Written through digital marketing agency GoUp!, I wrote this set of blog posts for UK online remortgage platform loan.co.uk. The tone of voice is accessible and explanatory, guiding users through their options and answering commonly searched queries on a range of remortgage-related situations. Blog post for online remortgage platform loan.co.uk.

completed: 2021
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Should you remortgage to finance home improvements?

What are my options for funding home improvements?

Is it sensible to remortgage to finance home improvements? That’s a tough one.

That new kitchen you’ve been craving for years? The loft conversion with the ensuite? The new roof or replacement windows? That total bathroom rethink? The patio that needs demolishing and rebuilding?

Almost every home has substantial works that either need doing, or that its owners would love to have done. The question is whether to remortgage for home improvements is the best way to go about things, or is there a better approach?

What about Homeowner Loans? Or how about other methods of financing the work entirely, like personal loans, credit cards or finance plans available through ‘package’ building firms who specialise in some of these kinds of home improvement?

Remortgaging for home improvements.

Remortgaging to pay for home improvements is really no different to remortgaging at any other time. In essence, you bring your current mortgage to a close and begin a new mortgage with the same, or a different, lender.

If you are doing this as a way to pay for home improvements, then you simply need to borrow the sum you already had outstanding on your old mortgage, plus the amount you need to cover the home improvements.

So say you have a £150k mortgage on a home with a value of £250k. And say you now want to spend £25k on ripping out the old kitchen and installing a nice new one. When you remortgage, (ie. end your current mortgage deal and replace it with a new one), you will need to borrow £275k rather than £250k.

Borrowing on mortgage for home improvement is not much more complex than that. However, as always, there are things to think about. If you are currently on a Standard Variable Rate mortgage, or on a Fixed Rate deal that is coming to the end of its term, you should be able to do this without too much difficulty. However, if you are only part way through a fixed rate term, you may find that ending the deal prematurely carries a financial penalty that is especially unattractive at a time when you are hoping to spend money your money on making your house a better place to live.

You can read more about how remortgaging works here. 

When is it a good option to remortgage?

So when is arranging to remortgage for home improvements generally a good idea?

  • You want to borrow more to fund home improvements.

As we said earlier, remortgaging to cover the cost is a perfectly sensible way to borrow more money to pay for home improvements, providing you’ve thought about your options and a few basic conditions all seem to be in order.

  • Your fixed, tracker or discounted rate is ending.

It‘s definitely a sensible option to consider if you’re on a fixed, tracker or discounted rate mortgage that is coming to the end of its agreed term. That means that once that term ends, you’re free to remortgage for home improvements (arranging a completely new mortgage deal) without having to pay any exit penalties. 

  • You want a more competitive rate.

It may also make sense even if your current deal is on a fixed, tracker or discounted rate, if you have found that there’s a significantly better rate available than the one you have currently, and the penalty for ending your current deal early is not so great that it negates the monthly saving you will make on the new deal. If you are not currently on a fixed term rate, or if you are but it is about to end, then of course you do not have this risk to consider.

So if you are planning to switch to take advantage of a better rate, and you also need to fund home improvements, rolling the two together may make sense. But remember that your new, larger borrowing may mean you will have a higher percentage ‘loan to value’ against the vale of your property, and so may find yourself choosing your new deal from a less favourable range of offers than you qualified for previously. 

  • You’re concerned that the interest rate will go up.

There is always a risk that interest rates will rise, and if you are on an SVR or tracker mortgage, a rise would almost certainly increase your monthly cost. That means remortgaging to a fixed rate might well be worth considering and, if you’re doing this and also need to fund some home improvements, why not lock in that additional borrowing at a rate that you are confident you can afford?

  • The value of your home has risen dramatically.

If the value of your home has risen dramatically, and you thus have rather more equity in the property than you did when you took out your mortgage, then providing you won’t face serious penalties for ending a fixed, tracker or discounted deal prematurely, borrowing on mortgage for home improvements could be a very sensible approach.

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