Are you one of the growing number of homeowners turning to remortgaging to fund a renovation or home improvement? Mortgage lenders are seeing people that remortgage as safer prospects compared to new buyers and therefore there are better deals becoming available.
A survey by NatWest has found that while home improvements are traditionally the reason for one in every five remortgage applications, three times as many homeowners (62%) would now consider remortgaging for this purpose. Now 6 in 10 homeowners are at least considering ‘remortgaging to renovate’, a figure that rises to nearly 8 out of 10 homeowners aged 30 or under.
Our clients often tell us that the main reasons for remortgaging are usually to reduce monthly payments. This is highlighted when a homeowner’s original mortgage deal ends and they move to a Standard Variable Rate which is typically more expensive.
Home improvements are the second most popular reason for remortgaging. Renovations and extensions are also a good way to ‘move up the property ladder’ without moving home. For example, a three-bedroom home could be upgraded to a four-bedroom house or otherwise expanded to raise the sale price. If the money for the building work is raised by remortgaging to release equity, then the cost to the homeowner may be low depending on how much value is added to the property as a result.
Other clients remortgage to reduce financial anxiety which is brought on due to the fear of moving to a more expensive SVR mortgage.
Remortgage to renovate: Our top tips
- Check if your property’s value has increased since you bought it. This could then result in you being able to remortgage for a larger amount without having to pay more per month.
- Check if your current mortgage deal has any early repayment charges. If it does then there might be a fee associated so factor this into your sums.
- Check all the fees involved with remortgaging – an arrangement fee, a valuation fee and a booking fee in addition to any early repayment fees.
- Contact a mortgage broker as they have access to a far wider range of deals some of which aren’t available on the high street.
- Look into your loan-to-value (LTV). When you remortgage, you will be borrowing more money so repaying more over a longer amount of time. You will also be increasing your LTV ratio which means if property prices fall you could find yourself in negative equity.
- Aim to renovate your house that will increase the value of your home. An extra bedroom is always a winner, a big open-plan kitchen-diner are also good choices. Building upwards are also better than reducing your garden space.
If you would like to speak more about remortgage to renovate options for you, please get in touch.
*Your home maybe repossessed if you do not keep up repayments on your mortgage.