A loft conversion, a new kitchen, an extension — home improvements add space, comfort and often value, but they cost money you may not have sitting in the bank. Remortgaging is one of the most common ways to fund them, borrowing against the value already built up in your home.
How it works
If your home has risen in value, or you have paid down a chunk of your mortgage, you will have equity — the difference between what the property is worth and what you owe. Remortgaging to release equity means taking a new, larger mortgage that pays off your existing one and gives you the difference as cash to spend on the work.
For example, if your home is worth £300,000 and you owe £150,000, you might remortgage to £180,000, clear the old mortgage and release £30,000 for the improvements. You are borrowing more, so your mortgage payments will usually rise, but you are borrowing at mortgage rates — typically much lower than a personal loan or credit — and spreading the cost over a longer term.
When it makes sense
Remortgaging for improvements often makes most sense when the work adds real value or when you would otherwise borrow the money more expensively elsewhere. Improvements like extensions and conversions can increase the property’s worth by more than they cost, meaning you are partly reinvesting in the asset. And because mortgage rates are usually far below unsecured borrowing rates, funding a large project this way can be much cheaper than a loan — provided you are comfortable with the longer repayment.
What to weigh up
Borrowing more against your home is not a decision to take lightly. Your payments will typically go up, and spreading the cost over the mortgage term means you may pay more interest overall than a shorter loan, even at a lower rate. Crucially, the debt is secured on your home. There may also be early repayment charges on your current deal to consider before you remortgage.
The alternatives — a further advance from your existing lender, a separate secured loan, or unsecured borrowing — may suit better depending on the amount, your current deal and your plans.
Getting it right
Whether remortgaging is the cheapest and most sensible way to fund your project depends on your current mortgage, the equity you hold, and the numbers across the whole market.
We advise on remortgaging for home improvements and will compare it honestly against the alternatives. If you are planning work on your home, get in touch and we will find the most sensible way to fund it.
