Home Improvement Loans And Mortgages

Being a property owner undoubtedly has its benefits, but it also has its responsibilities. Sometimes, your home desperately needs maintenance, or perhaps you wish to install a new kitchen or bathroom. If the matter is urgent and you don’t have any money put by for home improvements, then the only solution is to borrow the money. In this article we look at:

  • If you can add a home improvement loan to your mortgage
  • How to add a home improvement loan to your mortgage
  • How long home improvement loans are

Can I add an improvement loan to my mortgage?

Also known as a further advance, a home improvement loan can be added to your mortgage and involves cashing in some of your equity (the amount you have already repaid to the lender in your monthly mortgage instalments). The main difference between a further advance and remortgaging is that with a further advance, you borrow from the lender who gave you your original mortgage. However, this doesn’t necessarily mean that your further advance will have the same interest rate as your previous mortgage.

Home improvement loans are added to your mortgage by cashing in equity

Before applying for a further advance, there are a number of factors you need to consider. The first is that you should make sure you have a healthy credit score. This application for further funding is treated like a new mortgage so your credit rating and your pre-existing levels of debt will be taken into account.

You should also evaluate the affordability of further borrowing. You should use a budgeting tool/planner to make sure that you will be able to repay the borrowing without it affecting your lifestyle. If your circumstances have changed (for example, your salary has decreased), you may find you are no longer eligible. Finally, you should ensure that you have sufficient equity in the property. Lenders usually demand that your LTV is at least 80-85%.

How can I add an improvement loan to my mortgage?

Your first step is to contact your mortgage lender. Usually, lenders require you to have had your current mortgage for at least 6 months and also might have a minimum amount you can borrow in this way (usually £5,000).

A man is shown working on a home improvement project

Apart from assessing affordability, they will carry out a stress test to ensure that further borrowing would still be affordable if interest rates rose and/or your circumstances changed.
Your lender might also require to see proof of the purpose of further lending such as a builder’s estimates. In order to check the accuracy of your LTV, your mortgage provider might arrange for your property to be re-evaluated.

During the application procedure, you should ask whether you will have to borrow for the entire length of your mortgage term, or whether this home improvement loan can have a shorter term. A longer term might seem appealing because repayments are lower, but you will end up repaying more. Finally, you should enquire about all arrangement fees and the final cost of the loan.

How long are home improvement loans?

The length of home improvement loans varies, and often you can specify how long you want the term to be. Depending on the amount you have borrowed, they are usually anything from 1 to 7 years.

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