Financing Home Improvements
Every year thousands of people across the UK choose to improve an existing property. Spurred on by the increase in DIY and home improvement television shows, more and more people now have the confidence and know-how to embark on such a project.
The rising costs of moving house have also prompted people to stay in their existing home and spend their money improving or extending it rather than paying high stamp duty costs and solicitor fees.
Anything from installing a new kitchen or bathroom, to completely redecorating or remodelling a property can be classed as a home improvement project - with more extensive works being a full renovation, extension, basement or loft conversion
Your finance requirements will be different depending on if you are buying a house to improve or if you are improving your current house. Click on the options below to find out more about the ways you can finance your project.
Remortgage your home
When thinking about how to fund your home improvement plans, your first thought may be to remortgage your home and release the equity to fund works. There are some great low rate remortgage deals on the market at the moment, but this option can be tricky because your borrowing capacity can be significantly limited. You may have to pay an early repayment charge to your existing lender if you remortgage.
Most lenders will only lend up to 80-95% of your home’s current value, so you may not be able to release sufficient equity to cover your planned works.
A remortgage tends to only work if you’re carrying out minor improvements, such as a new bathroom or kitchen, and if you have sufficient equity in your home - if not, a stage payment mortgage could be the answer.
Stage Payment Mortgages
Stage payment mortgages differ from traditional mortgages as they release funds in stages – in arrears or in advance. Depending on your individual circumstances, your stage payments will either be guaranteed based on your costs, or rely on an uplift in value at each stage.
Unlike a traditional mortgage, your borrowing capacity is not limited by your home’s current value. You could potentially borrow enough to repay your current mortgage and fund the improvement works in full – up to a maximum of 85% of the expected end value of your home when works are complete.
These mortgages are especially useful for major home improvement projects - for example an extension, basement or loft conversion - as many traditional mortgage products and lenders will not lend on a property where major structural works are being carried out.
BuildStore’s unique cost based mortgages can provide guaranteed stage payments based on the cost of works before each stage – giving you certainty in your budget and the funds you need to get the job done! When works are complete, you can switch to one of your lender’s traditional mortgage deals.
If you own a second property outright, you could raise funds against this with a bridging loan to fund the improvements on your current home. When works are complete, the loan must be repaid in full, either by refinancing or selling your second property, or remortgaging your current home based on its new increased value.
BuildStore has a dedicated short term funding team and your BuildStore Mortgage Adviser can put you in touch with them if this is the right option for you.
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