A Remortgage Could Make You Thousands of Pounds

With the housing market still taking a battering, the last thing it needs is lenders to roll up the drawbridge and offer less mortgage products and restrict criteria for lending. That's without mentioning house prices continuing their downward decline, it forces many to sit tight in properties they wanted to leave years ago. Though people have not been idle, taking the opportunity to redecorate and renovate their property to increase its value when the housing market gets back on its feet.

The most common financing tool to use is a remortgage, moving to a different lender from your current one is an option if it secures you a better rate and by taking a remortgage you can borrow extra money to fund any renovations you have planned, as remortgages have no upper ceiling on how much you can borrow. When work is completed, your house will slowly rise in appreciation thanks to the improvements, nothing comes without catches however, so here are a few things that you should always have at the front of your mind.

Find out how much you can borrow

First things first to figure out how much you can borrow to remortgage and refurbish or redecorate your home, which is determined from the current value and the estimated value after the improvements are completed, in addition your income and credit rating are also taken into account.

Estimate the cost of the home improvements accurately

So you know how much equity will be needed through remortgage, you will have to estimate, with great care, the costs of all planned improvements. Establishing a ballpark budget will help with planning all the other steps that come after.

Even what seem small improvements can soon add up to colossal sums, evidence shows from consumer group Which? For instance just to replace one window can cost anywhere from £300-£1,000 depending on the windows size. Research from Channel4.com reveals a bathroom fitted by your good self could cost £1,300, getting a professional in will see the amount rise to £3,250, while a new kitchen with fitting costs will set you back £5,000.

Now you see why budgeting to the last penny is a necessity, running out of money before the work is completed is the worst case scenario that could happen.

Be sure all your improvements will add value

There are two different concepts when it comes to improvements, adding value and making your home look and feel more attractive to prospective buyers. The two objectives are not always the same thing and you could get distracted and go down the wrong track if you're not careful.

Now for the facts and figures to support our case, spending £7,700 on a bathroom refurbishment will only add £2,892 in appreciation to a house and expect only a £13,000 rise after spending £22,000 on a loft conversion. All these figures came from a 2009 report commissioned by Santander; Whatprice.co.uk has research showing a kitchen will only add 8% to a property, so to make a refitting worthwhile, a house worth £150,000 would have a budget of £12,000 to ensure value for money. All these figures are averages of course and every house will be different, but the trend only goes one way, plus cost overruns and budget breakers have not been taken into account making another reason to plan carefully.

Shop around to find the best remortgage deal

With a fixed budget and the improvements identified, the time is right to find the best remortgage deal on the market. Undoubtedly the best first step is to use one of the many price comparison websites to not only list and identify the remortgage deals, but order them in any preference you want to see which suit your needs best.

The decision will come down to a choice between a tracker or fixed mortgage rate, a fixed rate will offer firm security for a number of years, a tracker rate on the other hand is more flexible, but that can be a vice being linked to interest rates. Other things to consider are will your income and credit rating pass the criteria? Not to mention the Loan to Value (LTV) rate, also check if some remortgage lenders meet the cost of legal fees and valuation. It should be said that at the time of writing, some of the main banks and lenders were beginning to withdraw fixed rate mortgages and remortgages in anticipation of the base rate rising from its historic 0.5% low in 2011. Whether this trickle turns into a flood remains to be seen, but the smart money is on fixed rates becoming harder to obtain.


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