Remortgage for Home Improvements: Full Guide

Homeowners often choose to remortgage their properties to fund home improvements for various reasons. Remortgaging can be a cost-effective method compared to getting a home improvement loan or seeking a further advance from your existing mortgage lender. But why remortgage? By remortgaging, you could be one step closer to your dream home and potentially increase its value.

How to Remortgage for Home Improvements

To pay for home improvements on your home, you might consider using the equity in your home. You can achieve this in a couple of ways:

1. Second Charge Mortgage: A second mortgage on top of your existing one, using your home’s equity as collateral. This option allows you to keep your existing mortgage while borrowing additional as a home improvement loan.
2. Remortgage to Release Equity: Ensure you’re not in negative equity, and if your property’s value has risen, you can remortgage to pay for improvements to your home(assuming a good credit rating). This involves replacing your existing mortgage with a new one, potentially with a larger loan amount, to accommodate the cost of renovations.

Navigating the Remortgage Process: Key Considerations

The remortgage process involves replacing your existing mortgage with a new, more favourable one. This can be done with your current lender or by switching to a different provider. While staying with your current mortgage lender might be simpler and often fee-free, exploring other options can help you find the most competitive deals.

Assessing Your Options: Fixed vs. Variable Rate Mortgages

When remortgaging, you may choose between fixed-rate and variable-rate mortgages. Fixed-rate mortgages offer stability with a set interest rate for a specific period, whereas variable-rate mortgages have interest rates that can fluctuate over time. Consider your financial goals and risk tolerance when deciding which option suits you best.

Timing Your Remortgage

Be mindful of early redemption charges if you’re planning to remortgage before your existing mortgage term ends. Though these fees can be substantial, remortgaging may still be worth it if the benefits, such as lower monthly repayments or access to funds for home improvements, outweigh the costs. Carefully assess your situation and consult with a mortgage advisor to determine the best way to fund home renovations and improvements.

Balancing Costs and Benefits

Weigh the potential advantages of remortgaging to borrow extra money against the associated costs, such as valuation fees, legal fees, and early repayment charges. Ensure that the potential savings from a lower interest rate or the added value from home improvements justify the expenses involved in the remortgage process.

By thoroughly understanding the remortgage process and carefully considering your options, you can make an informed decision on whether it makes sense to fund home renovations with a remortgage. Speak with a mortgage advisor to discuss your specific circumstances and receive personalised advice.

How we help our customers remortgage to raise for their home improvements

Jane (YesCanDo Mortgage Adviser)

As one of our mortgage advisors, I recently had the pleasure of assisting a couple, Mark and Sarah, with their remortgage journey. They wanted to fund significant home improvements, including a kitchen renovation and a loft conversion. Initially, Mark and Sarah considered taking out personal loans, but after assessing their financial situation and discussing their goals, I recommended remortgaging to release equity. By doing so, they could secure a lower interest rate and more manageable monthly payments compared to a personal loan.

I helped them gather the necessary documents and asked them to get their property valued by a local estate agent. With the property having increased since they moved in they were able to release a substantial amount of equity to fund their desired renovations.

After comparing multiple mortgage deals, we found a competitive remortgage package from a new mortgage lender. This allowed Mark and Sarah to not only fund their home improvements but also reduce their monthly mortgage payments.

The couple was delighted with the outcome, and their new kitchen and loft conversion have transformed their living space while increasing their property's overall value.

Factors that could impact your plans

Whether you are remortgaging to fund an extension, loft conversion, or other home improvements, here are some of the things you need to think about:

Planning permission and building regulations

Before embarking on any home renovation project, it’s essential to determine whether you need planning permission or building regulation approval. Certain projects may require planning permission from your local council while building regulation approval ensures your project complies with safety and environmental standards.

Project costs

It’s vital to have a clear idea of how much your home improvement project will cost before committing to a remortgage. Consider obtaining quotes from several contractors or builders and factor in additional expenses such as planning permission fees, building regulation inspections, and legal fees.

Property valuation

Your property’s value will determine how much equity you can release through a remortgage. It’s a good idea to get a current property valuation before starting any home improvement projects. A professional valuation can give you a realistic idea of how much your property is worth and help you make informed decisions about financing your project.

Credit score

Your credit score is a crucial factor in obtaining a remortgage. Lenders will consider your credit score when determining whether to approve your application and what interest rate to offer you. Before applying for a remortgage, it’s a good idea to check your credit score and address any issues that could negatively impact your application.

Repayment terms

Consider the repayment terms of your remortgage and how they align with your financial goals. Longer-term mortgages typically have lower monthly payments, but you’ll pay more in interest over the life of the loan. Shorter-term mortgages usually have higher monthly payments but result in less interest paid overall. Work with a mortgage advisor to determine what repayment terms align with your financial goals.

Early repayment charges

If you’re considering a remortgage, be aware of any early redemption charges associated with your current mortgage. These fees can be substantial and could impact the overall cost-benefit analysis of remortgaging for home improvements. Be sure to factor in these charges when determining whether remortgaging is the right option for you.

Exploring Alternative Ways to Fund Home Improvements

There are several other options to finance home improvements if remortgaging is not the right solution for you:

1) Use Savings

Using your savings is a great way to avoid changing your mortgage or taking on additional loans. This approach can save you from paying interest on borrowed money without increasing your outstanding mortgage balance.

2) Further Advance on Your Existing Mortgage

A further advance is a top-up to your existing mortgage with its own term and rate of interest, taken out with your current lender. It allows you to keep your current mortgage deal while borrowing extra funds specifically for improvements on your home.

3) Secured or Unsecured Home Improvement Loans

Secured loans use your property as collateral, while unsecured loans don’t require any collateral. Both types of loans have their pros and cons, so consider your financial situation and ability to repay before making a decision.

4) Government Schemes

Look for government-backed programs designed to help homeowners finance energy-efficient or eco-friendly home improvements. These programs often offer low-interest loans or grants to encourage sustainable home renovations.

Unleashing Your Home’s Potential: Home Improvement Ideas

Here are a few suggestions that could enhance your living space and add value to your property:

Build an Extension

Create extra rooms to cater to your growing family, home business, or hobbies. An extension could add as much as 11% to your property’s value. Building an extension can also make your home more appealing to potential buyers in the future.

Loft Conversions

Transform your loft into an extra bedroom, storage space, or home office. Experts suggest that converting your loft could increase your home’s value by up to 20%. Loft conversions make the most of the available space, often without altering the external appearance of your home.

Internal Repairs

Maintain your property and prevent a decrease in value by addressing any structural or cosmetic issues. This can include repairing a leaky roof, fixing plumbing issues, or refreshing the paint. Regular maintenance can help you avoid costly repairs in the future and keep your home in top condition.

New Kitchens and Bathrooms

Update and enlarge these essential rooms for added functionality and value. An updated bathroom could add 4-5% more value to your home, and a new kitchen could add 10%. Consider modern designs, energy-efficient appliances, and ample storage to make these spaces more appealing to potential buyers.

Home improvement loan for energy efficient improvements

Although you may need to borrow money for double glazing and other energy efficient improvements remember you will be saving money on future energy bills.

Landscape Your Garden

A well-maintained and landscaped garden can increase the curb appeal of your home, adding up to 5% to its value. Invest in landscaping, outdoor lighting, and create functional areas like a patio or deck for outdoor entertaining. A beautiful garden can be an extension of your living space and provide a relaxing place for you and your family.

Did you know that is very possible to remortgage to buy another property?

Speak to Expert Advisors about Remortgaging

Consulting with a mortgage advisor can help you navigate the remortgage process and determine if it’s the right choice for financing improvements to your home. They can assess your financial situation, guide you through the application process, and help you find the best deal.

Prepare Your Paperwork

When you’re ready to remortgage, gather all necessary documents, such as proof of income, bank statements, and identification. Having these documents readily available can speed up the application process and demonstrate your financial stability to potential lenders.

Remortgaging: The Final Step in Unlocking Your Home’s Potential

Remortgaging for home improvements can be a smart financial decision, allowing you to create your dream home while potentially increasing its value. By carefully considering your options, speaking with expert advisors, and choosing the right home improvement projects, you can unlock your home’s potential and enjoy the benefits of a beautifully renovated living space.

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