Should you remortgage for home improvements?

If you don't have the cash to pay for home improvements upfront, remortgaging could help you finance it.

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Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.
A remortgage is the process of transferring your mortgage from one lender to another, or staying with the same lender and switching to a different deal.

There are many reasons why someone may want to do this, including planned renovations or improvements to their home.

As long as you have equity in your home and can afford the repayments, this may be a good option for you.

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A hypothetical example

Your home is worth £350,000 and your current mortgage is for £175,000. You would like to raise £25,000 to knock down an internal wall, fit a new kitchen and decorate.

You could switch to a new mortgage for £200,000, which would provide the funds you need to pay off your existing mortgage and give you the £25,000 you need to make the changes to your home.

Is it a good idea?

Remortgaging is likely to give you more flexibility on the amount you can borrow. You can expect lower monthly repayments as a result, because you’re spreading the cost of the extra borrowing over the whole term of your mortgage, which could be a great option if you need to keep your outgoings low.

You’re also likely to have greater access to cash, which can be a more attractive way to pay for goods and services. But the flip side of this is you’ll probably end up paying far more in interest.

By remortgaging, you’ll be increasing the amount of borrowing secured against your home. Plus, your mortgage payments may increase over the full term of your mortgage, which could be 25 years or more.

You may also have to pay fees associated with remortgaging, so make sure you include all of these in your calculations.

Lastly, it’s worth noting you’ll have to go through a mortgage application and affordability check again, even if you remortgage with your existing provider.

This could be bad news for you if your financial circumstances have changed since your initial mortgage application, meaning you may not pass these checks. And even if you do, it could still be weeks or even months before you have the money ready to spend in your bank account.

What are the alternatives?

Unsecured loans

An unsecured loan is a personal loan which allows you to borrow money over a number of years, normally at a fixed rate of interest and usually up to £25,000.

The rate you pay will depend on your personal circumstances, the amount you want to borrow and the length of time you want to pay the loan back over.

Secured loans

If you want to borrow a larger amount, you may need to look at a secured loan. These allow you to borrow larger amounts of money and may give a more competitive interest rate, as your home guarantees repayments to the lender.

There is, of course, one major catch – a secured loan usually uses your home as security, so be aware that your home would be at risk if you fail to make repayments.

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