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Home » Services » Mortgage Services » Home Improvement Mortgages » What is a Home Improvement Mortgage?

What is a Home Improvement Mortgage?

Ciarán Power

Last Updated: February 2nd, 2024 at 6:34 pm

Table Of Contents

Introduction

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Understanding Home Improvement Mortgages

A home improvement mortgage is a financial arrangement where you remortgage your property, with an additional element of capital specifically allocated for making improvements to your home. This is typically done by releasing some of the equity you have in your property.

Here’s a clearer breakdown:

  1. Equity Release: Equity is the portion of your property that you own outright, calculated as the property’s value minus any outstanding mortgage balance. In a home improvement mortgage, you borrow against this equity.
  2. New Mortgage: You essentially replace your existing mortgage with a new one (a remortgage). This new mortgage is larger than your previous one because it includes additional funds for home improvements.
  3. Funding Home Improvements: The extra money you borrow is earmarked for making improvements to your property. This could be anything from building an extension, renovating kitchens or bathrooms, or other substantial home upgrades.

The key advantage of a home improvement mortgage is that it enables you to fund significant home improvements without needing to save up the entire cost upfront. Additionally, mortgage interest rates are typically lower than other forms of borrowing, like personal loans or credit cards, making this a potentially more cost-effective way to finance home upgrades.

Why Consider Home a Improvement Mortgage?

Considering a home improvement mortgage during the remortgaging process can be advantageous for several reasons. Firstly, it offers cost-effective borrowing opportunities. Mortgages typically come with lower interest rates compared to other borrowing options like personal loans or credit cards. By incorporating the costs of home improvements into your mortgage, you can finance these at a more affordable rate. Secondly, well-planned home improvements can significantly increase the value of your property, making this investment potentially profitable in the long run, especially if you decide to sell.

Thirdly, including home improvement costs in your mortgage allows you to spread these costs over the term of the mortgage, making it more manageable financially, as opposed to needing a large lump sum upfront. Fourthly, this approach provides an excellent opportunity to customize your home to better suit your needs and preferences, whether it’s through adding space, upgrading facilities, or enhancing the overall living experience.

Lastly, remortgaging for home improvements can sometimes coincide with finding better mortgage deals. Market conditions and personal financial situations can change over time, and remortgaging offers a chance to reassess and potentially secure a mortgage product that’s more aligned with your current needs and circumstances.

Types of Projects Covered

Essentially all types of projects are allowed by lenders, so whether you are planning to renovate your kitchen, buy new furniture or landscape your garden, these are all perfectly valid reasons to take out additional capital. Some lenders may want to see some quotes from various builders or contractors, especially if you are undertaking a larger project such as an extension or conservatory.

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