Remortgage your house for home improvements

Many homeowners wish to remortgage their homes to carry out and pay for home improvements. The funds are then used to improve the house, increasing the estate’s value. This is only one of many reasons people remortgage their homes; other common reasons include consolidating debts or purchasing new land.

Is it a good idea to remortgage for home improvements?

All mortgage applications are assessed based on their unique situation. The lender will inform you if a remortgage for home improvements is possible. For many people, renovating their current home seems to be a less expensive and time-consuming choice than moving.

You may want to add a bedroom to your home, for example. In this scenario, it may be more cost-effective to create an additional room in comparison to moving to a home with more bedrooms.

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What factors will be taken into consideration?

Many consumers choose to remortgage their home to pay for home improvements such as an extension, repairs, or loft conversion. The list of home improvements is extensive, and it all depends on your goals for the remortgage.

When it comes to remortgaging for home improvements, there are a few factors to remember:

  • Affordability
  • Cost of the Home Improvement
  • Credit History
  • Equity
  • Financial Circumstances
  • Type of Property

Affordability

You must demonstrate to the lender that you can afford the repayments if you remortgage. Both aspects of your financial situation, past and current, will be taken into account by the lender. They’ll look at your income and expenditure such as loans, credit cards and childcare costs. .

The lender’s requirements entirely determine the amount you may borrow. Some lenders are more likely to lend than others, but this is dependent on your income and personal situation.

As an illustration:

You make £30,000 a year, and the lender is willing to lend you up to five times that amount.

Maximum Loan Amount: £30,000 x 5 = £150,000

Bonuses, commission, or overtime can be considered by certain lenders, making you qualify for a larger loan.

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Cost of the Home Improvement

In their assessment, the lender will factor in the expense of the home improvements to give you an idea of the price you’ll need to remortgage for. When estimating the amount of money you’ll need for home improvements, there’s a lot to think about.

That includes things like building permits, contractors, and materials. It’s sometimes better to plan and assume that you’ll need a little extra in case of an unexpected expense. In short the best thing to do is get estimates of the work you want to do, add a 10% contingency amount, add this to your current mortgage balance and that is the amount you need to apply for.

Example

Your house is worth £300,000, and you have a £150,000 mortgage. You want to spend £25,000 on an extension to your house. When remortgaging, you have the option of switching to a new mortgage for £175,000. This will pay off your existing mortgage and leave you with the £25,000 you’ll need to make improvements to your house.

Our experts will inform you that there are several factors to weigh up before remortgaging, as it might be more financially advantageous to take out a second loan with your current lender. All possibilities will be considered. We take the guesswork out of the equation by taking into account the following:

  • Is home improvement a viable option?
  • In relation to the amount, you owe on your new mortgage, how much equity do you have?
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Credit History

If you have a bad credit background, you can get a mortgage from a lender that specialises in mortgages for people with bad credit. Interest rates are influenced by the age and nature of your credit problems.

The amount of unpaid debt you have on credit cards or loans is another aspect to consider. When the lender examines your outgoings to determine your affordability, they consider the repayments you are making to your creditors. If you have a large credit card balance, for example, it might be in your best interest to pay it off before applying for a remortgage or incorporating it into the remortgage to be able to get the size of the mortgage you need.

If you have bad credit and want to remortgage for home improvements, contact one of our expert advisors.

It’s a good idea to learn about the costs of remortgaging, especially if you have bad credit and are likely to be offered a higher interest rate.

Contact us to discuss remortgaging for home improvements.

Equity

The amount of equity you will have is determined by the length of time you have owned your home. If you’ve owned the property for a while, you should have some equity, particularly if the value of property in your area has increased. You’ll have much more equity to deal with as a result of this.

Personal Circumstances

Most lenders will take the applicant’s age into account when making their decision. Many lenders require borrowers to be at least 18 years old, some lenders have a maximum age of 70, some are 75 and some do not specify a maximum age. This affects affordability because the shorter the term of the mortgage the higher the monthly payments therefore if you are 60 years of age and looking for a £500,000 mortgage on repayment over 9 years then the monthly payments will be extremely high. The lender needs to ensure this will be affordable moving forward for you.

Types of home improvements that you may remortgage for:

Remortgage for an extension

A standard extension will cost anything upwards of £20,000, so remortgaging to cover the cost of the extension isn’t going to cost the earth. It’s a good idea to consult with your local planning office to see if you’ll need planning permission before starting some work.

Remortgage for a loft conversion

Many people convert their lofts into additional living space. This may be a bedroom or a work area. In this case, the price tag could easily exceed £35000 approximately for a three-bedroom property. Depending on your lender, remortgaging to finance a loft conversion is a perfect way to borrow the funds you need while keeping a low interest rate. Loft conversions will generally increase the value of your home, so you should consider remortgaging after the conversion to take advantage of even lower rates because you would have more equity in your home.

Remortgaging for a property renovation

You can potentially remortgage for renovations, but the property must have a working kitchen and bathroom and be habitable in its current state. If it is not, other forms of short-term finance are available to get the property up to a standard where a normal mortgage lender is happy to lend on the property.

Remortgaging for renovations such as painting, and decorating are perfectly fine for most lenders.

If a major problem is discovered during the valuation, then depending on the problem, you may not be able to get the mortgage on the property because the lender may deem it as not suitable security for the mortgage. There could be other factors which affect the property being suitable security such as a problem with the electrical system but in some cases the lender may hold what’s called a retention and not lend the money until the problem has been resolved or hold back a certain amount of money during the remortgage. The remaining funds will be released after they are confident that you have completed the required repairs.

Steps for remortgaging to fund home improvements:

  • Estimate costs.
  • Work out remortgage fees.
  • See what remortgage rates you can get with additional borrowing – you can get a really accurate estimate in 15 minutes.
  • Get before and after valuation to see if it’s financially worthwhile doing.
  • Get official quotes for the home improvement work and add up all additional costs.
  • Decide if you want to go ahead with the work.
  • Decide if you want to fund it with a remortgage.
  • Apply for your remortgage. You can get free advice from our experts and talk through your remortgage options.
  • Submit your application to your chosen lender – we’ll help you get all the relevant documents together. Depending on the lender and the amount of additional borrowing you require, you may need to submit the builders’ quotes.
  • Wait for the valuation and underwriting phase to be complete.
  • Get your approval.
  • Get your money.
  • Get your work done.
  • Remember to get all the certificates you need for when you come to sell your property.
Want to know more?

For more details, call our Mortgage Saving Experts today.

Should I remortgage after making the improvements or before?

If your improvements increase the value of your house, it could be a smart option to remortgage after they have completed the work. Most people do not have enough savings to do the work which is why they look to remortgage to raise the money first. If your loan is for a smaller portion of the property’s value (LTV), you might be eligible for lower interest rates.

Are there any alternatives to remortgaging for home improvements?

Yes, a secured loan is an option as well. Simply put, a secured loan is secured, like a mortgage, when the lender registers a second charge on your home. The mortgage lender takes the first charge on your home and a secured loan lender will take a second charge on your home. This means when your property is sold in the future the first charge (your mortgage) is repaid first, the second charge is repaid next and any money that is left over goes to you.

You should be mindful that if you do not make your loan payments on time, you home may be repossessed.

It’s worth remembering that if you go for a secured loan, you’ll have to make the payments in addition to the regular mortgage payments. In a secured loan application, affordability is assessed in the same way as a normal mortgage application.

You may be able to get a larger loan from your current lender.

Will I be able to afford a remortgage for home improvements?

It is completely up to you to make this decision. When you apply for a remortgage to upgrade your home, the lender will carefully consider your affordability. You must be able to show that you can handle the monthly payments both now and over the term of the mortgage. The amount you can borrow based on your earnings varies by lender, with some allowing you to borrow three or four times your earnings and others allowing you to borrow more.

If remortgaging is the right choice for you, our goal is to find you the best remortgage deal available. We may also assist you in finding a specialist lender. We want to make sure you get the remortgage that is best for you and your situation. Contact one of our knowledgeable advisors right away.

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FAQ’s

Can you remortgage on a buy to let?

Yes, you can remortgage and use some of the equity for most legal reasons, such as a deposit for the next buy to let. Property investors often use this technique to expand their holdings. The lender will demand that your property be officially re-valued once more.

How soon can you remortgage a buy to let?

Most lenders will only allow you to remortgage after your name has been registered on the title deeds at Land Registry for six months. However, if you need to remortgage before then, you have some choices. We have access to a variety of lenders who would accept a remortgage within 6 months of purchase because we are a whole of market mortgage broker.

Can I use the equity in my current buy to let property purchase a second one?

Yes, you can remortgage and use some of the equity as a down payment for the next buy to let. Property investors often use this technique to expand their holdings. The lender will hire a valuer to officially calculate the current value of your existing home, allowing you to know precisely how much equity you have. This valuation will be charged to you, but some lenders offer free valuations. You may also ask your current lender for a further advance. The lender may ask that they carry out a new valuation at that time just to ensure the value you have given on the application is correct. Speak with our buy-to-let specialists who will be able to assist you in determining which path makes the most financial sense.

How Quickly Can I Remortgage a Property After Purchase?

Most lenders will only allow you to remortgage after your name has been registered on the title deeds for six months. However, if you need to remortgage before then, you have some choices. We have access to various lenders who would accept a remortgage within 6 months of purchase because we are a whole market mortgage broker. Many of these would require you to be registered as the owner with Land Registry. Land Registry can take months to add you to the title deeds after you’ve bought a house, so they frequently backdate them, recording you as the owner of the property from the date of completion – that is, the day the transaction is completed.

If I Buy a Home with Cash, Can I Get a Quick Remortgage?

If you bought the house with a mortgage or cash, you’d usually have to wait at least 6 months from the date your name is recorded as the owner on the title deeds at Land registry. However, since there is no original mortgage to replace, remortgaging a property purchased with cash is easier than remortgaging one purchased with a mortgage.
Want to know more?

For more details, call our Mortgage Saving Experts today.

Want to know more?

Get in touch with of our mortgage saving experts today to find out how we can help.

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