Remortgaging For Home Improvements

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

We’ll explain exactly how to do this, what alternatives to consider, and where to get expert advice.

Can you remortgage to fund home improvements?

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

However, this decision should be carefully considered alongside alternative funding options that may be available to you, such as borrowing more from your existing lender or taking out a personal loan. Other alternatives include using savings, a credit card, or a second-charge mortgage.

It’s important to understand that remortgaging to fund home improvements can lead to higher monthly payments and a longer repayment period. Additionally, you may face early repayment charges on your existing mortgage, and your home is at risk if you cannot keep up with the repayments.

If this is the case, getting a further advance with your current lender is an option. You can set up a second mortgage pot purely for home improvements, which wouldn’t result in an early repayment charge.

Seeking impartial financial advice is crucial when considering remortgaging for home improvements to ensure it aligns with your financial situation and goals.

A mortgage advisor can help you evaluate all your options and choose the best one based on your circumstances.

How does remortgaging to borrow more work?

Remortgaging to fund home improvements involves taking out a new mortgage, typically with a new lender. This releases additional funds from the equity to provide cash to pay for the improvements.

This will increase your mortgage’s loan-to-value (LTV) and may have other implications, such as higher monthly payments and a longer repayment period. That’s why it’s important to consider all options available to you.

If you haven’t already, it’s important to decide what home improvements you want to make before evaluating your options.

This could include:

• Fitting a new bathroom or kitchen (typically the two most expensive projects in a property).
• Building an extension.
• Decorating multiple rooms simultaneously.
• Garden renovations or adding a new garage or outbuildings.

Once you know exactly what you want to achieve and how much it will cost, consider the different funding options available.

To determine if remortgaging is the right choice, it is important to know:

• The outstanding mortgage balance
• The approximate valuation of your property
• The cost of the renovations
• Any early repayment charges that you may incur when remortgaging

For example, if you have an outstanding mortgage of £50,000 and your house is worth approximately £150,000, this leaves £100,000 in equity in your property.

If your renovations are going to cost £25,000, then you will still have a relatively low loan-to-value of 50% (the difference between your total mortgage borrowing after remortgaging—£50,000 + £25,000—and current property value).

How to remortgage to fund home improvements

One option is to speak to a broker specialising in helping homeowners release equity via a remortgage. They will have the knowledge, experience and lender contacts to help you understand the options available. Remember, remortgaging is just one of the funding options you could consider.

Make an enquiry, and we will match you with a remortgage specialist who can guide you through the steps to complete it.

• Evaluate Funding Options: Assess whether remortgaging is the best choice compared to other alternative funding methods.
• Calculate Loan-to-Value (LTV): Determine your current loan-to-value ratio and the amount of equity you need to release.
• Check Planning Permission: Verify whether planning permission is required for the improvements you plan to make.
• Find the Ideal Lender: Locate the best mortgage lender with competitive rates to fund your home improvements.
• Optimising Your Credit Report: Improve your credit report and gather all necessary paperwork for your application.
• Guide Through the Application: Receive assistance through every step of the application process to ensure a smooth experience.

Calculating the amount of equity you can release

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

Try our home improvements calculator below to get an estimate of the maximum amount of capital you can release from your property and your mortgage payments afterwards.

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

Many extensions are classed as permitted developments (unless a 2-story extension), but it’s important to check that your plans meet these conditions. Most extensions do, however, need approval from building regulations.

You can learn more about obtaining these permissions on the government’s website. You should also consider checking with your local council.

Should you remortgage before or after the work?

People usually remortgage to pay for home improvements before the work is completed. However, if you have the cash to pay for it in the short term, you might remortgage after the improvements are completed.

Home improvements can increase the property’s value, 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 not the only 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

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 considered uninhabitable 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.

Mortgage retention

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, a property’s renovation can take several months or even years. If you are at the end of a mortgage deal during this time, you can remortgage during a renovation. 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. 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.

Loft conversions

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 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 could open up a range of lower remortgage rates.

Is remortgaging the right thing to do?

If you have enough equity in your property and are eligible for a remortgage, this may be the right route for you.

However, there are other considerations which may not make it an attractive choice, such as:

• While you can remortgage whenever you want, you might incur early repayment charges if your current deal has not yet reached its completion
• You may have a high LTV
• Are the new repayments currently affordable?
• What if more money is required to complete the project?

With this in mind, it’s important to consider all the options before reaching a final decision.

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. However, 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…

Alternatives to Remortgaging

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 secondary mortgage 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: This might be an option if you can’t remortgage in the short term but may be able to do so in several months. 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 your property’s equity and release it tax-free for home improvements.
• Personal loans: If you don’t want to or are unable to remortgage, 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.

Factors that could impact your plans

Whether you are remortgaging to fund an extension, loft conversion, or other home improvements, here are some things you need to consider.

How much equity you have

One of the first things to consider 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 it by subtracting the value of your mortgage balance from the value of your property.

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

Some lenders impose a loan-to-value cap on home improvement remortgages. Some set the limit at 75%, a few 80-85%, and others offer 90% and up.

The property type

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

It’s possible to secure a mortgage on unusual and non-standard construction properties. Still, 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, you must have the correct planning permission and other amenities. 

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

Bad Credit

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

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

See our complete guide to bad credit remortgages for more information.

Age

Most lenders require borrowers to be 18 years old, and there are an increasing number of options for older borrowers. For example, some high-street lenders have 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, affordability is the most important factor to consider. They will want to know that if the remortgage means your mortgage term stretches into retirement, you will continue to be able to afford the repayments based on your retirement income.

Early repayment charges

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 must 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.

Remortgaging after renovating a property

There are several considerations to bear in mind if you are remortgaging a home after you have carried out renovation work on it. Firstly, the property’s value will likely have increased depending on what improvements were made, so you could borrow more if you need to.

Other things to think about include:

• Can you remortgage again so soon if you refinanced to fund the home improvements?
• What kind of deal will you qualify for based on the changes to your LTV?

A broker specialising in remortgages will be best placed to help you answer these questions and find the right solution.

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 consider when upgrading your home. However, the experts we work with are on hand to help.

Our network includes specialised remortgage brokers who help people release equity to pay for home improvements every day. They have the knowledge, experience, and lender contacts to ensure you get the best deal and will guide you through the process from start to finish.

Call 0330 818 7026 or make an enquiry, and we’ll match you with the remortgage expert 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.