If your house needs extending to make room for a home office or new baby you maybe considering remortgaging for home improvements.
An extension can cost tens of thousands of pounds and you might not have that kind of cash lying around.
There are ways you could raise the funds. One of those options is remortgaging for home improvements. And, like anything, there are pros and cons. This short guide will address key points for you to consider.
What are my options?
To borrow money, you could use a credit card, take out a home improvement loan, or remortgage your house. In other words, you are borrowing more money on your existing loan, releasing equity for funding the project.
This increases your mortgage amount and your monthly payments, of course. But it might be considerably cheaper than other borrowing options.
How does remortgaging for home improvements work?
If you have a fixed-rate mortgage, you’ll make a repayment every month for a set period of time, anywhere from two to 10 years. At the end of this period, you’ll need to remortgage. When switching deals, it’s possible to apply for an additional sum, for example to fund home improvements.
Lenders will look at the amount of equity you have in your home. For example, if you took out al 90% mortgage you may have been steadily paying it off for a few years. That means you now own more than 10% of the property. This should make borrowing more money a little easier.
You should also consider how much your home might have grown in value since you bought it. It may well have increased, which gives you even more borrowing power.
Lenders check income, job security and other debts to determine how much money they are willing to lend you. You don’t have to stay with the same lender, either. Be warned, though, there can be early repayment fees if you exit your fixed deal too early.
When is it a bad idea?
It can be a bad idea to remortgage if you’re locked into a long-term fixed rate deal. The early repayment charges could be very high, which could mean it’s simply not worth doing.
If you have a high loan-to-value mortgage, a couple of years worth of repayments won’t have made much of a dent into the balance. Also, you will not have built up much equity.
This could mean a significant change in your monthly payments if you remortgaged. Whatever you decide, do your homework. It’s worth getting advice before you make a decision.
A mortgage broker can always help because of their experience. They will check your monthly payments and possible early repayment fees. We can help make a decision based on all the facts.
Contact us today if you are considering remortgaging for home improvements.
Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment charge to your existing lender if you remortgage early.