Residential mortgages:
Improving your home
Improving your home can give you the space, layout or comfort you need without moving. You may be planning an extension, converting a loft, updating a tired property or making your home more energy efficient.
The right funding depends on the scale of the work, the equity available and your ability to afford the borrowing. Your existing mortgage also matters: replacing a competitive deal to fund a relatively small project may be unnecessarily expensive.
Considering the project and its funding together helps establish what is achievable, how much you need and when the money must be available.
Extensions and renovations
A kitchen replacement and a substantial structural renovation can require very different approaches to lending.
Some improvements can be funded through ordinary residential borrowing. More extensive projects may need a lender comfortable with structural alterations, a period when the property is uninhabitable or money being released in stages.
Explain the proposed work to your mortgage adviser before choosing a mortgage. A lender’s willingness to fund “home improvements” does not necessarily mean it will accept every type of project.
Establishing the full budget
The funding requirement should cover the complete project, including costs beyond the builder’s quotation.
Depending on the work, these may include:
Architects, surveyors and structural engineers
Planning and building control fees
Materials, labour and applicable VAT
Fixtures, fittings and finishing work
Temporary accommodation and storage
Finance costs
A contingency for unexpected work or price increases
Check what quotations include and when payments will be due. A project can be affordable overall but still encounter difficulties if the money is not available when contractors need paying.
Permissions and lender requirements
Planning permission and building regulations approval are separate matters, and your project may require one or both. Other consents may also be relevant, depending on the property and work.
Your mortgage lender and buildings insurer may need to be informed, particularly where structural alterations are involved or you will move out during construction. These requirements should be checked before work begins.
Keep the relevant approvals, certificates and guarantees. They may be needed when you sell or remortgage.
Property value and borrowing
The cost of improvements does not necessarily equal the value they add. Spending £100,000 on an extension does not guarantee that the property will be worth £100,000 more.
For ordinary remortgages and additional borrowing, the lender will generally assess the property in its current condition. You should not assume that an anticipated increase in value can fund the work upfront.
Specialist renovation arrangements may take the completed value into account, subject to the lender’s assessment and conditions.
Remortgaging for home improvements
Remortgaging involves replacing your existing mortgage with a larger mortgage from another lender and using the additional funds towards the work.
For example, if your existing mortgage is £200,000 and you need £60,000 for improvements, you might seek a new mortgage of £260,000, before any fees added to the borrowing.
The lender will assess your income, expenditure, credit history, property and proposed use of the money.
When remortgaging may fit
This can be worth considering when your current mortgage deal is approaching its end, particularly if you also want to review the term or repayment arrangements.
However, the comparison must cover the entire mortgage. A new rate applies to the existing balance as well as the money raised for improvements.
Early repayment charges, product fees, valuation costs, legal work and advice fees can all affect the outcome. Leaving a competitive deal early may cost more than arranging the additional borrowing separately.
Additional borrowing from your existing lender
Additional borrowing, often called a further advance, allows you to borrow more from your current mortgage lender.
Your existing mortgage product can usually remain in place, with the extra borrowing arranged as a separate part. That additional part may have its own interest rate, repayment term and deal end date.
This can be useful where you want to retain your existing rate while raising money for improvements.
What the lender considers
The lender will assess whether the additional borrowing is affordable and whether there is sufficient equity in the property. It may also request details of the work, quotations or supporting plans.
An established relationship with the lender does not guarantee approval. Its current criteria apply to the new borrowing, and the proposed works must be acceptable.
Some lenders offer specific products for qualifying energy-efficiency improvements. These may have restrictions on the work covered, when it can begin and how the funds are used.
Coordinating the mortgage parts
Different deal end dates can make future mortgage reviews more complicated. One part might be ready to switch while another still carries an early repayment charge.
The additional borrowing should therefore be considered alongside the existing mortgage and your likely plans once the project is complete.
Second charge borrowing
A second charge mortgage is a separate loan secured against your home, usually provided by a different lender. Your existing mortgage remains in place.
The original mortgage lender holds the first charge. The second lender’s security sits behind it, meaning the first mortgage is repaid before the second from sale proceeds if the property is repossessed.
You make payments on both loans, and both are secured against your home.
When a second charge may be useful
A second charge can be worth considering where:
Your existing mortgage has a competitive rate you want to retain
Replacing the mortgage would trigger a substantial early repayment charge
Your current lender cannot provide the additional borrowing required
Another lender’s criteria better accommodate your circumstances or proposed works
The second charge lender still assesses affordability, credit history and available equity. This is not a way to avoid those checks.
Comparing the overall cost
Second charge rates and fees may be higher than those available on a first mortgage. However, preserving a favourable rate on a much larger existing balance can sometimes make the combined arrangement more cost-effective.
Compare both loans together, including fees, repayment terms and any charges for repaying early. Your home is at risk if you cannot maintain either loan.
Adjusting your mortgage
Funding improvements is also an opportunity to review how the borrowing will be repaid.
A suitable monthly payment matters, but so does the length of time you will be paying for the work.
Choosing the repayment term
Spreading additional borrowing over a longer term generally reduces the monthly payment but increases the total interest paid.
You do not necessarily need to repay the improvement borrowing over the same period as your original mortgage. A shorter term for the additional amount may be appropriate if it remains comfortably affordable.
Consider the expected useful life of what you are funding. Borrowing over several decades for fixtures that may need replacing much sooner deserves particular thought.
Changing the existing term
Extending your existing mortgage term may create more room in the monthly budget, but it also changes the cost and repayment timetable of the original borrowing.
Shortening the term generally increases payments while reducing the time over which interest accrues.
Any change remains subject to the lender’s requirements, including relevant age, retirement and affordability considerations.
Repayment method and overpayments
Moving borrowing onto interest-only is not simply a way to make a project affordable. It requires an acceptable capital repayment strategy and must meet the lender’s criteria.
If you expect to use bonuses, savings or other lump sums to reduce the borrowing later, consider the mortgage’s overpayment allowances and early repayment charges when choosing the product.
Larger or more complex projects
Major renovations, conversions and projects involving substantial rebuilding may require specialist finance.
A renovation or self-build mortgage may release funds in stages. Some arrangements release money after work has been completed and inspected, so you need sufficient funds to reach the next release point.
Short-term bridging finance may sometimes be appropriate, but the eventual sale or refinancing must be assessed before the loan is arranged.
Starting substantial work before confirming the funding can restrict your options, particularly if the property becomes unsuitable for an ordinary residential mortgage.
Choosing the right funding
The best approach depends on the amount required, the project timetable, your existing mortgage and your wider finances.
For smaller projects, savings or an unsecured personal loan may be worth comparing with mortgage borrowing. A lower mortgage interest rate does not automatically mean a lower total cost if repayment is spread over a much longer period.
For larger projects, the comparison should bring together remortgaging, a further advance and second charge borrowing, including the effect on your existing mortgage.
Our role is to help you establish a realistic funding plan, compare the full costs and arrange borrowing that supports both the improvements and your longer-term budget.
It starts with a conversation.
Frequently asked questions.
Every client and every mortgage is different, but there are some questions we are asked regularly.
From affordability and deposits to complex income, expat mortgages and specialist property finance, our FAQs explain how different lenders may approach different circumstances.
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