Your home is more than just a place to live; it’s one of your biggest financial assets. Property values are rising after a slight slump over the last 12 months, and your mortgage balance obviously decreases over time, meaning that you may actually find yourself sitting on a substantial amount of equity. Remortgaging to release equity is becoming an increasingly popular option for homeowners looking to fund home improvements to add value. Whether it’s a kitchen renovation, a loft conversion, or adding a new extension, tapping into your home’s equity by remortgaging for home improvements can provide the financial boost needed to bring your property up to the high standard that it deserves! In this blog, I will walk you through the process of doing a remortgage for home improvements, highlighting the perks, potential risks, and how working with a mortgage advisor can make the process smoother and more efficient.
Can You Remortgage For Home Improvements?
In the simplest terms, remortgaging involves switching your current mortgage to a new deal, either with your existing lender or a new one. Most people with mortgages will remortgage every 2 to 5 years to move to a better rate and product. Often the balance of the mortgage remains the same and no extra borrowing is carried out. When you remortgage to release equity, you’re borrowing against the increased value of your home. For example, if your home is worth £300,000 and you have £150,000 left on your mortgage, you have £150,000 in equity. Depending on the lender’s criteria, you may be able to borrow a portion of that equity to fund home improvements.
Why People Choose To Remortgage For Home Improvements
Unsurprisingly, completely or even partially renovating a property is NOT a cheap job. Yes, there may be some cheap alternatives and crafty solutions that you might be able to try to bring costs down, but realistically it is probably going to cost a few thousand pounds. For people looking to carry out home improvements, liquid cash flow can become a massive issue. That is why remortgaging to release equity is becoming so popular. Here are some of the main reasons that borrowers look to remortgage:
- Cost-Effective Borrowing: Compared to personal loans or credit cards, mortgage interest rates tend to be lower. Remortgaging allows you to spread the cost of home improvements over a longer period, making it more manageable.
- Adding Value to Your Property: Home improvements can increase your property’s market value. A well-executed renovation could potentially give you a return on your investment when you sell.
- Tailored Financial Advice and Guidance: By working with a mortgage advisor, you can find a remortgage deal that fits your financial situation, allowing you to release the right amount of equity without overstretching yourself.
- Flexible Options: Remortgaging can offer flexibility in many cases, such as switching to a fixed-rate mortgage for predictable payments or choosing a product that allows overpayments to clear your debt faster.
How To Remortgage For Home Improvements
Consult a Mortgage Advisor
The first step in the remortgaging process is to consult a mortgage advisor. They will assess your current mortgage, financial situation, and goals for home improvements. A good advisor will provide an overview of your options, ensuring you understand the process and the costs involved. Never go direct to a bank for something as complicated as remortgaging to release equity. Not only will you be limited to the mortgage products that this one bank offers, but the process is often a lot longer direct with the bank (believe it or not!) and if you need quick cash for building work, this could be a major issue!
Assess Your Property Value And Equity
Before you remortgage, it’s important to get an up-to-date valuation of your property. Your mortgage advisor can help arrange this through the lender, or you can commission a valuation independently. This will determine how much equity you can release. Understanding your property’s current value and equity ensures you don’t borrow more than necessary or risk overextending yourself financially.
Determine Your Budget And Loan Amount
Based on the equity available and your financial situation, you’ll need to determine how much you want to borrow for your home improvements. Your mortgage advisor will help you calculate the monthly payments, interest rates, and the impact on your overall financial health. This step ensures that your new mortgage is affordable and aligns with your long-term financial goals. It’s also where you can evaluate if it’s worth borrowing the maximum equity or only what’s needed for specific projects.
Choose The Right Mortgage Product
There are various mortgage products available, from fixed-rate deals to variable-rate options. Your mortgage advisor will guide you through these choices, helping you select the one that best fits your circumstances. The right mortgage product can save you money in the long run and provide peace of mind with predictable payments or flexible terms.
Submit Your Application
Once you’ve chosen a mortgage deal, your advisor will help you complete the application process. This involves providing financial documentation, such as proof of income, bank statements, and details of your current mortgage. A mortgage advisor ensures that your application is accurate and complete, reducing the likelihood of delays or rejections.
Undergo Valuation And Approval
The lender will conduct their own valuation of your property to confirm its value and the equity available. Once everything checks out, your remortgage will be approved. The valuation ensures that the lender is comfortable with the risk, and once approved, you’re one step closer to securing the funds for your home improvements.
Completion And Funds Release
After approval, your new mortgage will be finalized, and any remaining balance after paying off your old mortgage will be transferred to your bank account. You can now start your home improvement projects! With the funds in hand, you can proceed with your planned renovations, knowing that your finances are secured and your mortgage is set up to support your goals.
Perks Of A Home Improvement Remortgage
- Access to Capital: Remortgaging allows you to access a large sum of money that can be used to enhance your living space and increase property value.
- Potential Savings: By switching to a better mortgage deal, you might reduce your interest rate and save money over the long term.
- Increased Property Value: Strategic home improvements can significantly boost your property’s market value, making remortgaging a worthwhile investment.
- Improved Quality of Life: Whether it’s a modernised kitchen, a new bathroom, or a more energy-efficient home, the improvements can enhance your day-to-day living experience.
Speak To A Mortgage Advisor
Remortgaging to release equity for home improvements can be a smart financial move if done correctly. By working with a mortgage advisor like ourselves at Oportfolio Mortgages, you can go through the process with confidence, ensuring that you secure the best deal for your needs. While there are risks involved, careful planning and expert advice can help you unlock the potential of your home and achieve the improvements you’ve been dreaming of. Before you take the plunge, make sure you give our team a call for a fee free initial mortgage consultation. We are here to help.
