Mortgage lenders offering cheap rates to borrowers remortgaging to raise funds for home improvements and extensions
Most banks and building societies are happy to offer capital raising remortgages to help homeowners access funds to pay for extensions, loft conversions or even basement digs.
The lenders allow homeowners to raise additional funds for home improvements as part of the remortgage process and they apply their normal affordability calculations. The market has improved in recent weeks and it is possible to borrow five or even 5.5 times single or joint salaries for mortgages.
The biggest lenders do not charge higher rates when borrowers remortgage to raise additional cash, and at the moment they offer two and five-year fixed rates at around 1.5%. They typically charge £999 arrangement fees and pay for the property valuation and legal fees when you switch to them.
Aaron Strutt, product director at Trinity Financial, says: "Our brokers regularly help homeowners to remortgage away from their existing lenders and secure funds for refurbishments. If the client is borrowing a large amount of cash and plans to do significant works on their property or they require planning permission, many of the lenders will want to see the plans and details of the costs. They will not ask for as much if you are upgrading your kitchen or bathroom, or landscaping your garden.
"While many of the lenders are keen to provide remortgages for home improvements, they often cap the maximum loan size or the loan-to-value. They offer their cheapest rates to those with 40% equity in their home, although the 20% equity rates are also very cheap."
If you have already started a property refurbishment project and you need more money to finish it, your home will need to be in a habitable condition with a working kitchen and bathroom to secure a mortgage. It may be possible to secure other forms of funding if you can't get a regular mortgage but it will be more expensive.
Here are the lending policies from some of the largest mortgage providers:
|
Mortgage lender |
Policy for raising funds for home improvements or extensions |
Maximum loan-to-value or maximum loan size |
|
Accord Mortgages |
Capital raising for home improvements is acceptable. |
Max 90% loan-to-value up to £600,000. |
|
Bank of Ireland for Intermediaries
|
Capital raising for home improvements is acceptable. The bank may request further details, including estimates and plans if the amount being raised appears excessive or may involve the property being vacated whilst the works are being completed. |
Capped at 85% loan-to-value. Bank of Ireland Bespoke has a separate policy. |
|
Barclays for Intermediaries |
Capital raising for home improvements is acceptable. |
Maximum 85% loan-to-value or 75% loan-to-value if any element of interest only. |
|
Clydesdale Bank for Intermediaries |
Capital raising is permitted as part of a re-mortgage application or against an unencumbered property. The loan purpose must be legal and genuine. For work that requires Planning Permission, evidence of planning consent must be provided. The applicant(s) must provide builder/contractor estimates for completion of the proposed works. |
For requests greater than £50,000 or greater than 20% of the properties current value (whichever is the lowest value). |
|
HSBC for Intermediaries |
Home improvements are defined as improvements to a habitable property, such as a new kitchen or bathroom, central heating, essential repairs or maintenance to the property. |
Maxiumum 80% loan-to-value. |
|
Nationwide for Intermediaries |
The purpose of the borrowing must be detailed in full on the mortgage application form. Nationwide can provide funding for non-structural and structural improvements; this includes internal wall removal, extending a property, major roof works or a new staircase.
|
The maximum loan size is £500,000 at 90% loan-to-value. It is £750,000 at 85% loan-to-value. £1,000,000 at 80% loan-to-value. £2,000,000 at 75% loan-to-value. There are different limits for new build flats/houses. |
|
NatWest for Intermediaries |
NatWest can consider remortgages for home improvement. The bank’s standard policy is to request quotes/estimates for the work and a copy of planning permission if required. |
The bank can consider it up to 80% loan-to-value, and the maximum loan is £1 million. |
|
Santander for Intermediaries |
Capital raising for home improvements is acceptable. |
Capped at 85% loan-to-value. |
|
Virgin Money for Intermediaries |
The bank is likely to ask for the breakdown of the home improvements and the costings. |
Capped at 85% loan-to-value. |
Call Trinity Financial on 020 7016 0790 to secure a mortgage for home improvements or book a consultation
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