With an extension, you can add value to your home, avoid the hassle of moving house, and adapt your living space to suit your lifestyle.
Despite the dust and noise that will be circulating around your home, your life should be improved when work has been completed. It might even be that you’re one step closer to living in your dream home after everything has settled.
Of course, work can’t commence until you have raised the funds for your home improvement project. So, unless somebody kindly offers to pay for your extension, you will have to get the money from somewhere.
Remortgaging for an extension
Some of the most searched terms on google are How to remortgage house and also Extension mortgage and remortgage for an extension. The reason these terms are searched is when you are looking for a dream extension, general building work or a loft conversion the most obvious place to fund them is on your existing mortgage.
It’s our opinion as an experienced mortgage broker that it makes sense to fund home improvements with a remortgage. Mortgage interest rates will be lower than taking out a personal loan and at the end of the day even though you are extending your home loan you will also be increasing the property value.
Raising funds for an extension project
There are different ways to fund your project.
You could take out a personal loan or use your credit card. Alternatively, you could make an effort to save money as you wouldn’t need to take out any line of credit.
Or you could remortgage to fund home improvement work as this could be the most sensible option for you if you’re looking to add extra space in your home.
Ultimately, the choice is yours. But in this guide, we will look at the ins and outs of remortgaging for home improvements to give you a better understanding of what is involved and how to get cheaper rates.
Keep reading to learn more and then get in touch with our team if you would like to look at your remortgage options after reading this guide.
Things to think about before a remortgage for extension
A remortgage for improvements for your home could be a good idea, whether you own your house outright or are still making payments on your original mortgage.
But you shouldn’t take on this financial commitment lightly. It’s wise to ask yourself the following questions before deciding on a remortgage for your planned project.
How much equity do you have in your home?
You should avoid remortgaging if you haven’t built up enough equity as you could decrease the value of your home and risk it falling into negative equity. You might also end up in a worse loan to value bracket and this will affect how much you can borrow in the future.
Read more about loan to value here.
So, before you remortgage, calculate the amount of equity you have in your home. You can do this by finding out how much your property is worth (perhaps by speaking to an estate agent) and subtracting the value of your mortgage balance.
If you’re unsure about the amount of equity you need and whether or not you will be eligible to remortgage, speak to a mortgage broker at YesCanDo Money and we will discuss your situation with you.
Can you afford the extension?
When you remortgage, you effectively take out a bigger loan, so you need to make sure you can afford higher monthly repayments over a longer term.
Of course, you might be in a position where you think you can afford to remortgage now. But think about the future. Do you plan to grow your family? Will your job situation change? Are you hoping to retire in the next few years? If your finances are likely to drop, for any reason, you might not have the financial means to afford the higher monthly repayments. You might even want to delay your plans.
But if you think you can afford the extension, despite the changes you might face in the future, then a remortgage could be a good idea.
Is a home extension worth it?
If you are living in your forever home, then an extension will be worth it if you think it will give you the home of your dreams.
But if you are planning to move house, you need to consider the financial costs of both the remortgage and extension relative to the impact an extension will have on your property value.
If you stand to lose money, remortgaging to build an extension probably isn’t worth it. So, do your own research or speak to one of our mortgage brokers for impartial advice.
Are you Self-Employed?
In the past, self-employed people found it harder to get a mortgage or a remortgage than PAYE employees but thankfully, this isn’t strictly the case anymore. There are lots of lenders willing to offer mortgages to those who are self-employed although lending criteria can be stricter.
If you’re self-employed, you should be able to remortgage provided you have evidence of past and current income and confirmation of any future work coming in.
If mainstream lenders deny your application, perhaps because your income isn’t secure or you don’t have the required set of trading accounts, there are specialist lenders who will treat you more favourably.
Get in touch with a mortgage advisor at YesCanDo Money if you’re self-employed and need help finding the appropriate mortgage lender for your remortgage.
Learn more about self-employed mortgages here.
Do you have Bad Credit?
You won’t necessarily be ruled out of a remortgage if you have bad credit but the deals you are offered may not be as attractive as the deals offered to borrowers with a good credit score.
Ultimately, your mortgage choices and the chances of a successful application will depend on the severity of your credit history and how recent your credit problems are.
If you have older credit issues and have taken steps to improve your finances, then you stand a better chance of being approved for a mortgage of 90% loan to value or higher.
Unfortunately, some mainstream lenders will deny your application if you have bad credit, even if you have taken steps to improve your situation. However, there are lenders who specialise in bad credit mortgages and these are accessible via the services of a mortgage broker.
Shall I remortgage before or after my home extension?
There are advantages to remortgaging before or after your extension project. Our advisors explain both options below.
Remortgaging Before Extension
Most people remortgage before starting work on a property extension as they need to release equity to fund the project. So, if you can’t afford to pay for your extension before remortgaging, this is the better option for you.
Remortgaging After Extension
If you do have enough money to start the extension before remortgaging, then you are free to go ahead and do so. You might even get a better deal when you do remortgage as you will own more equity if your home has increased in value after the work has been completed.
Of course, there is a small chance that your home won’t rise in value after the extension. Should this be the case, you may be financially worse off if you remortgage after work has been carried out. There is also the chance that your mortgage application might get rejected.
If you’re unsure whether to remortgage before or after your home’s extension, speak to a mortgage advisor at YesCanDo and we will help you make the right decision.
Alternatives To Remortgaging For An Extension
Remortgaging isn’t your only option if you want to fund an extension. There are alternatives, including the following.
Use your savings
The more money you have saved up the better as you may be able to use all or part of this to fund your extension. If you do have enough money to cover the building project, you won’t need to switch from your existing mortgage, you won’t need to worry about reducing your home’s equity, and you won’t have to budget for extra loan repayments and more interest.
Use a credit card
If you think you can pay back the balance on a credit card, then this could be one way to fund your extension. But as interest rates can often be quite high on credit cards, you do need to think carefully about this. If you can find a card with a low rate of interest or a credit card deal with a 0% introductory rate, this will be better than using a card with a higher interest rate.
Take out an unsecured loan or personal loan
If you don’t want to use your property as security, then an unsecured loan, such as a home improvement loan, could be the best option for you. You will usually need to have a good credit score to be accepted for a loan so you should check your credit file before you make an application. Be aware that unsecured loans often come with a higher interest rate than remortgages so the monthly loan amount may also be higher.
Take out a second mortgage (secured charge loan)
A second mortgage, also known as a secured charge loan, is basically a separate mortgage from your current mortgage. Second-charge mortgages usually come with lower interest rates than credit cards and personal loans but as you will have two mortgages instead of one, there will still be an increase in your monthly outgoings.
If you don’t think you will be able to afford mortgage monthly repayments on a second mortgage, perhaps because you are already stretched with the mortgage repayments on your current mortgage term, then this isn’t the right option for you.
Get a further advance for home improvements
A further advance on a mortgage for home improvements can be a very cost-effective way of raising money for an extension. A further advance is when you apply to your current mortgage lender for extra funds. It’s our opinion that it depends on which lender you are with and how far into your fixed term period as to whether it makes sense to consider this as an option.
For more advice on second mortgages, get in touch with a mortgage broker at YesCanDo Money today.
Will I need planning permission for an extension?
It depends on the size of the extension. If it isn’t likely to be higher than the roof of your house and if it doesn’t exceed 3 metres from the house wall, then you shouldn’t need planning permission.
If you’re unsure, it’s wise to check with your local planning authority as you don’t want to start work on your extension and then get told that work has to cease because it’s not classed as ‘permitted development.’
Conclusion: Should I fund home improvements by remortgaging?
Your ability to remortgage will be based on how much equity is in your home and whether you are eligible to remortgage. Most lenders will consider your application if you meet their criteria so you may have this option.
If accepted for a remortgage deal, you will be able to fund whether you have a loft conversion or an extension you have in mind, such as a conservatory, sunroom, or an extended kitchen. Many people use the extra money for other improvements to their homes, such as loft conversions and bathroom renovations, so you can use your home equity to fund whatever is right for your personal circumstances. It’s our experience that you will then have more equity in your home if you have increased the value of your property.
However, it might be that a second mortgage or a loan is better for you, so it’s wise to consider all of your options before you approach mortgage lenders.
If you’re unsure about which direction to take, get in touch with a mortgage adviser at YesCanDo and we will explore all of your options with you.
Remortgage for extension with the help from YesCanDo
If you want to remortgage to fund an extension or any other building work or home improvement work on your property, then we are here to help
Our specialist mortgage advisers have years of experience helping customers release equity, for a variety of different purposes, so if a new mortgage is something you are interested in, we can give you advice and support.
After getting in touch with us, your appointed representative will arrange a meeting with you. We will make sure the new mortgage is affordable to you and double check you have no early repayment charges on your existing mortgage.
They will discuss all of your remortgage options and after finding you a mortgage provider with the best deal, they will fill out your remortgage application on your behalf to raise funds for your home improvements.
For more information, please contact YesCanDo Money today on 033 0088 4407, send us a message on WhatsApp, or fill in the form below for a no-obligation callback.