With the average house price expected to soar to around £300,000 by 2011 its no surprise that homeowners are choosing to extend their property. But research from comparison website moneysupermarket.com reveals that people choosing the wrong loan to fund their home improvements could end up £2,130 out of pocket.
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Borrowers wanting to secure extra cash on their mortgage to fund work on their house will be offered a home improvement loan. But moneysupermarkets figures show that they would be better off if they remortgaged to pay for the renovations instead.
Louise Cumming, head of mortgages at moneysupermarket.com, said: Not only will a remortgage save you money in the short term, but the home improvements should increase the value of your property for when you do want to move.
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Interest on a home improvement loan from a lender would be charged at the typical rate of 6.5 per cent as much as 2.13 per cent over more competitive mortgage rates which are currently available.
Cumming added: Many lenders have really simplified the remortgage process so associated costs can be minimal, with products offering free valuation and legal fees for standard transactions.
And remortgaging to a larger loan incorporating an allowance for home improvements could work out more cost effective even after mortgage exit fees.
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