Should I remortgage to fund home improvements?
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If you are looking to fund some important home improvements, you could look at remortgaging to raise some capital and to help pay for any renovations, alterations and building costs.
Remortgaging allows you to get a new mortgage deal with potentially more favourable rates and the ability to release some cash upfront - and you can avoid being put automatically onto a higher standard variable rate (SVR) after a certain number of years.
When you remortgage, you can choose to release cash which can be used to fund home improvements and the repayments are just added to your monthly mortgage repayments as per usual.
“Using a remortgage to fund home improvements can be very appealing, especially if it increases the value of your home,” explains David Beard of Lending Expert.
“If you are adding a loft extension with maybe two rooms and a bathroom, this could add an additional 20% to the value of your home,” he continues.
“Not to mention the huge popularity these days for things like home offices, garden offices or home gyms due to more people working remotely during the pandemic.”
So is remortgage for home improvements a good idea?
“Yes,” explains Mr Beard. “There is certainly a strong case for remortgaging if your existing mortgage has come to an end and you have other good characteristics such as a good credit score and a stable income.
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“If you have been behind on your mortgage payments or your credit history has worsened, you could find that a remortgage becomes more expensive than what you are currently paying.
“In addition, if you are a little older, you could find yourself paying more to remortgage your house, since lenders may consider your income less stable as you enter retirement, or they could only lend to you over a shorter term, which could mean very steep repayments.”
What other options are there to fund home improvements?
“For basic home improvements under £5,000 or £10,000, you could look at just putting these on a credit card or applying for the product on finance, because you can still spread repayment and using large purchase credit cards or reward cards means that you could scoop up some nice air miles and points too,” said Mr Beard.
“There are also specific home improvement loans available, both secured and unsecured, and the rates are very reasonable, sometimes starting from just 2.8%, especially if you have good equity in your home and a good credit score.
“If you are over 55, you can look at using equity release or a lifetime mortgage to release money that is tied up in your home. You receive a large cash sum upfront, which is tax-free, and you can just pay off the loan and interest when you die or go into long-term care.
“If you are using home improvements to make the house more adjusted to senior living, this could be an option to consider. Make sure that you speak to a financial advisor or an expert to make sure you retain ownership of your property and can put money aside as inheritance.”
To discuss your requirements, please enquire with Lending Expert today or speak to an advisor on 0161 820 8099.