Have you bought a home which needs renovations? Wondering how to pay for the improvements and refurbishments? Darren Polson runs through the financing options in his latest reader Q&A
The Question
I own a Victorian ‘two-up two-down’ in the North of England and I’m currently one year into a two-year mortgage deal. This is my first home so apologies for my ignorance – but can I remortgage to pay for home renovations?
Since I’ve moved in, I’ve noticed it needs a full rewire and a new boiler. I would also like to put in a new bathroom as the current has leaks and the tiling is full of cracks. I can’t afford it without remortgaging – but is this route available to me? Will I have to wait until my mortgage expires in 2026?
The work is likely to cost around £10,000. I bought the house for £140,000 and I put down a 10% deposit. Thanks for your advice
Darren’s Answer
When it comes to borrowing against your property, there are three main options in terms of products or approaches:
1. An additional loan to an existing residential mortgage
This is often known as a Further Advance. It is where the additional loan would be with your current lender. The amount you could apply for would be based on the loan-to-value (LTV) of your current mortgage (equity) and affordability.
2. Remortgage to a new lender
I know your deal is up to 2026 but at the product end date, you could remortgage to a new lender and borrow more to renovate. Effectively the solicitor will repay your old mortgage, then transfer the surplus funds to you that you can then use to repay your debts.
3. Secured loan
Another option is a secured loan. This is normally classed as a second charge loan which can be on different terms to your standard mortgage but tends to be at a higher interest rate with higher fees involved.
Borrowing on your mortgage generally will be a lower rate than an unsecured loan which is a positive as the payments will be lower.
A few factors to consider…
Do bear in mind these points, though:
- Paying back over a longer time means you will likely pay more in interest overall.
- As you are effectively increasing your mortgage, this will reduce the equity in your property.
- As you are effectively increasing your mortgage, this will reduce the equity in your property.
- It may be cheaper to go down another route. Such as better unsecured options like a 0% balance transfer credit card or a lower interest rate personal loan.
This can be a complicated process, and you need to ensure the outcome will deliver the desired results.
It is important to speak to a mortgage broker who can review all options with you and provide advice tailored to your individual circumstances.
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.
