Many people are asking, should I move or improve
One of the many side-effects of lockdown is that many people are re-evaluating the amount of space they need in their house and garden.
With working from home becoming the norm, and trips to the pub now often forgoed in place of a couple of drinks in the back garden (if you’ve got one) lots of Brits are now grappling with a dilemma; move to a new home entirely, or improve their current home? Common home improvements include:
- Loft conversions
- Single or double extensions
- Garage to room conversions
- Reconfiguration of the existing layout for more space
- Outdoor cabin as a playroom, home office or a place to relax
Many people are simply taking advantage of the current stamp duty holiday and low interest rates and moving homes altogether. However, if you want to stay put for family, friends or schools, you can look at improving your current home.
Most clients’ first thought when they are looking to do home improvements is raising additional funds from their existing mortgage provider. However, there are various pros and cons to this, and some lenders don’t offer it.
Many lenders are becoming more stringent about lending at the moment due to the current Covid-19 pandemic, especially if your personal circumstances have changed this year to the extent that you’ve sustained a drop in income, which could affect your application.
You may also be restricted by a maximum ‘loan to value’ with your existing lender, that being the amount you can borrow against your property’s value.
A remortgage involves switching your entire mortgage balance to a new lender and, if necessary, borrowing the additional funds from that lender. A remortgage to another lender will also involve a new application. This will be subject to a valuation of the property and a solicitor to transfer the property deeds to a new lender.
Some lenders offer incentives which includes either one or both the valuation and legal services for free, whereas with others you will have to pay them yourself.
If you have a discounted or fixed rate deal on your main mortgage you may also be ‘tied-in’ with your current lender. This means that there may be early repayment charges (ERCs) due if you pay off your main mortgage with the current lender.
You could also have an interest only mortgage which you wish to retain, and a new lender may need the whole or more of the main mortgage balance to be taken on a repayment basis, which will cost you more per month.
As with the case of Further Advances you may be restricted by lenders criteria and maximum Loan to Value allowance.
There are other options available that could not only see you get the money you need to redesign your garden, or build that additional room required for working from home.
Second Mortgage or sometimes called a Secured Homeowner Loan
Opting for a second mortgage (also known as a second charge or secured homeowner loan) allows you to take out a second charge against your home. This is separate from the mortgage you’ll currently have secured against your property – if you choose to do this, you’ll carry on making repayments on your current mortgage and retain the current terms and interest rate. You’ll then make separate payments towards your new second mortgage.
Secured loans are usually easier to get approved if you have had poor credit in the past or no credit history. Secured Lenders have also tightened their criterial since COVID-19 but they are more likely to accept an application where higher Loan to Values (LTV’s) are required.
At some point in the future after taking out a secured loan, you might be in a position to bring it all under one mortgage again. This often happens when the mortgage product on the first mortgage comes to an end, the property has increased in value, your income may have increased or credit score has got better.
This means that in addition to getting the finance you need to build an extension, conservatory or home office, you’ll also be able to get a more competitive rate on your mortgage repayments down the line if you can find the right deal – why not get in contact and find out what’s available?
Mortgages with bad credit
Worried about your credit score affecting your remortgage or second mortgage rate?
As specialist mortgage brokers, we’re experts in finding the very best deals available for people with low or bad credit scores and have access to thousands of mortgage products that just aren’t available to people who choose to go direct.
We work with over a hundred different lenders, and can use our relationships with them to get you the best deal possible for your circumstances – so if you’re considering a home improvement, why not give us a call and see what options are out there?
You can speak to one of our specialist team by calling 0800 197 0504 or arranging a call back at a time that suits you. Our opening hours are 9am to 5:30pm, Monday to Friday.