If you are thinking about adding an extension or getting a conservatory to add extra space to your home then a home improvement remortgage could be the best and most cost effective way to finance it. A frequent question our advisors get asked is, is a remortgage the best way to pay for home improvements? In this article we will discuss the different avenues that can be used to pay for your home improvements.
While there are different routes to finance your home improvement a number of factors will impact your options and eligibility for certain products such as
- Credit History
- Property type
For a tailored answer on the best options based on your personal circumstances speak with one of our specialist remortgage brokers today.
Home Improvement loan or Remortgage
If you are look at financing your home improvements then there are two main options for you. You can either get a home improvement loan or a remortgage. Knowing which one is right for you is what we will discuss in this article. It will come down to getting the best deal and lowest interest rate for your borrowing. Depending on the size of the home improvement you want to make may determine which route is best for you.
Remortgage – If you have equity in your property you can release this equity by increasing your mortgage to accommodate your home improvement needs
Secured Loan – Secured loans are usually for more than £20,000 and can allow you to get the level of borrowing you need. It’s called a secured loan as it is secured on your property but separate from your mortgage.
Unsecured Loan – An unsecured loan is a loan that is not secured on your property or any other asset. Unsecured loans tend to have a higher interest rate but this will depend on your circumstances.
Additional borrowing on top of your current mortgage will increase your monthly outgoings and you should think carefully before securing debts against your property. It is best to speak with a specialist advisor who will take full details of your circumstances and come up with the best options for you. If you have the equity in your home you may find a remortgage will give you the best rate and work out the most cost effective way to borrow a large sum of money for your home improvements.
Remortgaging to pay for home improvements
When considering your options looking into remortgaging is one of the best options as long as you have the equity needed in your home and can afford the increased monthly outgoings.
The first thing you will need to do when considering a loan for home improvement is work out an approximate figure. Are you looking to add an extension or just redecorate your home? Once you have an idea of what you want you can do some rough working out and use our remortgage calculator to work out what your repayment’s may look like. This is essential and will give you a guide on how affordable your home improvements are.
Working out the equity you have in your home will give you a guide on what you may be able to borrow. If for example your home is worth £200,000 and you current mortgage is for £100,000 you have £100,000 equity or 50% Loan to Value (LTV)
Remortgage for an extension
Even a relatively modest extension is likely to cost 20K+ and larger extensions while be a lot more. Due to the vast expense it’s no surprise a lot of home owners choose and potentially need to remortgage to fund their extension. Extensions are a great idea if you want more space but love your home and do not want to move. If you have a growing family or are looking to add further space or even a sunroom funding this by using the equity in your home is a great idea.
As extensions are considered permitted development you might not even need to get planning permission but if you are just starting to look at your options on an extension it, it is a good idea to get professional advice and to remember that you most likely will need to get approval under the buildings regulations.
Ensuring that your extension and building work is done professionally and within regulations will make selling your house smoother if the time ever comes to move. Your potential buyers solicitor may dig into your extensions to ensure it was carried out correctly and is within regulation and boundaries.
Remortgaging for a loft conversion
If you are looking to get a loft conversion remortgaging can allow you to get the funds to carry out all of the work needed. A standard loft conversion can anywhere from £10K -15K while a bigger conversion with rooms and an en-suite can be considerably more.
Remortgaging to get the funds you need to carry out your loft conversion can be a low cost way to finance this. A loft conversion can add up to 20% to the value of your home and can make a great investment to increase the value of your property. Increasing the value of your property will also mean that your mortgage will be a lower percentage of the value giving you more equity in your property and potentially allowing you to get lower rate mortgage deals.
What you need to think about
When thinking about remortgaging to make a big home improvement one of the main things that you will need to think about is equity. Working out how much equity you currently have in your home will allow you to estimate the funding you may have available if you were to remortgage.
Your credit rating is also important. If you have a good credit history and low amount of debt you should be able to get a low remortgage rate. If you have bad credit it may be more difficult to obtain a remortgage at a low rate. If you have any CCJs or have had an IVA in the past it will limit the number of lenders that will be willing to consider your application. Our specialist bad credit mortgage advisors are on hand to help if you are in a situation like this.
If you are wanting to move forward with remortgaging your home improvement’s then the first thing you will need to do is search the market and find out what mortgage products are available to you based on your current LTV and personal circumstances.
Firstly you should find out what your current mortgage provider will offer you. This may not be the best deal that you can get but it is a good base line to weight up your options once you have had a full search of the whole market. Using a specialist remortgage broker who knows the market is a good option and will save you many hours of scanning for the best deal. If you would like a specialist advisor to help you get the best deal get in touch with us today.