A workman installing a new kitchen.

Whether your property needs an emergency repair or you have renovation plans to turn it into your dream home, how will you fund the costs?

Many families are choosing to improve their homes rather than move. And unless you have a savings pot you can dip into to cover the bill, you’ll need to consider the different finance options. 

If you’re making plans to install a designer kitchen or convert your loft, here are five practical options you should be weighing up.  

1. Increase your current mortgage

You may be able to borrow more against your home by increasing your existing mortgage. It could allow you to access some of the equity you’ve built up in your home.

As mortgage interest rates are relatively low, it could be a cost-effective way to fund your renovation plans. However, you should note that any additional funds may not be offered at the same rate as your current mortgage. Interest rates have increased in the last year, so the cost of borrowing could be more than you expect. 

By increasing your mortgage, your repayments will also rise, and it’s important to factor this into your budget. Alternatively, you could extend your mortgage term. By increasing how long you’ll be paying your mortgage, your repayments could fall, but you’d pay more interest in total. 

2. Take out a second mortgage

It is possible to take out a second mortgage against your home known as a “second charge mortgage”. You’d pay this mortgage alongside your current one, so you’d need to budget to cover both repayments.

This is often worth considering if you have favourable mortgage terms and it doesn’t make sense to refinance. 

As with a regular mortgage, a second charge mortgage is secured against your home. So, if you didn’t keep up with repayments, your home could be repossessed. 

3. Apply for a personal loan

A personal loan could give you access to the funds you need. While interest rates are rising, there are still some deals that offer a competitive rate, so shopping around is important.

You should ensure you understand the cost of borrowing when applying for a personal loan and whether a deal is secured or unsecured. While a secured personal loan is likely to offer a lower rate of interest, it is borrowed against your home. This means the lender could use your home to cover your debt if you don’t meet repayments. 

4. Use a credit card

Credit card interest rates are likely to be higher than alternative options. However, if you’re eligible, a credit card with a 0% deal could cut the cost of your home improvement plans.

If you choose to use a credit card, you should check how long any promotional period will last and what the interest rate will be after. 

You should note that you may not be able to use a credit card to pay for all goods and services. For instance, while you could use it to pay for bathroom fixtures, you may not be able to use it to pay a builder to complete the work. 

5. Unlock some of your property’s equity

If you’re over 55, using equity release may be an option. This would involve accessing some of the property wealth you’ve built up, often by taking out a lifetime mortgage. 

One of the benefits of equity release is that you usually don’t need to make any repayments towards the loan. Instead, the debt is paid when you pass away or move into long-term care. This can make equity release useful if you want to access funds without increasing your outgoings. 

However, if you don’t make payments, the interest is rolled up, so the total amount you owe can rise quickly. As a result, it could affect the value of your estate when you pass away and what you leave behind for loved ones.

Equity release could also affect your entitlement to means-tested benefits. 

It’s important you carefully consider the different options and long-term implications of equity release.

Contact us to talk about your mortgage 

If you’re interested in increasing your mortgage or using equity release to cover your project, please contact us. We can help you search the market to find a deal that suits your needs and answer any questions you have.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.

Think carefully before securing other debts against your home.

Equity Release will reduce the value of your estate and can affect your eligibility for means-tested benefits.