Retirement is a great opportunity to revamp your living space and make some home improvements. Whether you’re interested in building an extension, doing up the bathroom or adding solar panels, home renovations can modernise your home and increase its value.
That said, home improvements can often be costly and can raise questions like; ‘how do I pay for expensive home repairs?’ or ‘should I remortgage for my home improvements?’ To help, we compare two ways you can release money from your home to pay for renovation plans.
Remortgaging for home improvements
Remortgaging is when you move your current mortgage to a new deal, either with your current lender or a new provider. You can remortgage for home improvements by releasing equity you’ve built up over the time you’ve owned your home. It’s a popular way to fund home improvements in the UK. It can take several weeks though, and could include exit fees if you move to a new lender, so you should factor this into your plans. You’ll always own your own home though, and you could use the money to increase the value of your home.
It’s worth keeping in mind that remortgaging to fund home improvements isn’t right for everyone. It can be difficult to remortgage in later life, as the affordability checks are based on your age and income. And, if house prices fall, you could end up in negative equity, making moving or remortgaging again difficult. If you don’t keep up with your repayments, your home may be repossessed. If you’re over 50, you may be better suited to using equity release for home improvements. You don’t have to have paid off all your mortgage – you can remortgage to a lifetime mortgage and pay off the rest of your mortgage using the money you access, but you might have to pay an early repayment charge if you do.
Fund home improvements with a lifetime mortgage
If you have ambitious plans for your renovations, you might require a bigger budget and be looking for ways to borrow larger amounts of money. A lifetime mortgage, a type of equity release, could be one way to fund your project.
A lifetime mortgage allows you to access the money that’s tied up in the value of your home, allowing you the freedom to use the money the way you want.
You can choose whether you want to repay some, all or none of the money each month, so it can fit into your budgeting plans. If you choose not to repay the interest though, it will be added to your loan and can build up quickly. If you take out our Payment Term Lifetime Mortgage, which requires the full monthly interest payments to be made for an agreed payment term, and you don't keep up with your payments, as a last resort your home may be repossessed.
One of our customers, Lillian, used a lifetime mortgage to convert a former chapel into her forever home. She used the money to create a space that was more eco-friendly and energy efficient, re-using building materials as much as possible.
Like any other mortgage, a lifetime mortgage is a loan secured against your home. The amount you can borrow is based on your age and the value of your home. It may impact any means-tested benefits you receive though and can affect any inheritance you leave behind. There may be cheaper ways for you to borrow money for your home improvements, so there’s plenty to think about.
You can only take out a lifetime mortgage through a qualified financial adviser, who will make sure that:
- It’s the right choice for you
- You choose the right product
- You fully understand the product you’ve chosen
Our Energy Saver Cashback offer rewards customers making energy efficient home improvements with their Lifetime Mortgage. If you have a lifetime mortgage with us and use your initial advance or drawdown facility to make a more positive impact on the environment, you can claim up to £1,000 cashback (for drawdowns up to £200, a maximum of three times). You can use the money to pay for double or triple glazing, loft insulation – or, like Lillian, you could install an air source heat pump.
When thinking about how to fund home improvements, it’s worth considering all of your options. Whether you have savings to cover the cost or are looking to remortgage or take out equity release, you should always seek advice. You can find an adviser through Unbiased.
If you’d like to see how much equity you could release from the value of your home, try our equity release calculator.