By Matthew Horan CeMAP · Mortgages
Quick answer: If you're planning an extension, loft conversion, new kitchen or other home improvements, re-mortgaging to release funds is one way to pay for it, but it isn't the only option and it isn't right for everyone. The best route depends on how much you need, what your current mortgage deal looks like and how long you'd take to repay it. Clarity Mortgages & Protection in Altrincham gives fee-free advice, with no obligation.
Altrincham, Hale and Bowdon have plenty of period homes and family houses where people choose to improve rather than move. Extending, adding a loft room or redoing a kitchen can make a home work better for your family, and may add to its value.
The question is how to pay for it. Here are the main options, what to consider with each, and what to check before you commit.
Your main options
1. Re-mortgage and borrow more
You move your mortgage to a new lender, or a new deal, and borrow more than your current balance. The extra money is released to you to use for the work.
Worth considering when: your current deal is ending soon, or you'd save money by switching anyway, and the extra borrowing can go alongside that.
Watch out for: an early repayment charge if you leave your current deal early, plus fees for the new mortgage. You'll also be borrowing the extra over the full mortgage term unless you arrange otherwise.
2. Further advance from your current lender
A further advance is additional borrowing from your existing lender, taken as a separate part of your mortgage on top of what you already have. Your existing deal usually stays in place.
Worth considering when: you're on a good rate you don't want to give up, or you're tied in with a charge for leaving.
Watch out for: the new borrowing is usually at the lender's current rate for further advances, which may be higher than your existing rate. Not every lender offers them, and they have their own criteria.
3. Second charge mortgage
This is a separate loan, secured against your home, from a different lender. It sits alongside your existing mortgage.
Worth considering when: you're locked into a good deal with a charge for leaving, and your own lender can't or won't offer a further advance.
Watch out for: rates can be higher than for a main mortgage, and you'll have two loans secured on your home.
4. Personal loan or savings
For smaller projects, an unsecured personal loan or your own savings may be simpler. There's no impact on your mortgage, and you'd usually repay over a shorter period.
Watch out for: loan rates can be higher than mortgage rates, and monthly payments are larger because the term is shorter.
How much can you borrow?
Lenders usually look at two main things:
Loan to value (LTV). This is the size of your mortgage compared with your home's value. The more equity you have, the more choice you'll typically have.
Affordability. Your income and outgoings need to support the larger payments.
Some lenders will want to know what the money is for, and may ask for quotes or details of the work. Some will only release funds in stages, as the work progresses.
The value of your home is assessed by the lender's valuer, so it may differ from what you expect.
Think about the whole cost, not just the monthly payment
Spreading the cost of a kitchen across a 25-year mortgage can make the monthly payment look small, but you'll pay interest on it for a long time. A few ways to keep that in check:
Split the borrowing. Some mortgages let you set up the extra borrowing as a separate part with a shorter term.
Overpay where you can. Many deals allow some overpayments each year without a charge. Check what yours allows.
Compare the total cost. Look at what you'd pay overall in interest and fees, not just the monthly figure.
We can run these comparisons with you so you can see what each route actually costs.
Check before you start the work
A few practical points that are worth sorting out early:
Planning permission and building regulations. Some projects need them, some don't. Check with your local council, and with your architect or builder.
Tell your lender. Check what your mortgage says about making changes to the property, as some work may need their consent.
Get several quotes. This helps you borrow the right amount, with a bit of room for the unexpected.
Keep a contingency. Building projects often cost more than planned.
Think about the value. Speak to a local estate agent about what improvements add value on your street, so you don't overspend for your area.
Don't forget protection
When you borrow more, your mortgage is bigger, and any life cover you have set up against the old balance may no longer be enough. It's worth checking before you commit. Read Re-mortgaging? Check your life insurance still fits your new mortgage for what to look out for. We review mortgage and protection together.
Where a whole-of-market broker can help
Choosing between a re-mortgage, a further advance and a second charge isn't always straightforward. A whole-of-market broker can:
Compare options across lenders, rather than just one bank's products
Work out whether it's worth leaving your current deal, including any early repayment charge
Show you the total cost of each route, not just the monthly payment
Check lender criteria before you apply, so you avoid unnecessary declines
Handle the application and keep you updated through to completion
If your fixed rate is coming up for renewal anyway, you can read Your fixed rate is ending: what Altrincham homeowners should do next. It might be a good time to combine the two. For more on timing, see When should you re-mortgage?
Frequently asked questions
Can I re-mortgage to pay for home improvements?
In many cases, yes. You can borrow more when you re-mortgage, subject to the lender's criteria, your equity and affordability. Nothing is guaranteed.
What's the difference between a re-mortgage and a further advance?
A re-mortgage usually means moving your whole mortgage to a new deal, often with a new lender. A further advance means borrowing more from your current lender, usually alongside your existing deal.
Will I have to pay an early repayment charge?
If you leave your current deal before it ends, you may have to. It depends on the terms of your mortgage. We'll check it before you decide, as it can make a big difference to the cost.
How much can I borrow for home improvements?
That depends on your property's value, your existing mortgage, your income and the lender's rules. We can give you an idea once we've looked at your situation.
Is it better to use a mortgage or a personal loan?
It depends on the amount and the time you'd take to repay. Mortgage rates are often lower, but you'd pay interest for longer. For smaller amounts, a loan may make more sense. We can compare the options for you.
Do I need planning permission?
It depends on the work. Many projects don't, but some do. Check with your local council or your architect before you start.
Does it cost anything to speak to you?
No. We don't charge a fee for our advice.
If you're planning home improvements and want to understand the best way to fund them, get in touch. It's fee-free with no obligation, and we'll talk you through your options. We help clients across Altrincham, Trafford and Cheshire.
About the author
Matthew Horan CeMAP is Principal of Clarity Mortgages and Protection, an independent, fee-free mortgage and protection broker based in Altrincham. He has over 10 years' experience helping individuals, families and business owners with mortgages and protection, and writes in plain English because most people aren't given the chance to understand what they're signing.
Your home may be repossessed if you do not keep up repayments on your mortgage or any other debts secured on it.
This article is general information, not advice. What's right for you depends on your own circumstances. Acceptance of an application depends on the lender's criteria and is not guaranteed. A second charge mortgage may carry higher rates than a main mortgage, and you may pay more in total over the life of the loan if you extend the term.
