Thinking About Remortgaging for Home Improvements? Here’s What to Know

Home improvements can enhance how a property functions, increase living space, or modernise older features. For homeowners looking to fund renovations, one option often considered is remortgaging for home improvements. This involves borrowing against the value of your existing property to release funds for works such as extensions, loft conversions, kitchens, or general refurbishment.

While remortgaging can provide access to larger sums at potentially lower interest rates than unsecured borrowing, it is not suitable for everyone. This guide explains how remortgaging for home improvements typically works in the UK, what lenders look at, and what to consider before making a decision.

This article provides general information only and does not offer regulated mortgage advice.

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What Does Remortgaging for Home Improvements Mean?

Remortgaging for home improvements usually involves replacing your existing mortgage with a new one, either with your current lender or a new lender, and borrowing more than your current outstanding balance. The additional borrowing is released as cash and used to fund renovation works.

For example:

• Property value: £300,000
• Current mortgage balance: £160,000
• New mortgage: £200,000
• Funds released: £40,000

The £40,000 could then be used towards home improvements, subject to lender approval.

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Why Do Homeowners Consider Remortgaging for Improvements?

Homeowners often explore remortgaging for improvements because:

• Mortgage interest rates may be lower than unsecured loans
• Larger sums may be available
• Repayments are spread over a longer term
• Improvements may increase property value

However, increasing your mortgage also increases long-term borrowing and total interest paid.

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Common Home Improvements Funded Through Remortgaging

Funds released through a remortgage are commonly used for:

• Extensions
• Loft or garage conversions
• Kitchen or bathroom renovations
• Structural repairs
• Energy efficiency upgrades
• General modernisation

Lenders usually ask for a general description of the intended works but do not typically manage or oversee how funds are spent.

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How Much Can You Borrow for Home Improvements?

The amount you can borrow depends on several factors, including:

• Property value
• Outstanding mortgage balance
• Loan-to-value (LTV) limits
• Income and affordability
• Credit history

Most lenders cap borrowing at a certain LTV, commonly around 75%–85% for residential properties, though this varies by lender and circumstances.

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Understanding Loan-to-Value (LTV)

Loan-to-value is the percentage of the property’s value that is mortgaged.

For example:

• Property value: £250,000
• Mortgage balance: £175,000
• LTV: 70%

When remortgaging for home improvements, increasing borrowing also increases LTV. Higher LTVs can reduce product choice and affect interest rates.

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Affordability Checks Still Apply

Even if your property has significant equity, lenders still apply full affordability checks.

These typically include:

• Income verification
• Household expenditure
• Existing credit commitments
• Stress testing against higher interest rates

Lenders must be satisfied that increased mortgage payments are affordable both now and in the future.

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Credit History Considerations

Your credit history is reviewed as part of any remortgage application.

Lenders assess:

• Missed or late payments
• Defaults or CCJs
• Overall credit conduct
• Recent financial behaviour

Strong recent credit behaviour can support an application, while recent adverse credit may limit options or affect terms.

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Will Home Improvements Increase Property Value?

Some homeowners remortgage with the expectation that improvements will add value. While certain upgrades can increase a property’s appeal, value increases are not guaranteed.

Factors influencing value include:

• Type and quality of work
• Local property market conditions
• Over-improving compared to similar properties
• Planning permissions and building regulations

Lenders base lending decisions on current value, not projected future value.

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Timing Your Remortgage

Timing can be important when remortgaging for home improvements.

Considerations include:

• Whether you are within a fixed-rate period
• Early repayment charges on your current mortgage
• Interest rate environment
• Length of time you plan to stay in the property

Early repayment charges can sometimes outweigh the benefits of remortgaging.

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Remortgaging with Your Existing Lender vs Switching

Homeowners may choose to:

• Remortgage with their current lender – sometimes quicker, but options may be limited
• Switch to a new lender – potentially more choice, but involves a full application process

Both routes involve affordability checks and lender approval.

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Alternatives to Remortgaging for Home Improvements

Some homeowners compare remortgaging with other funding options, such as:

• Further advance from the existing lender
• Unsecured personal loans
• Credit cards (for smaller projects)
• Savings or staged improvements

Each option has different costs, risks, and repayment structures.

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Risks of Remortgaging for Home Improvements

While remortgaging can be effective, there are risks to consider:

• Increased long-term debt
• Higher total interest over the mortgage term
• Exposure to interest rate changes
• Reduced equity buffer

Home improvements do not remove the obligation to repay the mortgage.

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What Lenders Typically Ask When Funds Are for Improvements

When remortgaging for home improvements, lenders may ask:

• The reason for the additional borrowing
• Estimated cost of works
• Whether planning permission is required
• Whether the property will remain owner-occupied

Funds are usually released as a lump sum once the remortgage completes.

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Common Misunderstandings

“Equity Means Automatic Approval”

Equity alone is not enough. Affordability and credit checks still apply.

“Any Improvement Adds Value”

Not all improvements increase value, and some may only improve personal use.

“It’s the Cheapest Option in Every Case”

While mortgage rates can be lower, the long-term cost may be higher due to the extended term.

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Preparing Before You Apply

Homeowners often prepare by:

• Getting an up-to-date property valuation
• Reviewing current mortgage terms
• Checking for early repayment charges
• Assessing affordability realistically
• Budgeting for additional costs such as surveys and legal fees

Preparation can help avoid unexpected issues during the remortgage process.

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Remortgaging for Improvements vs Moving Home

Some homeowners weigh up whether to improve their current property or move instead.

Considerations include:

• Cost of renovations vs moving costs
• Suitability of the property long term
• Local market conditions

There is no universal answer, and both options have financial implications.

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Summary

Remortgaging for home improvements can be a way to access funds for significant renovation projects by using equity in your property. While it may offer lower interest rates compared to unsecured borrowing, it also increases long-term mortgage commitments and total borrowing.

Understanding how lenders assess remortgage applications, how LTV and affordability affect borrowing, and the potential risks involved can help homeowners approach this option with realistic expectations.

This article provides general information only. For personalised guidance, regulated mortgage advice is required.