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  • Writer's pictureArchie Davidson

Using the equity in your property - Remortgaging explained

Updated: Mar 16, 2021

Do you dream of a shiny new bathroom to make mornings a breeze, or a loft conversion to provide extra space for family life? Remortgaging your house is an option that could supply the funds you need for your home improvements.

There are many reasons to consider a remortgage - it’s important to review your mortgage regularly, particularly as you near the end of a fixed rate, or if you are on a standard variable rate (SVR). Switching to a new mortgage deal can save you a substantial amount of money, both each month, and over the full term of your mortgage. Your mortgage advisor will be able to advise on suitable products for your needs.

One of the most common reasons for remortgaging is to carry out improvements to your property. This is achieved by borrowing against the equity in your home. This article explains how remortgaging for home improvements works - and what you should consider if you decide to remortgage your home.

Calculating the equity in your property

Your home equity is the difference between the value of your home and the outstanding mortgage value. If you have lived in your house for a while, then it may well have increased in value. If your current mortgage is a repayment mortgage, then the balance decreases over time, increasing the equity available. You can get a good estimate of this if you check selling prices of similar properties in your street, and then compare the values against your mortgage statement. Here is an example:

House Value: £290,000 -

Mortgage Balance: £180,000 =

Current Equity: £110,000

Remortgage: £210,000

Released for home improvements: £30,000

Remaining Equity: £80,000

You may decide to use some of the equity in your home when you remortgage. By borrowing more money - against the increased value - you release additional funds.

Remortgaging for Home Improvements

Releasing equity from your home can give you the funds to build an extension, refit your bathroom or convert your loft into an extra bedroom. It can be a cost effective and convenient solution. In most cases, the improvements will add also value to your home. An extension or loft conversion can add more than 20% to the value, whilst kitchen and bathroom upgrades can add up to 5%.

Once you have a rough idea of costs, contact your mortgage advisor to see what could work for you. Before applying for a remortgage, it’s a good idea to have firm quotes for the work required. You can then be confident that the funds are available to cover your home improvement project.

Remortgaging for other reasons

We have already mentioned home improvements, but there can be a host of other reasons;

  • A deposit for an investment property

  • Debt consolidation*

  • Business purposes

  • To gift to your children to help them onto the property ladder

  • To buy a second or holiday home

  • School fees

There may be other reasons that you have considered additional borrowing all of which we can review with you. At Mast Financial Services we will look to give you expert advice to get the most appropriate deal for you.

To find out more about debt consolidation and how it may help you, please click here.

Your home may be repossessed if you do not keep up the repayments of your mortgage

*Think carefully before securing other debts against your home. You may have to pay an early repayment charge to your existing lender if you remortgage and other fees may be payable. You may also end up paying more interest over the term of the debt.

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