Using Equity for Improvements
Remortgaging to fund home improvements is one of the most popular reasons for releasing equity. By borrowing against your property's current value, you can fund extensions, renovations, new kitchens, bathrooms, or other improvements that enhance your living space and potentially increase your property's value.
The advantage over other borrowing methods is typically lower interest rates - mortgage rates are usually cheaper than personal loans or credit cards. However, you're securing the debt against your home, with all the implications that carries.
Will Improvements Add Value?
Not all improvements deliver a return on investment. Generally, extensions (especially adding bedrooms), loft conversions, and kitchen/bathroom upgrades tend to add value. Highly personalised features, swimming pools, or over-improving for the area may not.
Research local property values and what sells well in your area. Consider getting an estate agent's view on how your planned improvements might affect saleability and value before committing funds.
How Much Can You Borrow?
Your borrowing capacity depends on current equity, property value, and affordability. Most lenders cap additional borrowing at 85-90% LTV. The new higher mortgage must be affordable based on your income and commitments.
Get quotes for your improvement works before approaching lenders, so you know how much you need. Build in contingency - renovations often cost more than initially estimated.
Alternatives to Consider
Further advance: Your current lender might offer additional borrowing without a full remortgage, potentially avoiding early repayment charges. Second charge mortgage: Borrowing from a second lender, leaving your first mortgage untouched - useful if you have a great rate you don't want to lose.
Personal loans: For smaller amounts, a personal loan might be simpler and avoid increasing secured debt. Compare total costs including interest over the full term.
The Process
Remortgaging for home improvements follows the standard remortgage process. The additional funds are released when the new mortgage completes, usually paid directly to your bank account. You can then manage payment for works as they progress.
Some borrowers choose to complete works before remortgaging, hoping the improved property value allows better LTV and rates. This requires alternative funding for works upfront.