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Remortgaging for Home Improvements

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Pete Mugleston

Author: Pete Mugleston - Mortgage Advisor, MD

Updated: June 28, 2022

By remortgaging your home, you can release any available equity in your property to help fund home improvements, but many homeowners don’t know where to start with this.

If you’re looking for answers, you’ve come to the right place. In this guide, we discuss how to remortgage for home improvements, what alternatives to consider, and where to get expert advice. We’ve also fielded the questions we hear most often on this topic in our FAQ section.

Read on for mortgage information or jump directly to a topic on the menu below…

Can you remortgage to fund home improvements?

Yes, absolutely. As long as you have enough equity in your home and can afford the repayments, it is possible to remortgage to foot the bill for home improvements and extensions.

First, decide what type of home improvements you want to make, if you haven’t already. Are you just thinking about decorating the property, are you fitting a brand new kitchen or bathroom, or do you want to refinance to help you pay for more substantial building work?

Once you know exactly what you want to achieve and how much it will cost, you can do some quick sums to work out whether remortgaging to release equity is the right fit for you.

If you’re not sure where to start or what the next step should be, help is available. There are remortgage broker who specialise in helping people raise money for home improvements, and they have the knowledge, expertise and lender contacts to make sure you get the best deal.

Calculating the amount of equity you can release

Some mortgage providers impose a cap on the amount of equity you can release for home improvements, but it is possible to release up to 90% and over with the right lender.

Try our home improvements calculator below to get an idea of the maximum amount of capital you can release from your property as well as what your mortgage payments will be afterwards.

calculator icon

Home Improvements Calculator

Our home improvements calculator can tell you what your new loan-to-value (LTV) ratio will be after you’ve released equity from your mortgage for your home improvements. Simply enter your property value, remaining mortgage balance and the amount of equity you need to release below and our calculator will crunch the numbers for you.


Estimate if exact value is unknown
£
Estimate if exact value is unknown
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Amount must be less than property value
This is the capital you’ve built up by paying your mortgage
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What will the new term length be after you've refinanced?
years
Keep in mind that this could change if your LTV rises
%

New LTV:

After you have remortgaged and released this amount of equity, your new LTV ratio will be and your new mortgage payments will be as indicated below…

New Monthly Repayments:

Get started with an expert broker to find out how much they could help you save while raising capital through your remortgage.

Get Started

Extending your property

Extending your property is often a cost-effective alternative to moving house, and it can significantly increase the value of your home. It’s possible to fund one, or partially fund one, with any equity you can release when you refinance, but there are steps you should take first.

Here are some key things to consider before arranging your remortgage…

Regulatory approval

Planning permission isn’t usually needed as most extensions are classed as permitted developments, but it’s important to check that your plans meet these conditions. Most extensions do, however, need building regulations approval. You can find out more about obtaining these permissions on the government’s website.

Should you remortgage before or after the works?

Remortgaging to pay for home improvements is something that people usually do in advance of carrying out the work. But if you have the cash to pay for it in the short term, you might choose to remortgage after the improvements have been completed. Home improvements can increase the value of the property, which might mean you have access to more equity for a remortgage, and therefore a wider range of products and better rates.

Other types of home improvement

Extensions are the only type of home upgrade you can carry out with the equity you release when you refinance your property. Other forms of home improvement you could do include…

Home renovations
Mortgage retention
Loft conversions

If your house needs significant repairs, it is possible to raise funds with a remortgage to renovate the property.

Property renovations are broadly split into two categories:

  • The property is habitable but needs some modernisation
  • The property is not considered habitable by a mortgage lender

The minimum requirement for a property to be considered habitable by a remortgage lender is generally a usable kitchen and bathroom and a watertight roof.

One possibility to be aware of is that the valuation may identify a serious problem, for example, electrics that don’t comply with current regulations. In this case, the lender may impose retention, which means they will deduct the amount needed for repairs from the initial advance. Once you can prove that you’ve fixed the problem, the lender will advance the rest.

Sometimes, the renovation of a property can take a number of months or even years. If you come to the end of a mortgage deal during this time, it is possible to remortgage during a renovation and again, your options will depend on whether or not the property is habitable.

If your improvements are successful in increasing the value of your property, you may choose to remortgage after the renovation as, if the loan is a smaller proportion of the property value, there could be a wider choice of remortgage deals to choose from, and better rates too.

A loft conversion is one of the most popular ways to add extra space to a home. A basic conversion can start at £15,000, but the average dormer loft conversion with a double bedroom and en-suite costs between £35,000 and £45,000. How much you spend is, of course, your decision, but it’s wise to think carefully about what will add value within a reasonable budget.

Many people choose to remortgage before starting a loft extension as this can provide the funds they need to complete the work, often at a lower interest rate than other types of borrowing.

Research has found that a loft conversion could add up to 20% to the value of a home, so don’t just think about a remortgage to pay for a loft conversion, but also a remortgage after a loft conversion. If your house has increased in price by 20%, your mortgage will be a smaller proportion of its value, and this could open up a range of lower remortgage rates.

How to remortgage to fund home improvements

Follow these simple steps to get your plans off to the best possible start…
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Step 1: Calculate costs and obtain permissions

You’ll need to know how much your home improvements are likely to cost before you get started so you’ll have a firm idea of how much equity you’ll need to release.

It’s also a good idea to find out what permissions you’ll need to get the work off the ground. Needing planning permission is unlikely, but it’s worth double-checking if your project is large in scale. At the very least, you will need building regulations approval from the local council.

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Step 2: Work out your loan-to-value (LTV) ratio

Once you have an idea of the amount you want to borrow. Add the amount of equity you hold in your home to any additional borrowing you need for the renovations and work out what your property is worth. If you’re unsure, you can get an idea of its value by visiting Zoopla or mouseprice to find out what similar properties in the area have been selling for.

Next, divide the loan value by the house value and multiply by 100 to get your LTV.

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Step 3: Speak to a remortgage specialist

Expert advice is worth its weight in gold if you’re remortgaging to finance home improvements, as the right mortgage broker could help you save time and money on your project.

We work with remortgage experts who specialises in helping customers release equity to bankroll home renovations, extensions and other upgrades. They know exactly which lenders to approach for these arrangements and often have access to exclusive deals with them.

To get started, make an enquiry with us and we’ll match you with your ideal remortgage broker and set up a free, no-obligation chat between you and them today.

Customer success stories

“I was almost put off extending my house when I found out how many hoops I’d have to jump through to raise the money through a remortgage. Before calling it quits, I decided to do some further research online, and that’s when I came across Online Mortgage Advisor.

“Their site was full of useful info on this topic, so I was convinced to give their advisor-matching service a try. Before I knew it, they introduced me to Graham, a remortgage expert who I was told had a great track record helping people like me raise money for home improvements.

“Graham was friendly and professional, and he made the process very simple from here. Not only that, he helped me get a better interest rate when I remortgaged along with the equity I needed for the extension. What a result!”

Todd, Chesterfield

 

“We had been after a new kitchen for a good while, but thought we’d have to wait even longer for one when our lender told us they were only prepared to offer 75% LTV on an equity release remortgage. This was hard to hear, as it wasn’t quite enough for the kitchen we wanted.

“In search of a second opinion, we gave Online Mortgage Advisor a try and the broker they matched us with, Sofia, was quick to assure us that higher LTV deals were indeed available.

“After talking us through the alternatives and implications, Sofia found us a lender who was willing to offer us an 85% LTV remortgage on exactly the same terms. We were delighted that our plans could finally go ahead, all thanks to Online Mortgage Advisor.”

Joan & Walter, Sunderland

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Is remortgaging the right thing to do?

If you have enough equity in your property, are eligible for a remortgage and won’t be stung by heavy early repayment charges, refinancing might be a good choice for you, but it isn’t the only way to raise money for home improvements and it’s important to consider all options.

If you’re unable to remortgage or would prefer not to, for whatever reason, here are some potential alternatives that you could speak to your broker about…

  • Secured loans: This is a secondary mortgage that sits behind your primary one as a second-charge debt. It’s often possible to borrow a much larger amount than you’d be able to on a remortgage, provided the lender is convinced you can service both debts.
  • Bridging loans: Might be an option if you can’t remortgage in the short term but may be able to in several months’ time. For example, perhaps you have bad credit that will soon be resolved or need to spend a few more months in your job to qualify for a remortgage. A bridging loan might also be a fallback if you’re planning to renovate your home to sell it, or if time is of the essence – they can be arranged quicker than remortgages.
  • Equity release: If you’re over 55, this could be an alternative way to access the equity in your property and release it tax-free for those home improvements.
  • Personal loans: If you don’t want to remortgage or are unable to, personal loans could be an alternative if you need between £25,000 and £50,000 for your refurbishment and can afford to take on the debt. These loans are not secured against an asset and the rates they come with are often far more expensive than mortgage interest rates.

You can find out more about each of these options through the links, or better yet, speak to a mortgage broker to discuss all of your choices and compare them to the remortgage route.

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.

How much equity you have
The property type
Bad credit
Age
Early repayment charges

One of the first things to think about if you want to remortgage to fund building work is the level of equity you have in your home. This will serve as your deposit and you can easily calculate this by subtracting the value of your mortgage balance from the value of your property.

The more equity you have, the better, as this will increase the number of approachable lenders.

For home improvement remortgages, some lenders impose a loan-to-value cap. There are a number who set the limit at 75%, a few 80-85% and others who offer 90% and up.

Most lenders will lend on properties built with standard construction methods, but options might be more limited for studio apartments, ex-council properties, flats in high-rise blocks or properties that are built from ‘non-standard’ materials, such as concrete or timber.

It’s possible to secure a mortgage on all kinds of unusual and non-standard construction properties, but you’ll almost certainly need a broker who can match you with a specialist lender.

Moreover, If you’re remortgaging to renovate an unusual property, such as a barn conversion, it’s important that you have the correct planning permission and other amenities. 

Read our article on non-standard construction property mortgages for more information.

There are lots of remortgage options for people who want to unlock equity for home improvements but have experienced credit problems. It is now possible to borrow up to 90% loan to value, or even more, with some bad credit mortgage lenders.

Your choice of remortgage rates and deals will likely depend on the type of issues on your record and how long ago they happened, as well as the reason for your bad credit.

See our complete guide to bad credit re-mortgages for more information.

The minimum age for most lenders is 18 and there is an increasing number of options for older borrowers. For example, some high street lenders have had a maximum age at application or at the end of the mortgage term, but there are now lenders that do not stipulate a maximum age.

For these lenders, the important thing to think about is affordability and they will want to know that, if the remortgage means your mortgage term stretches into your retirement, you will continue to be able to afford the repayments based on your retirement income.

It is possible to remortgage to fund home improvements if you have early repayment charges on your current mortgage, but it may be expensive. You need to decide whether it’s worth paying the charges or waiting until they no longer apply. A mortgage broker can help you work out the overall cost of both options and help you make the right decision.

Get matched with a remortgage specialist

If you’re remortgaging to fund home improvements, professional advice is essential. Releasing equity from a property should never be done lightly and there is a lot to think about when upgrading your home, but the experts we work with are on hand to help you out.

There are remortgage specialists in our network who help people release equity to pay for home improvements every day. They have the knowledge, experience and lender contacts to make sure you get the best deal, and will guide you through the process from start to finish.

Call 0808 189 2301 or make an enquiry and we’ll match you with the remortgage expert who’s best placed to help you refinance for home improvements. We won’t charge a fee for the introduction and your first consultation will be free with no obligation to proceed.

FAQs

Can I remortgage to fund renovations for my buy-to-let property?

Yes. It’s possible to remortgage a buy-to-let property to raise money for renovations, and the calculation for how much you are able to borrow will be based on a combination of the rental income the property can achieve and your circumstances.

Although affordability models can differ, for many lenders if you pay tax at the basic (20%) rate, the rental income has to cover at least 125% of the mortgage, assuming the mortgage is charged at 5.5%. For higher rate taxpayers, this increases to 145% or 160%.

Can I remortgage to build a house?

Potentially. If you have enough equity in your home you may be able to remortgage to build a new house. If you cannot raise enough money on your existing property to pay to build a new house outright, you could use it as a deposit and get a loan to help you with the build costs.

The type of loan you need will depend on whether you are building a single property or starting a more commercial development and these types of projects would generally need a deposit of about 15% or 20%.

If you’re unable to raise enough to fund the construction through a remortgage on your existing property, you may need to take out a self-build mortgage to borrow the money for the project.

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We know everyone's circumstances are different, that's why we work with mortgage brokers who are experts in Remortgaging for Home Improvements.
Ask us a question and we'll get the best expert to help.

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About the author

Pete, an expert in all things mortgages, cut his teeth right in the middle of the credit crunch. With plenty of people needing help and few mortgage providers lending, Pete found great success in going the extra mile to find mortgages for people whom many others considered lost causes. The experience he gained, coupled with his love of helping people reach their goals, led him to establish Online Mortgage Advisor, with one clear vision – to help as many customers as possible get the right advice, regardless of need or background.

Pete’s presence in the industry as the ‘go-to’ for specialist finance continues to grow, and he is regularly cited in and writes for both local and national press, as well as trade publications, with a regular column in Mortgage Introducer and being the exclusive mortgage expert for LOVEMoney. Pete also writes for OMA of course!

Read more about Pete

Pete Mugleston

Mortgage Advisor, MD

FCA disclaimer

*Based on our research, the content contained in this article is accurate as of the most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The information on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs.

Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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