Finances for home improvements
Your home modifications, whether they involve a new kitchen, bathroom, loft conversion, addition, or energy-saving upgrades, will need you to consider the best way to finance them. We examine your mortgage extension, remortgaging, personal loans, and credit card possibilities.
Nearly 4 in 10 homeowners (39%) have delayed making renovations, according to our 2019 annual Homeowner Survey, because they are unsure how to pay for them. Read on to learn about the financing choices available to you if you don’t have any savings in the bank that you can utilize to start your home upgrades.
What choices do I have for financing home improvements?
To finance your improvements, you can either:
With cash, by taking out a secured homeowner loan for improvements or a credit card, by remortgaging to raise your mortgage and free funds, or with cash.
Often, the most affordable rates are available when using your mortgage for home improvements. But, take advantage of the chance to refinance and look about for the
best offer. You can save money and lessen the effects of a larger mortgage by switching mortgages.
Speak with fee-free mortgage brokers L&C to see if you can extend your mortgage or refinance to a better offer.
How do I remortgage my home to pay for improvements?
Transferring your mortgage from one lender to another is known as remortgaging.
Remortgaging is a great method to boost your borrowing and lock in a better deal if you aren’t constrained by any special introductory periods or reduced rates with early repayment fees.
You’ll need to demonstrate your ability to pay back the larger mortgage, and you’ll need enough equity in the home to generate money.
Although many deals will provide a free valuation and free legal work for remortgages, which helps to cut down on switching costs, reduces set-up cost.
Can I get a bigger mortgage to pay for house improvements?
Consider additional borrowing from your present mortgage provider if you currently have a particularly good rate on your mortgage and don’t want to lose it or are bound by a contract with early repayment penalties. It might end up being the least expensive overall bundle, even if the rates might not be nearly as favorable and there might still be costs.
Are all lenders willing to give a mortgage extension for house improvements?
Lenders will inquire about the purpose of obtaining money, but they should let equity be released—i.e., more borrowing on your mortgage—for home repair projects.
Loan to Value, also known as LTV, is a measure of how much of the value of the property your mortgage represents. The maximum loan-to-value (LTV) that a lender will approve for home upgrades is often 85% or 90% of the property’s value. It will be based on the property’s existing valuation, not on what it is expected to be worth when the restoration is finished.
Keep in mind that the interest rate will increase as the LTV increases. Of course, when the agreement has ended, you can review the rate. If the upgrades have increased value, the LTV may also have increased, which should enhance the mortgage possibilities.
A secured homeowner loan or second mortgage
Finding a second mortgage is an alternative to remortgaging to pay for home upgrades if that’s not what you want to do (in addition to your existing mortgage). This is sometimes referred to as a second-charge mortgage or a secured homeowner loan. If you have a terrific mortgage offer or early repayment fees that make getting a second mortgage more cost-effective, you might not want to remortgage to finance home upgrades. These loans do, however, typically have higher interest rates.
Be aware that taking out a second mortgage, extending your current mortgage, and remortgage all involve increasing the amount of borrowing secured against your house. Verify that you are comfortable with the additional borrowing and the repayment schedule (usually 25 years).
Other financing options for home improvements include credit cards and unsecured loans.
Depending on the amounts needed to pay for your home repairs, you can also think about utilizing a credit card or an unsecured personal loan in addition to the mortgage choices mentioned above.
If your builder or other tradespeople go out of business, using a credit card to make the payment may also provide further security.
But, these will typically have higher interest rates than mortgages, so it’s crucial to weigh all of your options, especially for a bigger improvement
Tips for increasing the value of your house
A loft conversion
The simplest option to add a second bedroom and bathroom is through a loft conversion. If you haven’t exceeded the highest valuation allowed for your street, adding bedrooms to a property will typically increase your sale price. See our loft conversion guide.
Create more living space by adding a conservatory or an addition. Learn where to begin when building a house addition.
A remodel of the bathroom
Only a new suite, along with new fixtures and fittings, can result in enormous benefits. You are likely to increase the value if you add a second bathroom, preferably an ensuite. For advice on where to start with your bathroom renovation, consult our guide.
Make the kitchen better.
We want to be impressed here because it’s the center of the house. But, keep your spending in line with the size of your house. In a $250,000 house, you probably won’t get your money’s worth from a £25,000 kitchen. Check out our article on where to begin a kitchen renovation.
Maintain your windows and exterior in good condition.
Your home’s exterior updates can help preserve it in good shape and increase its curb appeal. Updating windows that are in bad condition will add value to your home.
Maintain your windows and exterior in good condition.
Your home’s exterior updates can help preserve it in good shape and increase its curb appeal. Your home will be worth more if you replace any damaged windows.
Boost your home’s energy efficiency.
Making your home more energy efficient will be a key selling factor for prospective buyers given government intentions to guarantee that as many homes as possible achieve an EPC rating of C by 2035. Green mortgages might be used to finance upgrades.
Read more: SHOULD I REFINANCE MY HOME LOAN?