numbers and come back to you with options.
How can BR Needham help with remortgaging for home improvements?
If you’re considering this, just get in touch with us – we can at least work out how much you could release and how much that’s going to cost. If that’s affordable and something you want to do, it could add value to your property when you sell further down the line and give you some of that money back.
It’s definitely more common at the moment for people to adapt a house they’re already happy with. They just need to use the space a bit differently. So come and have a chat to find out how this could work for you.
Your home may be repossessed if you do not keep up with your mortgage repayments.
You may have to pay an early repayment charge to your existing lender if you remortgage.