Home Improvement Loan vs. Remortgage - Which is Better for You?

Are you looking to undertake some home improvements?

If so, you are not alone. Research from Everest, a glazing firm, published in the Independent in September 2010 found that the average homeowner planned to spend £2,831 over the next year to give their home a facelift or to improve the living space available.

The survey found that the most popular home improvement (and by far the easiest way to add value to your home) was to redecorate, with 67 per cent of those questioned planning to spend an average of £1,326 on internal redecoration. The research also found that many homeowners were planning more expensive renovations, with 12 per cent planning to spend £4,340 on a new bathroom and 9 per cent intending to spend £3,713 on a new kitchen.

However, even though they may add value to your home, home improvements are not cheap. So, you may be looking for the best way to finance your proposed work.

Two Methods of Raising Additional Cash

When you are looking to find the cash undertake home improvements there are two main ways to raise funds. You can either take a home improvement loan (a loan secured against your home) or you can remortgage (switch your entire mortgage to another lender and borrow an additional amount).

So, when considering a home improvement loan vs. remortgage, here are some factors to consider.

When a Remortgage May Be Better

A remortgage involves you switching your entire mortgage from one lender to another. As part of this process you can also raise additional funds to undertake home improvements.

If you have a lot of equity in your home and you want to benefit from the same low interest rate – perhaps a fixed rate deal – on your entire mortgage, a remortgage may be the best option for you. Some lenders offer excellent interest rates for remortgage clients although you may have to prove your income and that the loan is affordable to you.

When a Home Improvement Loan May Be Better

There are several advantages of taking a home improvement loan over a remortgage.

Firstly, you may be benefiting from an excellent current deal on your main mortgage. You may have a low fixed or discounted rate and you may be tied into this deal for several years. By remortgaging, you would lose this deal and you may have to pay ‘early repayment charges’ to your current mortgage lender. By taking out a home improvement loan, you can continue to benefit from your existing mortgage deal without paying any penalties.

In addition, you may not be able to remortgage for other reasons. Perhaps you are self employed and cannot provide the proof of your earnings that a remortgage lender requires? Even if the loan is easily affordable to you, a remortgage may not be possible if you don’t have three year’s accounts or other proof of earnings.

In addition, you may want to repay your home improvement loan at a different speed to your main mortgage. You may want to take the loan over a shorter period in order to clear it quickly, whilst letting your main mortgage continue as previously.

Whether you need cash for a simple redecoration or a large extension, a home improvement loan is a simple and affordable way to borrow the money you need.

To get your home improvement loan, fill our form on the right.