Home improvements can modernise a property and also add value. In our latest reader Q&A mortgage expert Darren Polson explains the funding options for carrying out refurbishments
The Question
My husband and I purchased a property three years ago at £225,000 we have spent £50,000 of our own money already on a refurb. We are now looking at similar properties for sale around our area, and they are now going for £350,000 to £380,000.
We think we will need to spend another £10,000 on the property so it reaches its full potential. We currently have a fantastic rate with our lender at 1.6%. What can I do to generate another £10,000 to finish the property’s refurb?
Darren’s Answer
Thank you for your question, this certainly seems to be a huge increase in value which is not uncommon in some areas of the UK.
Regarding the additional £10k refurb you’re considering, it is great to add value to your property, however this only makes a difference if you plan to sell. The most important thing is your enjoyment of your home as a place to live.
If you are looking to sell soon, I would suggest the best first step would be to contact a local estate agent who provides free valuations and ask them to give you an indicative value. You might find you’re already at the higher end without needing to spend more on a further refurbishment.
If selling isn’t on the horizon for you just now but you do feel like you want to carry out further refurb work to the property, you might want to spread out the enhancements into smaller financial commitments so that you won’t need to need to borrow any funds.
Funding options for your refurb
Ask your mortgage lender for a further advance
This would be an additional mortgage or ‘top-up’ to your current mortgage. Please note that this will impact your loan-to-value (LTV) and equity in the property should you sell. Also, you may pay more interest back depending on the terms of the loan. Generally, this won’t impact your current rate of 1.6%.
A secured loan
Many providers on the market offer secured loans. These can incur set-up costs and there are complexities that you need to discuss with a mortgage broker fully before committing to this type of loan.
A personal loan
This would be over a shorter period but again is a credit commitment that may impact borrowing power should you decide to move home and still have the loan outstanding.
Remember that any form of loan/credit is a big commitment and consideration, so it is worth investigating the option of spreading your costs before you seek additional borrowing.
An experienced mortgage broker can help you look at secured and unsecured lending, if this is the route you’re keen to go down.
Meet our expert…
Darren Polson is head of mortgage operations at Aberdein Considine. He has been writing a regular column for What Mortgage for over two years and is now here to answer YOUR questions.
If you have a question for Darren please email kate.saines@emap.com or leave a message in the comments below.
