A growing number of homeowners are choosing to modernize their existing homes with funds from a new mortgage. Here’s what’s behind the increase and what to do if you’re looking to add value.
UK homeowners are borrowing more than ever from lenders to finance home renovations, according to data from mortgage broker Mojo Mortgages.
The average amount requested by existing owners to fund these projects has increased by more than £ 13,000 during the COVID-19 pandemic. This has increased by 25%, from an average of £ 52,209 in 2019 to £ 65,267 this month.
It is not just the amount of money borrowed per applicant that has increased. The number of people looking to borrow has also increased significantly. Re-mortgage requests for home renovations have increased 174% so far this year compared to 2019.
What is behind this increase?
Several factors explain the increase in the amount of funds applied and the total number of requests. For starters, record mortgage rates are a big factor. Lenders continue to attract borrowers with competitive offers. This can benefit homeowners looking to remortgage their property, allowing them to lock in particularly attractive rates.
Another factor causing this is rising costs of labor and building materials, which drives up costs. In addition, owners are undertaking more ambitious projects to improve their homes after successive closings, while adding value.
Cassie Stephenson, Director of Mortgages at Mojo Mortgages, says: “After such an uncertain 18 months, you would have thought that the purse strings would have tightened for both homeowners and lenders, but in many cases this has was quite the opposite.
“With people spending more time in their homes than ever before, homeowners have had time to imagine the property of their dreams and the steps needed to make it a reality as the company opens up and returns to normalcy. “
How to use remortgaging to finance home renovations
Mojo Mortgages shares the steps and some helpful tips on how to use remortgage to finance home improvements.
Estimate the total cost of the work required. Get quotes from multiple sources to make sure you get the best deal.
Calculate the mortgage fees required. Be sure to include all costs for architects, building permit, building regulations, certificates and VAT.
Find out what remortgage rates are available. Seek advice from a mortgage broker to help you.
Get a before and after assessment. This can help you find out what a difference the improvements might make and if you are likely to add value.
Get official quotes for all associated work. Add up all the quotes, so that you are aware of all the costs involved with the home improvements.
Decide if you want to move on. Take into account all the quotes you have received and how you will fund the project.
Choose how you are going to finance it. If you want to get the job done, decide how you want to finance it. Find out if a remortgage is the best option for you.
Apply for a remortgage. If you decide to remortgage, speak to a mortgage broker to confirm all the numbers and details.
Choose a lender and submit the request. Include all relevant documentation. Keep in mind that some lenders may want to see quotes from builders.
Wait for the subscription process. It will take time for the appraisal and re-mortgage process to complete.
Receive approval. Once you get the approval, you will receive the funds to begin the home improvement work.
Have the job completed. Then you can enjoy your new improved home.
Obtain all certificates. Finally, obtain all the certificates necessary for the future sale of your property.
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