Q&A with an expert
The most common first question homeowners ask us is "how much is it going to cost?" or "what can I afford?". And rightly so! If you’ve got the cash - brilliant!... but the vast majority of our homeowners need to take out a loan to fully or partially finance their project.
So, we thought it would be helpful to quiz an expert on the subject of mortgages for home improvements. We asked Paul Cooksley, mortgage broker and home improvement finance expert about the basics to get you started!
"Hi Paul, thanks for speaking to us! OK let’s start with the basics. I thought mortgages are for buying houses? Shouldn't we be talking about personal loans instead?"
Mortgage expert extraordinaire, Paul Cooksley
"Mortgages are very simply a large loan (well a very large loan). They can be used for a number of reasons: to buy a new home, a straight re-mortgage, to consolidate debt, but also for home improvements. You can get a mortgage for an extension or just to re-decorate. You can even get one if you want to finance your new-build house.
There are a couple of big advantages as to why someone would want to borrow more money on a mortgage rather than taking a personal loan from a bank:
- A mortgage interest rate will be much lower. They can start from under 2%, whereas personal loans generally start around 6% (depending on your situation of course).
- Your outgoings are consolidated into your existing mortgage payment, so there aren't multiple payments leaving your account each month to keep track of.
- Finally the repayment term is usually much longer. This means people can budget better and not over stretch financially – but can still get the home improvements they want.
OK great, so what’s the best mortgage deal out there right now for home renovations?
There are so many deals, lenders and options available, it’s very easy to get confused, but really, they are very flexible and there is generally something for everyone. What’s the best deal for one person is not the best deal for another – each mortgage is tailored around an individual situation.
There isn’t such a thing as a “home improvement” mortgage, its just classified as a normal mortgage, so you get the same rates as someone not wanting to raise any extra money. Lenders just cap how much extra you can borrow, and that’s all down to your property value.
So what do you need to get one and how much can you borrow?
You need a deposit or equity in the property if you already own it. When looking for additional borrowing, lenders do cap borrowing at generally 75% of the property value, but it can be possible to get up to 90%. If you’re not looking for additional borrowing and just want a mortgage for your property, you can borrow up to 95% of the property value.
Any final tips?
People often turn down mortgages because they have a fee attached. However, a fee generally buys you a lower interest rate, and when the sums are worked out, that might be cheaper for you. However, be careful if you see very low rate deals, they might be hiding a very high fee!
What are the first steps to arranging the mortgage?
It only takes a few minutes to have a chat with a mortgage adviser, and you will know if you pass the basic criteria with a lender to find out if you can get a mortgage or not! Simple things such as income, out goings and how much you need to borrow is often all it takes.
If you have any specific questions about mortgages for home improvements or want to check some figures, Paul has kindly agreed to be on hand as he provides mortgage advice across the UK. Just drop him an email on firstname.lastname@example.org or call on 0191 217 3913 and he’ll be happy to give you some advice!
Your home may be repossessed if you do not maintain payments on your mortgage.
- Borrowing extra money generally results in a larger overall repayment total.