Remortgaging for Home Improvements

Remortgaging for Home Improvements

Rather than moving home, many homeowners choose to improve or expand their current living space. Providing you have enough equity in your property, remortgaging serves as a way to finance home improvements whilst raising the value of your property at the same time.

What is Remortgaging?

Remortgaging is essentially the process of taking out a new mortgaging on a property whilst paying off an existing one. You usually do this when your current deal comes to an end and have the option of moving to a new lender, or staying with your existing one (completing a Product Transfer). When you are raising finance on your existing property, if you choose to stay with your existing lender, this is known as a Further Advance.

You can find out more about remortgaging here.

What is Equity?

Equity is basically the amount of your home that you own. You can calculate your equity by finding out the current market value of your property and subtracting your current mortgage balance.

For example, if you home is worth £250,000 and you have a mortgage of £150,000, you will have £100,000 worth of equity in your home.

Is Remortgaging for Home Improvements a good idea?

For many homeowners, releasing equity to improve or expand their home makes perfect sense and can actually be a great, long-term investment. Typically, the enhancements you make to your home will exceed the initial investment. Should you decide to sell later on, you can expect to fetch a significantly higher price than you could have done had you not made the improvements.

An alternative to remortgaging would be to move house and this can be a costly process due to associated fees such as stamp duty, legal feel and estate agency fees. If you are happy where you are but just feel like you need to increase the living space or modernise your property, remortgaging could be a very sensible option.

How could I improve my property?

There are many ways you could improve your property and in turn, add value. Examples include but are not limited to:

Building an Extension

As families grow, the once-spacious home can quickly feel cramped. What previously felt ample can soon be overwhelmed by furniture, belongings, and children vying for space. Whether you need an extra bedroom, a larger kitchen or living area, or a home office to cut down on commuting and spend quality time with family, building additional rooms can offer a solution. can serve various purposes.

However, it’s essential to note that building extensions can be pricey. It’s always worth discussing your plans with an estate agent who can help to advise you on how much value the extension is likely to add to your home post completion. This can ensure that you are not spending more on the building works than the amount value it will add to your home.

Always consider local planning permissions before undertaking any structural changes to your home.

New Kitchens and Bathrooms

A contemporary kitchen or bathroom can rejuvenate your living space significantly. Modern kitchens come equipped with technological advancements and sleek designs, making them both functional and aesthetically pleasing. Such upgrades not only enhance your living experience but also boost your home’s market value.

Loft Conversions

Loft conversions present another way to capitalize on unused space within your home. Typically, they prove more cost-effective than building a full extension. As with an extension, it is crucial to consider local planning permissions before undertaking any structural changes to your home.
General Maintenance and Repairs
Age catches up with homes, and repairs and upkeep can be costly. If overlooked for an extended period, these maintenance tasks can accumulate. Upgrading insulation, roofs, windows, heating systems, floors, and even electrical and plumbing components can revitalize your home and prolong its lifespan.

Interior Design Alterations

Over time, your you may feel that your home’s layout no longer fits your family dynamics. For example, you may want to have more inner parties and prefer a open plan layout where you can cook and entertain at the same time. While redesigning the interior can be enticing, exercise caution. While some modifications can elevate your home’s value, others might actually devalue it or deter potential buyers. Always consult a professional before embarking on significant structural or aesthetic changes to the layout of your home.

What factors will lenders consider if I want to remortgage my home?

As with any mortgage, lenders each have their own set of criteria that you need to meet in order to be eligible for a mortgage loan. The main areas that they will consider include:

The Equity you hold in your home

First and foremost, you need to have equity in your home in order to be able to release funds.

Typically, lenders require you to retain a minimum equity stake in your property, ranging from 5% to 25%, depending on their specific terms and criteria.

For instance, if your property is valued at £250,000 with an outstanding mortgage of £110,000, your equity stands at £140,000.

By maintaining a 10% equity stake, you could potentially release £126,000 for home improvements.

Your Income

As with any mortgage application, your income plays a pivotal role in determining affordability. Lenders aim to verify that your income is consistent and sustainable to manage monthly repayments. Generally, a higher income level allows for a larger borrowing capacity.

Outgoings

Lenders will assess your monthly expenses to ascertain your available disposable income after meeting all financial obligations. This helps them determine whether you can comfortably manage mortgage repayments.

Credit History

Your credit history serves as a testament to your reliability in repaying debts. A favourable credit record can enhance your borrowing potential, while a less-than-ideal credit history might limit your loan amount or result in higher interest rates.

Age

Age considerations arise because younger borrowers typically have a longer future earning potential, whereas older individuals might have a shorter time frame for earning income before they retire. Certain lenders may impose age-related restrictions on their mortgage offerings.

Affordability Calculators

Lenders use affordability calculators to determine an applicant’s borrowing capacity. These tools factor in multiple elements, such as income, expenses, and credit history. It’s essential to note that each lender’s criteria may vary.

Are there alternatives to remortgaging to pay for home improvements?

Absolutely! Another viable option is to apply for a secured loan. In essence, a secured loan is borrowed against your existing assets, primarily your home.

However, it’s crucial to understand that this route carries inherent risks. Should you falter on the loan repayments, you face the potential threat of losing your home through repossession. Therefore, it’s vital that you thoroughly evaluate the benefits of home improvements against the considerable risk to your property.

It’s also important to note that if you choose the secured loan path, you’re obligated to manage both the secured loan repayments and your existing mortgage instalments so you need to ensure that making payments on both is affordable.

If you are considering remortgaging for home improvements, get in touch with our expert team who can help advise you on the best mortgage options for you and your circumstances.

Your home may be repossessed if you do not keep up with repayments