Will mortgage lenders allow remortgaging or additional borrowing for expensive home improvements?

by Aaron Strutt

May 17 2024

Home improvements can be expensive, particularly when structural work is planned. Rather than using money from savings or borrowing funds from family, many homeowners remortgage or take additional borrowing with their lender to pay for the work.

Over the years, Trinity Financial's brokers have helped borrowers refinance to raise the funds needed to make significant changes to properties, such as extensions and basement digs. We have also helped our clients secure funding to build home gyms and swimming pools and landscape their gardens. 

Banks and building societies are usually pretty happy to fund home improvements as they improve the property, potentially raising its value and decreasing their credit risk. However, some lenders will cap the amount they will lend existing borrowers regarding the loan-to-value and mortgage amount. This means borrowers remortgage to other lenders and assess their finances again. Either way, any additional capital raising will be subject to strict mortgage affordability calculations, which assess applicants' overall financial situation.

Many homeowners take additional borrowing with their lender or remortgage to raise funds for:

• Purchase of Land
• Loft conversions
• Extensions
• New kitchen or bathroom
• Conservatory
• New garage for classic cars
• Landscaping
• Swimming pool or home gyms
• Double glazing
• New roof

Aaron Strutt, product director at Trinity Financial, says: "If you are thinking about remortgaging to raise funding for home improvements, first check if you have early repayment changes on your existing mortgage and if your lender provides additional borrowing.

"Sometimes, the lenders offer additional borrowing rates that are much more expensive than your current deal. For many homeowners, waiting for the mortgage rate to finish and then applying for a remortgage makes sense. This means they do not have two separate rates."

What to consider before remortgaging to fund home improvements

Even though the price of materials and labour has increased in recent years, many people find making home improvements more cost-effective than buying a new property. However, seeing what properties are available in your local area makes sense just to ensure spending money on refurbishing makes sense. 

Many people remortgage to generate the finances needed for significant changes, such as an extension, basement dig, open-plan living extension, home gym, or swimming pool. Stamp duty is a significant barrier for many people who want to move.

The pros and cons of remortgaging for home improvements

There are upsides and downsides of remortgaging that you need to consider.

Pros:

• When you remortgage to another lender, you can typically fix your monthly repayments for two, three, five or ten years. However, the fixed-rate options may be restricted if you stick with your current lender and apply for additional borrowing.
• Early repayment charge-free products are available if you are considering selling your home although not through all banks and building societies. 
• There is plenty of choice or rates through banks and building societies.

Cons:

• By spreading the cost of home improvements over your mortgage term, you could pay back significantly more interest than with other finance options.
• Current mortgage affordability rules will apply. This means if the lender's calculations have changed or your income and expenses are higher, the additional borrowing or remortgage may not be affordable.
• You may be charged a mortgage-arrangement fee, valuation and legal fees.
• The application process can be longer if you need to get a schedule of work.
• If you want to remortgage before your current deal expires, you could be charged an expensive early repayment charge.

Lenders may ask for the schedule of works as evidence 

If you apply to borrow a relatively small amount to pay for a kitchen or bathroom, the lenders may not ask for evidence of costs. However, if you are planning to borrow a lot of money to make structural improvements, lenders may want to see builders' quotes detailing the costs and changes to the property. 

Some lenders reserve the right to request further details, including estimates and plans, and even hold back funds until the improvement work is completed if the amount being raised appears excessive or if the property may be vacated while the works are being completed. 

Call Trinity Financial on 020 7016 0790 to secure a remortgage, book a consultation, or complete our mortgage questionnaire. 

The information contained within was correct at the time of publication but is subject to change.

Your mortgage is secured on your property. Your property may be repossessed if you do not keep up repayments on your mortgage