With the economy as it is, we are seeing a lot of people talking about staying where they are and either extending their home or making other improvements so this post about getting a Remortgage for Home Improvements seemed apt.
Rather than move house and spend money on solicitors, stamp duty etc, they would rather put that money towards an extension or an office pod for instance or even an alteration to their home layout to make it more usable for them.
This is something we can help with.
How to fund home improvements
There are 2 ways to pay for these changes, the first is to pay for it and then remortgage, the second is to remortgage to pay for it. This post will explain both a little more and then look at the pros and cons of each.
Pay for the improvements and then remortgage: The first way is to pay for the improvements upfront. You may have savings or you may put the cost on to to credit cards or loans. Once the work has been completed you can then remortgage clear off the debts you spent to do the work.
The pros for this method are that you can probably start a little bit sooner. It is generally speaking quicker to get a loan or a credit card than it is to get a Mortgage. You may also benefit from some 0% periods on purchases with credit cards. You can also take out the finance as and when you need it and so you only pay interest when you take it out. You can take advantage of any increase in value as soon as the work is complete.
The downsides however are that loans and credit cards are usually more expensive interest rates. You will also need to have multiple credit checks which can affect obtaining further credit (including mortgages) and your repayments will likely be higher.
Take out a mortgage for the home improvements: The second way is to apply for a mortgage and then get the works done.
The pros here are that you make one application and theoretically that should be it. You have the money in hand and you may even be able to use that to drive a harder bargain with the tradesmen if needed. The monthly repayments should be long
The cons are the exact same reason, you have the money in hand. It is easy to get a little spend happy when you have the money in your bank account and you may end up spending more than expected purely because the money is there. The other downside is that you can not take advantage of the increase in value for maybe 2 years if you are tied in to a new mortgage. You would need to wait until your deal comes to an end.
There are other alternatives which are maybe a hybrid of the 2, we can look to do a secured loan to sit behind your mortgage to pay for the work. This product may be a little more expensive but it would be for maybe 12 months. Once the work is complete, we could then look at remortgaging, taking advantage of the increase value and merging ti all back in to one new mortgage repayments.
Which is the best?
This ultimately depends on your circumstances.
- What do you want?
- How much equity is in your home at the minute?
- How much do you expect the work to cost?
- How long do you expect it to take?
There are a few questions to go through in considering a Remortgage for Home Improvements. I you have some adverse credit have a look at our Can I Remortgage with Bad Credit post for further details, or give us a call.
Once we have the answers to these we can start doing some research and collating your options before deciding on the best way forward.
Once we have decided on the best way forward we can then look at getting your documents together and going from there. If you want to talk through your options with an adviser, please get in touch and we will be happy to talk to you about your situation.