How Much Can You Borrow On A Remortgage

How Much Can You Borrow On A Remortgage – A home improvement remortgage can add a little extra layer of complexity to your mortgage, but since your mortgage is probably your biggest financial liability, it’s always worth checking out your options—especially if you can’t get a deal that’s worth it.

You basically take the remaining amount on your current mortgage and add the cost of your home improvement project, then apply for a remortgage for the total amount:

How Much Can You Borrow On A Remortgage

How Much Can You Borrow On A Remortgage

Mortgage example £150,000 outstanding mortgage + £40,000 for extensions or other home improvements = £190,000 mortgage.

Remortgage Deals And Rates

Thinking of some major home improvements such as an extension or conversion? Wondering how to pay and if you can get a little more out of your mortgage to do it?

You’re not alone, figures from UK Finance typically show that there are around 40,000 remortgages each month and around half of these involve additional loans amounting to an extra £51,470, on average.

It’s safe to say that the vast majority of the roughly 20,000 mortgages are used to finance some sort of home improvement – that’s the main reason banks feel comfortable enough to provide additional funds.

As with any remortgage, this depends on your property, your existing mortgage and your current financial situation. Of course, if you’re applying for additional money to finance building work, the bank will also want additional details about the improvements that will be carried out.

How Early Can You Remortgage?

If you have equity in your home, have kept up with your payments, and can afford the new payments, you should be able to refinance home improvements, but let’s break it down a bit.

You should be fine as long as your home’s appraisal hasn’t dropped significantly since you took out the original mortgage and your LTV is at least 90%. Remember, the higher the LTV you end up with, the higher your rates are likely to be.

You must have made all your previous repayments and your total outstanding loan should not be too close to the affordability ceiling. On a normal remortgage this wouldn’t really be a problem as long as you didn’t experience a drop in income from your original mortgage.

How Much Can You Borrow On A Remortgage

However, since you are applying for a larger loan, you may reach the limit of what the lender is willing to lend. In general, you can borrow around 4 times your income, but each lender’s decision is based on their specific circumstances and you can find banks that offer up to 6 times your income.

Do You Pay Stamp Duty On A Remortgage?

When you apply for a remortgage, you’re basically applying for a mortgage again, subject to all the same criteria as before: debt-to-income, disposable income, savings, existing unsecured loans and credit score checks.

Remember, taking out a home improvement mortgage will increase your loan amount, so you and your banks should feel comfortable with your ability to meet the higher repayments.

It’s really important to understand that you can only borrow against the current value of your home. So the right type of job you have in mind is not as important as its price.

As already mentioned, banks are relatively comfortable in providing additional loans for additions and other home improvements, after all, the loan is secured on the value of the property.

Helocs Vs. Home Equity Loans Vs. Remortgaging:

Your existing mortgage is £150,000 and you want £40,000 for your building work. It is a brand new loan of £190,000. If your house is worth £250,000, that’s a pretty safe investment for the bank.

However, if your home is worth £200,000 then this is not as secure and your application may be refused. It doesn’t matter if you’re blindly talking about your property honor that your extension will add £50,000 to the value of the house.

From an emotional point of view only you will know that. If you don’t plan on moving and are desperate to replace your fire escape, there’s no stopping you.

How Much Can You Borrow On A Remortgage

As already mentioned, your bank only cares about the current value of your property. However, once they give you the funds, you are responsible for paying them back.

Remortgage To Royal Bank

With that in mind, it’s pretty easy to spot a potential problem; Your building works should add value to the property – or at least not detract from the existing value.

If so, it’s much easier to pay back the equity you’ve used when you remortgage for the first time after work or when you come to sell the property. In fact, home improvement can pay for itself.

Any home improvement is only a good financial investment if it increases the value of your home by more than what it ultimately costs you to do the work (plus financing costs).

Not all home improvement projects are created equal, and it’s always a bit of a gamble. Here’s a handy chart that shows, on average, where you can make and lose money.

Why Do People Remortgage?

Of course, before you spend a penny, get a real estate agent with good local knowledge to value your home as it is now, and what they think it will be worth after the job.

For most people you may not have an option, home improvements such as extensions can cost anywhere between £20,000 and £200,000 and unless you have that kind of cash you will need to take out a mortgage first.

If you can pay upfront, you can consider doing so and then remortgaging. That way, the bank can value your house higher, meaning your LTV will be lower and you’ll have access to better deals and lower mortgage rates.

How Much Can You Borrow On A Remortgage

However, this again represents a bit of a gamble. If rates rise, home prices fall, or the job doesn’t result in the expected increase in value, you won’t be able to save on your mortgage.

Could Remortgaging Help You Navigate The Cost Of Living Crisis?

For example, if you want an extension, state of the art home building and renovation, you should expect to pay around £1,680 to £1,920/m² for a good quality single extension. Although you can pay up to £2,500/m² or more if you want top quality finishes over multiple floors. While the Alliance of Home Owners suggests that the average cost of a garage conversion is £6,000.

Once you have this rough figure and feel you can afford it, it’s time to get some quotes. You want at least 3 to give you some ideas of a good price and some options.

The first thing you should ask yourself is “could I be hit with prepayment charges?” They are the most painful of all mortgage costs and can end up costing more than the home improvement work itself.

Early repayment fees usually apply until you are in the final weeks of your initial term. However, they decrease during that term. If you are already on the lender’s SVR, you should avoid the prepayment fee altogether and only pay a small exit fee.

What Is A Bridging Loan?

That doesn’t mean you’ll avoid fees entirely. Lenders may still charge you appraisal and arrangement fees. Feel free to use our mortgage match to see exactly what remortgage rates you can get and what fees you can avoid.

If your fees aren’t too prohibitive, you might want to start measuring interest rates. Mortgage interest rates will be lower than a personal loan, but chances are you’ll pay back the interest over a significantly longer period of time, meaning you’ll be able to pay back a lot more in total.

To find out what’s best for your circumstances, you need to compare rates, the amount of money you want to borrow (the more you borrow, the higher the rate) and how long you want to spend. return it for.

How Much Can You Borrow On A Remortgage

Your Mojo mortgage advisors can talk you through all the remortgage options available to you.

Remortgage A Buy To Let Property: Landlord Guide

There are other considerations. Do you want an unsecured personal loan – less risky but more expensive – or a secured loan, which is cheaper but uses your house as collateral.

A second installment mortgage, also known as an additional down payment, is another option you may want to consider.

A standard mortgage is secured on the property you purchase and is based on your deposit, credit rating, income, debt and affordability, the terms and qualifications for a second mortgage are based on the equity you have built up in that property.

However, even if you have enough equity to secure a secure recovery mortgage, you will still need to prove your ability to repay the new mortgage.

Remortgaging For Home Improvements: How Does It Work

It only takes a few minutes to find out exactly how much you could save on your remortgage with Mojo.

We compare over 90 lenders and give you free expert advice. We even help you with the documentation.

It is one of the biggest savings of your life. Get this mortgage deal right and never regret another mortgage payment again

How Much Can You Borrow On A Remortgage

Need to know what your mortgage costs will be? Is it worth it? Probably. Let’s see if it’s worth the switch

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