Home improvements can be expensive when you need to make a big change like replacing a kitchen, getting a new bathroom or having an extension built. It’s easy for costs to escalate due to unforeseen circumstances, so you run the risk of running out of money if you go over budget.
Things can really start to go wrong as the construction workers, plumbers, electricians or decorators could refuse to continue working on your home until they get paid, leaving your house in the state of a building site.
It's important to have the right finance in place, here’s why…
Applying for money successfully
When it comes to applying for funds from any lender, you’ll be assessed on your ability to pay the money back.
You’ll have already proven your ability to pay your monthly mortgage off, so your lender may be more likely to give you a remortgage deal.
This may not be the case if you’re applying for a separate loan, as you’ll have to go through a separate round of checks. Lenders will need to assess your affordability, because this will be an additional monthly payment to your mortgage.
When you get a remortgage, you’ll be able to ask the provider for a lump sum upfront for your home improvements and as a result your monthly repayments will increase.
But if you were to apply for a loan, you’d need a separate pot of money to pay the loan off.
Though the numbers may add up over time, from a management perspective, you may find it more convenient to handle an increase to your existing mortgage payment as opposed to creating an entirely new bill to pay off each month.
How much time do you have to pay off your debt?
When it comes to deciding between a loan and a remortgage to raise funds, you need to consider the most affordable way to suit you. Here’s a quick calculation to show you why:
A typical mortgage can be paid off over the space of 25 years, while a loan is usually limited to around 5 years, meaning you’ll have a significantly smaller amount of time to pay a loan back.
Also, if you decide to sell your home for much more than you bought it for due to your home improvements, you can get rid of the extra debt immediately, even if it’s over 5 years since you took the lump sum up front.
So, if you’re thinking about making home improvements and need some extra money, think carefully about your options. Try our broker matching service to see if a mortgage deal is the way to finance you home improvements