Can Remortgaging be used for Home Improvements?
Interest rates are generally lower on remortgage deals than on personal loans or credits cards - this is why many homeowners are now remortgaging to pay for home improvements.
Overtime, our properties have become increasingly important. No longer are they just a place to eat and sleep but now a place to work and exercise. Some homeowners choose to upsize and move to a bigger property whilst others choose to make improvements to their existing home.
If you are planning significant work on your home, like loft conversions or home extensions, and you are considering raising funds from your mortgage to cover these costs the following information will come in very useful:
Home Improvement Project
Remortgaging to fund home improvements whether that is for a new bathroom, extra bedroom, loft, kitchen or extension is common but your chances of remortgaging will depend on a number of factors. These include: your property, your existing mortgage loan and your current financial situation.
Factors to consider when remortgaging:
Affordability: Your monthly payments will rise if you choose to increase your mortgage loan. Your lender will check your salary before agreeing to the remortgage deal. This is to check that your salary is high enough to afford the new payments after your other outgoings have been deducted.
Cost of the home improvements: In the assessment by your lender they will consider the home improvement costs to provide you with an idea of what cost you need to cover by remortgaging. There are a lot of different aspects to take into account when calculating the amount of money you will require for your home improvement.
Credit history: Your income, debts and credit history, employment status and job security will be considered by your lender. The primary factor in the lender's decision of whether to approve your remortgage will be your credit score. It's best to understand how lenders may see your application before you apply to avoid the shock of being rejected.
Equity release: Many homeowners will have equity in their home if they have owned their property for a number of years. Since initially purchasing your home, if property prices have increased significantly, you may find you have enough equity to utilise and work with when looking to remortgage.
Financial circumstances: Your financial situation will be assessed whether you are hoping to move to a new lender or switch to a new mortgage deal with your existing lender. If you have regularly missed payments or been late with your payments this can result in being turned down by the lender. With lenders that accept borrowers who have previously experienced mortgage payment issues, they often charge higher interest rates.
Type of property: Will your new home improvements add value to your home? This is a key point to consider and your local estate agent can help you ascertain whether a return on your investment will be achieved.
5 reasons to avoid moving and stick to home improvements:
- Certain home improvements add value to your home
- A great way to create additional living space
- You can remain in your current location
- You can stay near local schools
- Savings on the cost of moving home
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