Purchasing a house can be costly, particularly one which needs renovations. But if you haven’t got the direct funding, you may not know your options. In this article, we’ll be discussing whether you should borrow money against your house for renovations…
When you purchase a new home it can be exciting, especially one that needs renovations. It allows you to make it into your own home, designed exactly as you please and not to someone else’s taste. But home renovations can be costly, and after purchasing property, it’s not always likely you have the cash to carry out the work.
If you want to borrow money against your house for renovations, it is important to understand the limitations and benefits of this so you are fully informed before proceeding forward. There are also other available options when it comes to borrowing money for renovations, so it’s crucial to take this into consideration.
To learn more about whether you should borrow money against your home for renovations, keep reading…
How Can You Borrow Money Against Your Home for Renovations?
If you need home renovations but cannot directly fund them you might be considering borrowing money against your home. There are various options available for borrowing money against your home, including:
Remortgaging
When people choose to remortgage, it simply means that they are moving their mortgage from their current mortgage deal to a different one in hopes of finding a better deal for their circumstances. This could be with the same lender or by finding a new mortgage provider.
When you apply to remortgage in order to borrow more money, the prospective lender will generally ask for an explanation of why you need the money and how it will be spent. Most lenders are satisfied with lending additional money for renovation purposes.
Remortgaging for renovation purposes means you will be looking for a new deal that allows you to borrow more money on your mortgage.
For more information on remortgaging for home renovations, Halifax has a helpful article available: Should you remortgage to make home improvements?
Equity Release
An alternative way to fund your home renovations could be by doing an equity release. This is only available for those aged 55 years old and older.
Equity release allows you to have a lump sum of money or small amounts every so often, and it comes from equity which is held up in your property.
There are two different types of equity release, these include:
Lifetime Mortgage
A lifetime mortgage is the most commonly used type of equity release. A lifetime mortgage is where payments and interest are added up and paid upon your death.
Home Reversion
With home reversion, you can sell all or part of your home to a home reversion provider and in exchange, receive a lump sum or frequent payments of money. These payments you could then use to fund your renovations.
The thought of equity release can be daunting, but there are many benefits to it, these include:
• Tax-free cash
• You will only owe up to the value of your property
• You can continue to live in your home
• You will still own the property
• You don’t need to make repayments until you pass away or need to go into long-term care
However, like with anything, there are some drawbacks of equity release, which include:
• You won’t receive the full market value of your property
• It can impact your estate
What other Funding Options are Available?
Bank Loan
There may be more suitable funding options available for carrying out home renovations, meaning you needn’t borrow money against your home.
If the cost of your renovations is not going to be huge, it may make more sense to acquire a home improvement bank loan. Depending on your credit, the APR rate might be better than if you were to remortgage your property or do an equity release.
For more information about home improvement bank loans, the Evening Standard has posted a helpful article: Is it worth getting a home improvement loan?
You Have Funding Options Available For Renovations
What we can conclude in this article is that there are various funding options available when it comes to paying for renovations on your property, including borrowing money against your home.
It is worth noting that borrowing money against your property for renovations doesn’t need to be the only answer you are looking for. There are other options available, and it’s worth considering them.
Please be advised that this article is for general informational purposes only, and should not be used as a substitute for advice from a trained legal professional. Be sure to consult a lawyer/solicitor if you’re seeking advice on the law. We are not liable for risks or issues associated with using or acting upon the information on this site.
