What Is The Best Way To Fund Your Home Renovation?
You may be able to use a credit card or small loan to fund your project, but other homeowners have an array of mortgage options available to them.
If you find yourself in the situation where you’ve outgrown your existing home, then you’ve got two options. You can either move to a different property, or you can look into building an extension. This can be a tough decision and finance may be a key factor in determining the solution. Recent data from TSB Bank suggests that two out of five homeowners would rather commit to building an extension in their existing property, rather than opt to move house and budget for the various fees that go hand in hand with a move. If you favour the idea of staying put and adding space to your home, then the next question you’ll have will be related to funding.
Credit Options For Smaller Conversions
If your proposed project is relatively low cost, perhaps a garage or loft conversion worth beneath £25,000, then you might be able to fund the renovations with your own savings, or potentially by taking out a small loan or using a credit card. Remember that some cards have 0% interest deals or can achieve this by completing a balance transfer, so this could be an option worth looking into.
Remortgaging For More Substantial Projects
Many people won’t have access to enough credit to fund an entire conversion project, particularly if the costs are expected to be more substantial and priced above £25,000. The best options for homeowners in this scenario are either to ask for further money from your existing mortgage lender, or else remortgage. The route you choose to go down will likely depend on how much time you have left on your current mortgage deal. Interest rates are extremely low at the moment with the Bank of England base rate held at 0.75% and the lowest tracker deals available at 0.98%. A remortgage brokers Wirral based firm explains that if you’re coming to the end of your current mortgage deal, then now would be a great time to remortgage which would allow you to release some equity for your extension project, whilst taking advantage of these historically low interest rates on your next mortgage product.
Alternatives Including Second Charge Products
Alternatively, if you’re already on a low tracker deal for example then there may not be much benefit to remortgaging, particularly if you’re locked in for a year or two and would need to pay charges to change or exit the deal. In this situation, you could either wait until your mortgage term is up and then switch to a different product, or else you could speak to your lender and ask them to advance you more funds. Another option is to take out a second charge mortgage. This type of product is typically taken out for home improvements such as extensions or other renovation works. It enables you to use the equity you have in your home as security, and then this sits alongside your current mortgage, essentially as a second mortgage on your home. If you opt for a second charge, then this is usually taken out from a different lender, and as such the mortgage rates can be somewhat higher than typical market rates. You might expect to pay almost 4% interest on a second charge mortgage in the current market.
If you need to build an extension to create extra space in your home, take your time in deciding how to pay for it, and always speak to a professional mortgage advisor who will determine the best method of funding depending on your personal situation.