Remortgage for Home Improvements
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Possible Home Improvement Costs
Selling your property and looking for somewhere new to meet your changing needs can seem like an easy option, but most property experts will tell you that staying in your current home and making improvements – such as adding a bathroom or extra bedrooms – is usually far more cost-effective than buying a larger house.
However, despite being perhaps cheaper and keeping you close to your familiar community, home alterations and improvements do come at a cost. Depending on the extent of the work you plan to carry out, this could amount to many thousands, or in fact tens of thousands, of pounds. Taking out a remortgage on your property can be a fast, efficient way to raise a significant amount of money.Read More
If you have a clear idea of the work you want to carry out, then the first thing you need to do is make an accurate calculation of the costs involved. You might have to obtain a number of quotes from various contractors, suppliers and craftsmen, or find a company that can manage everything for you. Whichever route you take, you should ensure you have taken everything into account, and, depending on the scale and nature of your improvements, the elements to consider could include:
- Architect’s plans and services
- Planning permission application fees
- Materials costs
- Labour costs – builders, plumbers, electricians, other specialists
- Waste disposal or collection
- Building regulation inspection
- Money put aside as a contingency against unforeseen extra costs
Once you know, as closely as possible, how much money you will need to complete the project, then you will be able to look at the possible options to obtain it.
More Home Improvement Information
How to Finance Home Improvements
Unless you have other personal assets to cash in, there are generally two ways that you can raise the large sum of money you are likely to need for home alterations or improvements – a personal secured loan, or a remortgage for home improvements. Both options have their pros and cons – we’ll run through them here.
A personal secured loan is a well-established method of borrowing a reasonable amount of money for home improvements. As with a mortgage, the sum loaned is secured against your property, meaning your home is used as a guarantee of repayment. So, if for whatever reason you are unable to meet the repayments in the future, your home could be at risk.
Therefore, it’s vital when considering a secured loan to get an accurate figure for the monthly repayments to ensure that you are able to repay them. If you fail to keep up with the payments, then not only could you potentially lose your home, but your credit rating will be adversely affected, possibly impairing your ability to borrow money in the future.
Finding the best terms and rates for a personal secured loan is fairly straightforward via the various loan comparison websites available, but you would also be best advised to talk to a professional expert for guidance. They’ll be able to run through your situation with fresh eyes, perhaps suggest options you hadn’t thought of, and not least ensure you understand all the costs involved and will be able to afford the loan repayments.
Home Improvement Remortgage
A remortgage for home improvements entails taking out a new mortgage on your property in order to take advantage of the value already in your home – the difference between the value of the property (which may have increased over the years) and the remaining balance on your existing mortgage.
If the value of your home is £350,000 and the remaining balance on your current mortgage is £150,000, then you have £200,000 of equity in your home. However, you should note that lenders will not be prepared to let you borrow the entire value of your home – just as with a conventional mortgage, you will likely get a maximum loan value of 90% of the property value, and they will take will make calculations based on the value of your home at the time of your application rather than when you bought it.
Remortgaging verses Secured Loan
There are a couple of main differences between remortgages and secured loans. The first is that with a remortgage, your loan remains all with one lender, rather than with two sources, one of which might have a higher interest rate. Mortgage interest rates are typically a little lower than loans, and with it all in one place you can be certain of the rate and repayment amounts.
Secondly, a personal loan provider will usually assess a loan’s affordability for a client using different, and often more favourable, methods than those used by a mortgage provider, and possibly take a more lenient view of your credit rating. This could make the difference between borrowing the amount you need or not, and while this may make obtaining the loan easier, it might mean you are taking an improperly calculated risk.
Both methods of borrowing have their upsides and downsides, and how much they affect you will depend a great deal on your individual circumstances. This is why you should always talk to a qualified expert who knows the market – and all its pitfalls and benefits – when looking to take out a significant loan.
If, after assessing your options, you decide that remortgaging your home is the best way to raise money for your planned home alterations and improvements, then there are a few steps you should take.
Firstly, you should make a thorough plan for the improvements you want to make, however extensive or basic they may be, and draw up a budget that is as accurate as possible.
Secondly, you should research the market and find out what plans and rates are available to you – both across the remortgage lenders you can find, and also with your current provider. After taking various peripheral costs and fees into account, you might find that the most cost-effective solution is with a different provider, or you might find it financially beneficial in the long run to remain with your current provider and switch to a new product with them.
Whichever route you choose to take, it’s vital that you examine your options, and indeed understand what all your options might be. Doing research yourself will only return information in the public domain, and you may find that there are remortgage deals and products available that are not advertised on the high street or online.
This is why it’s important to work with a specialist mortgage broker such as The Mortgage Centres. Our team not only has a profound knowledge of the mortgages market, but we are also able to access deals not commonly available to the public, often on an exclusive basis. We will also be happy to guide you through every stage of the remortgaging process, making sure you are in the picture at all times and that you understand your options.
To get more information on how we can help, or to book a free, no-obligation chat with an advisor, feel free to get in touch today.