Home Improvement Remortgage

Pay for home improvements in a cost-effective way

Are you wanting to make some home improvements but not sure how to fund them? Remortgaging might be the solution you are looking for.

Remortgaging is a process of switching your existing mortgage deal to a new remortgage lender, or renegotiating the terms of your current mortgage with your existing lender. In this article, we will explain what remortgaging is, how it works and how it can be used to finance home improvements.

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What is remortgaging?

Remortgaging is a way for homeowners to switch from their existing mortgage to a new mortgage product or lender. The process involves paying off the existing mortgage with the proceeds of the new mortgage.

The new mortgage could offer lower interest rates, lower monthly repayments, a better mortgage term or features that are more suited to your financial circumstances.

How does remortgaging work?

When you remortgage, you are essentially taking out a new mortgage on your property. The new mortgage provider will pay off your existing mortgage, and you will start making repayments on the new mortgage. The amount you can remortgage for will depend on your home’s current value, your credit score, and your income.

How can remortgaging be used to fund home improvements?

Remortgaging can be an effective way to fund home improvements. By releasing equity in your home, you can access funds to pay for the improvements, such as a new kitchen, bathroom, or extension.

Equity is the difference between your home’s value and the outstanding mortgage balance. For example, if your home is worth £300,000, and you have an outstanding mortgage balance of £150,000, your equity is £150,000.

But, just because you can remortgage for home improvements, should you?

Benefits of remortgaging for home improvements

Remortgaging can be a great way to finance home improvements. It can release equity, offer lower interest rates and longer repayment terms, potentially save you money, simplify your finances, and increase your property’s value. For example:

Release equity

Remortgaging can release equity in your home, which can be used to fund renovations. As mentioned above, equity is the difference between your home’s value and the outstanding mortgage balance. By remortgaging, you can borrow against this equity and access funds to pay for the improvements.

Lower interest rates

Remortgaging can offer lower interest rates compared to other funding options, such as personal loans and credit cards. This means that you could potentially save money on interest charges over the long term.

Longer repayment terms

Remortgaging can offer longer repayment terms than other funding options. This means that you could spread the cost of the improvements over a more extended period, which could make the monthly payments more affordable.

Potential cost savings

By remortgaging, you could potentially save money on your monthly mortgage payments. If the new mortgage product offers a lower interest rate than your current mortgage, you could save money over the long term.

Simplify your finances

Remortgaging can simplify your finances by consolidating your debt into one monthly payment. If you have multiple loans and credit cards, remortgaging could help you manage your finances more efficiently.

Increase property value

Home improvements can increase the value of your property, which can be beneficial if you plan to sell your home in the future. By remortgaging to fund the improvements, you could potentially increase the value of your property and make a profit when you sell.

Risks of remortgaging for home improvements

While remortgaging can be a good way to fund home improvements, there are some risks to consider before making a decision:

Increased debt

When you remortgage, you’re potentially taking on more debt, which means you’ll be paying interest on a larger amount for a longer period of time. This can result in you paying more interest over the life of the mortgage.

Cash-out refinance

Cash out refinance involves borrowing against the equity in your home and taking out a larger mortgage than you currently have. The excess cash can then be used however you need to. While this can be a convenient way to access cash, it does increase your overall debt and may put your home at risk if you’re unable to make your mortgage payments

Higher monthly payments

Depending on the interest rate and term length of your new mortgage, your monthly payments could be higher than what you were paying previously. This can put a strain on your finances, especially if you haven’t accounted for the increased payments.

Negative equity

If the value of your property decreases, it’s possible that you could end up owing more on your mortgage than your property is worth. This is known as negative equity and can be a risky situation, particularly if you need to sell your property in the future.

Early repayment charges

If you remortgage and then decide to repay your mortgage early, you may be charged early repayment fees. These fees can be substantial and can negate any savings you might have made by remortgaging.

What home improvement projects can be funded by remortgaging?

Common home improvement projects that can be funded by remortgaging include:

Extension

An extension can add significant value to your property by creating more living space. Whether you add an extra bedroom, a larger kitchen, or a new living room, the additional square footage can increase your home’s value. However, it’s advisable to ensure that the extension is in keeping with the style of the property and that you have obtained any necessary planning permission and building regulation approvals.

Loft conversion

A loft conversion can add value to your property by creating an additional bedroom or living space. This can be particularly beneficial if your property has a small footprint and limited space for extensions. A loft conversion can also provide more natural light and better views than other rooms in the house, which can make the space more attractive to potential buyers.

Kitchen and bathroom renovation

Renovating your kitchen or bathroom can also add value to your property. These rooms are often seen as the heart of the home and can significantly affect a buyer’s decision to purchase the property. By updating these spaces, you can improve the overall aesthetic and functionality of your home, making it more attractive to potential buyers.

Energy-efficient improvements

Remortgaging can be used to fund energy-efficient improvements such as installing new insulation, upgrading your heating system, or adding solar panels. These improvements will not only make your property more comfortable to live in by reducing drafts and improving insulation, but they’ll reduce your energy bills and make your home more environmentally friendly. This can be particularly attractive to buyers who are looking for sustainable homes.

Structural repairs

Finally, if your home needs structural repairs such as fixing a cracked foundation or replacing a damaged roof, remortgaging can be used to fund the repairs. This can help to maintain the value of your property and ensure that it is safe and comfortable to live in. These repairs can also prevent further damage to the property and ensure that it meets building regulations. By addressing these issues, you can increase the value of your property and help make it more attractive to potential buyers.

What are my other options for funding home improvements?

Remortgaging isn’t the only option open to you to fund home improvements (although it typically is the more cost-effective solution because the interest rates are generally lower and the repayment terms longer.

Personal loans

Personal loans are a type of unsecured loan that can be used for various purposes, including home improvements. The interest rates for personal loans are usually higher than remortgage rates, and the repayment terms are shorter.

This means that the monthly payments are likely to be higher than remortgage payments. Additionally, personal loans usually have a maximum borrowing limit, which may not be enough to cover the cost of significant home improvements.

Home improvement loans

A home improvement loan is a type of secured loan that can be used to fund home improvements. The interest rates for home improvement loans are usually higher than remortgage rates, but lower than personal loan rates. The repayment terms can vary, but they are typically shorter than remortgage terms.

Credit cards

While credit cards can be used to fund home improvements, they are not a cost-effective option. The interest rates for credit cards are generally much higher than remortgage rates and personal loan rates, and the repayment terms are usually short.

This means that the monthly payments can be high, and the total cost of the borrowing can be expensive. Additionally, credit cards usually have a credit limit, which again may not be enough to cover the cost of your home improvements.

Equity release

Equity release is a way to release equity from your property without selling it. There are two types of equity release homeowners can use: lifetime mortgages and home reversion plans.

Lifetime mortgages let you borrow against the equity in your home, and the loan is repaid when you die or sell the property.
Home reversion plans are where you sell a portion of your property to a third party in exchange for a lump sum of cash up front, or regular payments.

Personal savings

If you have personal savings, you can use them to fund your home improvements. This can be a cost-effective option as you won’t have to pay any interest on the borrowing. However, it’s wise to ensure that you have enough savings left for emergencies and other expenses.

The remortgaging process – what you need to know

Research and comparison: Research and compare remortgage deals from various lenders to find the one that suits your needs and budget.
Application: Once you’ve found a suitable remortgage deal, you’ll need to apply to the lender. The application process will involve providing information about your income, employment status, and financial situation. You may also need to provide documentation to support your application, such as bank statements, pay slips, and proof of identity.
Valuation: The lender will carry out a valuation of your property to determine its current value. This will help the lender to decide how much to lend you and what interest rate to offer.
Offer and legal process: If your application is successful, you’ll receive a remortgage offer from the lender. You’ll then need to instruct a conveyancer or solicitor to handle the legal process of remortgaging. They’ll carry out the necessary checks and ensure that the remortgage is registered with the Land Registry.
Completion: Once the legal process is complete, the lender will release the funds to pay off your existing mortgage. Your new remortgage will then come into effect, and you’ll start making repayments at the agreed interest rate and term.

Bear in mind, the approval process for a remortgage can take anywhere from a few weeks to several months, depending on various factors such as the lender’s processing times, the complexity of your application, and the legal process.

It’s important to allow plenty of time for the process and to ensure that you have all the necessary documentation and information ready when applying.

Potential fees and costs associated with remortgaging

You’ll also want to consider fees and costs when remortgaging, as they can significantly increase the overall cost of the mortgage. Potential fees and costs can include:

Early repayment charges (ERCs): If you’re still within the initial fixed or variable rate period of your existing mortgage, you may need to pay an early repayment charge to switch to a new mortgage deal. These charges can be significant and can vary depending on your lender and the terms of your existing mortgage.
Valuation and survey fees: When you apply for a remortgage, your lender may require a valuation or survey of your property to determine its current value. You’ll need to pay for these fees, which can vary depending on the value of your property and the type of survey required.
Legal fees: You’ll need to instruct a conveyancer or solicitor to handle the legal process of remortgaging. They’ll carry out the necessary checks and ensure that the remortgage is registered with the Land Registry. You’ll need to pay for their services, which can vary depending on the complexity of the legal work involved.
Arrangement fees: Some lenders charge arrangement fees for remortgages, which can vary depending on the lender and the terms of the mortgage deal. These fees can be paid upfront or added to the overall mortgage amount.
Broker fees: If you use a mortgage broker to find and arrange your remortgage deal, you may need to pay a broker fee. This can vary depending on the broker and the services provided.

Tips for homeowners considering remortgaging for home improvements

Assess if remortgaging is the right choice

Before considering remortgaging for home improvements, assess whether it’s the right choice for you.

Consider the costs associated with remortgaging, including any fees and potential interest rate increases.
Also, consider if you’ll be able to afford the new monthly mortgage payments, especially if you choose a longer term length.
Be realistic about your financial situation and your ability to pay back the mortgage.

Choose the right mortgage product

When choosing a mortgage product for home improvements, it’s important to consider your specific needs and circumstances.

Consider the interest rate, term length, and any features such as offset or overpayment options.
Think about how long you’ll need to pay off the mortgage and how much you can realistically afford to pay each month.
It’s worth comparing different mortgage products and seeking advice from a reputable mortgage broker.

Use a mortgage broker such as Believe Money

While finding the right mortgage lender for a home improvement remortgage can be challenging, Believe Money is here to help. As a specialist broker, we have partnered with specialist lenders and mortgage providers that offer borrowing solutions to individuals no matter their personal circumstances.

Our dedicated team can work with you to assess your individual situation and help you secure the funds you need for your home improvement project. With zero upfront fees and access to specialist mortgage lenders, we aim to simplify the remortgaging process and allow you to enjoy its flexibility.

At Believe Money, we understand that every individual has unique needs and circumstances. That’s why we take the time to work closely with you to find the right mortgage product for your specific situation.

If you’re considering a home improvement remortgage and are looking for expert guidance and support, contact Believe Money today. We’d love to work with you to help you achieve your home improvement goals.

About Company

When it’s time to remortgage, getting the best deal to save money in the short and long term is often a main priority. Believe Money has access to hundreds of remortgage providers so whether you’re looking for lower interest rates, to release equity or consolidate debt into a remortgage, we work hard to get you the best remortgage deal.

We’re here to help you at every step of the remortgage journey. Contact us online or give us a call on 01302 591 360

Why Use Believe Money?

Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan provides.

Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.