An increasing number of homeowners are choosing to upgrade their existing homes through funds from remortgaging. Here’s what’s behind the rise and steps on how to do that if you’re looking to add value.
UK homeowners are borrowing more from lenders than ever before in order to fund home improvements, according to data from mortgage broker Mojo Mortgages.
The average amount of money being applied for by existing homeowners to fund these projects has risen by more than £13,000 over the course of the COVID-19 pandemic. This increased by 25% from an average of £52,209 in 2019 to £65,267 this month.
It’s not only the amount of money being borrowed per applicant that has increased. The number of people looking to borrow has also risen significantly. Remortgage applications for home improvements is up 174% so far this year when compared to 2019.
What’s behind this rise?
There are a number of factors behind the rise in the amount of funds being applied and the total applications. For starters, record low mortgage rates is an important factor. Lenders are continuing to entice borrowers with competitive deals. This can benefit property owners looking to remortgage their property, allowing them to lock in particularly attractive rates.
Another factor behind this is increasing costs of labour and building materials, which is pushing costs up. Additionally, homeowners are undertaking more ambitious projects to improve their homes after successive lockdowns, while adding value.
Cassie Stephenson, director of mortgages at Mojo Mortgages, says: “After such an uncertain 18 months you might have thought that purse strings would have tightened from both homeowners and lenders, however in many cases this has been the complete opposite.
“With people spending more time in their homes than ever before, homeowners have had the time to imagine their dream property and the steps required to make this a reality as society opens up and returns to normality.”
How to use remortgaging to fund home improvements
Mojo Mortgages shares the steps and some top tips for how to use remortgaging to fund home improvements.
- Estimate total costs of the work required. Obtain quotes from multiple sources to help ensure you get the best deal.
- Work out the required mortgage fees. Make sure to include any costs for architects, planning permission, building regulation, certificates and VAT.
- Explore what remortgage rates are available. Seek out professional advice from a mortgage broker to help with this.
- Get a before and after valuation. This can help you find out what the difference the improvements could make and if you’re likely adding value.
- Obtain official quotes for all of the associated work. Add up all of the quotes, so you are aware of all of the costs involved with the home improvements.
- Decide if you want to go ahead with it. Consider all the quotes you’ve been given and how you will fund the project.
- Choose how you will fund it. If you want to do the work, decide how you want to fund it. Check if remortgaging is the best option for you.
- Apply for the remortgage. If you decide to remortgage, speak to a mortgage broker to confirm all of the figures and details.
- Pick a lender and submit the application. Include all of the relevant documentation. Keep in mind that some lenders may want to see builders’ quotes.
- Wait for the underwriting process. It’ll take time for the valuation and remortgaging process to complete.
- Receive approval. Once you get approval, you’ll receive the funds to start on the home improvement work.
- Have the work completed. Then, you can enjoy your new and improved home.
- Obtain all the certificates. Finally, get all of the necessary certificates in place for when you come to sell your property in the future.
