If you’re a homeowner, you may be dreaming of a new kitchen, a loft conversion, or an extension to create more space. Home improvements are a great way to put your personal stamp on your property and potentially increase its value. But how can you pay for these renovations without draining your savings?
Many homeowners consider borrowing to fund home improvements, but choosing the right option can be confusing. The most popular ways to finance home improvements include remortgaging, taking out a second charge secured loan, or applying for a further advance from your existing lender. Let’s explore each option in detail to help you decide what might work best for you.
Remortgaging to Fund Home Improvements
Remortgaging involves switching your existing mortgage to a new deal, often with a different lender, to release equity from your home. If your property has increased in value, you may be able to borrow more than your outstanding mortgage balance and use the additional funds to pay for your renovations.
For example, if you owe £150,000 on your current mortgage and need £30,000 for improvements, you might remortgage for £180,000. The new mortgage pays off your existing balance, and the extra £30,000 can go towards your home project.
Things to consider when remortgaging:
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You’ll increase the total amount secured against your home.
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Monthly repayments are likely to rise.
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You could face early repayment charges if you’re still within a fixed-rate deal.
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Your new mortgage rate and terms will depend on your property value, equity, and credit profile.
Remortgaging can be an affordable way to borrow large sums at competitive interest rates, but it’s crucial to review all costs and ensure repayments fit within your budget.
Second Charge Secured Loans
A second charge secured loan (also known as a homeowner loan) allows you to borrow against the equity in your home without changing your existing mortgage. Instead of remortgaging, you keep your current mortgage in place and take an additional loan secured on your property.
This option can be helpful if:
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You have a competitive mortgage deal with high early repayment charges.
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You need to borrow a larger amount than an unsecured loan would allow.
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Your credit profile makes remortgaging less attractive.
While secured loans often offer lower interest rates than unsecured loans, they do carry the risk that your home could be repossessed if you don’t keep up with repayments. You’ll need to repay both your first mortgage and the second charge loan at the same time.
Further Advances from Your Current Lender
A further advance is when your existing mortgage lender agrees to lend you more money, secured against your home. This can be a straightforward option if you want to avoid remortgaging completely.
Benefits of a further advance:
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You stay with your current lender, which may simplify the process.
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It can help you avoid early repayment penalties on your main mortgage.
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It may come with a competitive interest rate compared to other types of borrowing.
However, the additional amount might be at a different interest rate from your original mortgage, and repayments will increase. You should also ensure that you can comfortably afford the higher monthly payments.
Other Ways to Fund Home Improvements
If you prefer not to secure extra borrowing against your home, you could consider:
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Unsecured personal loans — Typically up to £25,000, with fixed rates and shorter repayment terms (usually up to five years).
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Credit cards — Suitable for smaller projects, especially if you can use a 0% introductory rate card and repay the balance before interest kicks in.
Need Advice on the Best Option for You?
Choosing how to fund your home improvements is a big decision. As experienced mortgage brokers, we can help you compare remortgages, secured loans, and further advances to find the most suitable solution for your needs.
Get in touch today to explore your options and turn your home improvement dreams into reality.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.
