Remortgage for Home Improvement – What you need to know
You might have heard the term remortgage before, but not know a single thing about it. You wouldn’t be alone in this, so don’t panic. We’re going to be looking at all the information that you need surrounding remortgages, with a specific look at remortgaging to fund home improvements. If you want to know more about this topic, keep reading.
Adding a new bathroom, kitchen or extension can make a property feel like new no matter how long you have lived there. Renovating can often work out cheaper than moving but it still needs funding.
Low remortgaging interest rates now mean there are plenty of options to fund home improvements. How much you need to borrow will of course depend on the size of the job. When done properly home improvement can add value to a property and increase your house price.
Overview Of Remortgages
A remortgage is the process of paying off one mortgage with a new mortgage. You use the same property as security. It’s similar to when you go around and look at new rates for your phone or broadband, you can look around and see if there is any opportunity for you to save money. You can then switch to the new deal, which, when it comes to mortgages, is known as remortgaging.
You can either find a new lender or simply switch to a better deal with your current lender, it’s up to you. It’s all about finding the best mortgage rate, interest rate, and so on. As such, it’s important that you do your research into what the best option is going to be before you dive right in.
Who Is Able To Remortgage?
Anyone who has an existing mortgage should be able to remortgage their home. Like we mentioned above, though, it depends on what kind of deals you find. You might be able to find something cheaper with a different lender and remortgage your home this way.
Although homeowners are able to remortgage at any time, it is important to bear in mind the terms of your mortgage and any fees/penalties associated with remortgaging outside of an expiration clause. It is best practice to speak to us, your mortgage brokers, around 4-6 months ahead of a rate expiring.
In What Circumstances You Remortgage
People remortgage their homes for a number of reasons. Whether they have simply found a better deal on their existing scheme, or they want to complete some home improvements.
However, there are also other reasons, such as moving away from interest-only to repayment, wanting to make overpayments, or you want to borrow more money. All of these are common reasons to remortgage, but completing home improvements is one of the most common.
When you are remortgaging for home improvements, most people are doing so so that they can release the equity that they have, for example, the difference between the current mortgage balance and the property value. This could include anything from a new kitchen or bathroom through to a full loft conversion or extension.
The difference is the amount of equity that you want to release, and how much will help you with your home improvements. It is important that you realise most lenders are not going to let you take all the equity of your home, though, so don’t expect this when you look into remortgaging.
How Do You Go About Arranging One?
If you are looking to remortgage for home improvements then it’s a good idea to speak to an experienced mortgage broker. They will be able to review your current mortgage monthly repayments, scan the market for suitable lenders and products and come back to you with the most appropriate deal available on the market.
You’ll need to be aware that by remortgaging you’ll be increasing the amount of borrowing secured against your home. Plus your mortgage payments could increase over the length of your mortgage. If as an example you have £100,000 remaining on your existing mortgage and you require £50,000 for home improvements, you will be looking for a mortgage lender willing to lend you £150,000.
How Do They Work?
First, you need to agree to an agreement in principle. This will let you know if someone is willing to lend you the money without having to go through a full credit check. Keep in mind that this is not a guarantee that you will be accepted, it just gives you a good idea.
You will need to provide personal and financial information so that all lenders have everything they need to create a new plan for you. Your TMS Mortgage Broker can talk you through this process.
Remortgaging to release equity is similar to when you get a mortgage in the first place. The lender will complete a credit check on you to confirm what you have stated. Make sure you have a solicitor to handle the transfer from the old mortgage to the new, and then you’ve got your new deal. It’s that simple.
We hope that you have found this article helpful, and now understand how you can remortgage for home improvement and how a remortgage works.