More home owners in 2018 are staying put and opting to tap into today’s cheap remortgage deals than ever before. Why? To get the size of property they need.
In the last four years, there’s been a five-fold increase in property owners choosing to stay put and improve their homes.
Grand Designs Remortgaging
Many of them are funding these home improvements thanks to low-priced remortgaging options.
An extension can be a clever and simple way to transform a property without moving. It can both change the character of a house and supply the extra space a growing family needs.
Developing your existing home can also be a positive investment. Budget for a medium- to long-term period of five years and it may put lasting value on your home.
Adding square footage will almost certainly boost your home’s value. This could be a kitchen or dining area with a single-storey extension, which usually doesn’t need planning permission. Or it could be a double extension for extra bedrooms.
So what are the best home improvements to use cheap remortgaging to invest in? The National Association of Estate Agents (NAEA) lists the top modifications as these:
- Extra bedroom
- Improved kitchen
- Extra bathroom
The Factors Driving Remortgaging
There are four reasons for the current enthusiasm by property owners to use cheap remortgaging for home improvements.
- The sluggish property market right now simply means there’s a limited choice of homes up for grabs.
- Nervousness about the likelihood of the upcoming interest rises that have been predicted over the next two years.
- Uncertainty over Brexit and its impact on the economy in the next five years.
- The stress and cost of moving. For ‘second steppers’ (people moving from their first to second home), the difference between the sale of a current property and the cost of a next home is £135,985. Factor in moving costs, legal fees, stamp duty etc and the estimated cost of moving house in 2018 is £8,885.66 on top of this.
Should You Consider a Cheap Remortgage?
If the home improvement you’re planning isn’t costly, you could consider a personal loan. Rates are currently low. But these will generally be higher than on with remortgaging. Personal loan periods are usually between two to five years. So you’ll be paying more off each month.
Another option is a ‘further advance’ on top of your current mortgage. Some lenders will have specific rates for this. Others will present you the choice of their standard mortgage deals
Do you have equity in your home? Then remortgaging is likely to be more cost-effective.
Equity is the share of the value of your property that you actually own. As opposed to the part you borrow as part of a mortgage. So if your home is worth £500,000, and you have a mortgage worth £200,000, then your equity is £300,000.
You can borrow against the value in your existing property. Then extend the mortgage to release cash to invest in your home improvement.
A remortgage is when you arrange a new mortgage deal that’s larger than your existing one. This is often done with a new lender. With rates now being historically low, you’re likely to be able to switch to a cheaper deal than the one you took out.
Right now, five-year fixed rate remortgages are the most popular. They’ve overtaken two-year fixed rates both in value and popularity. This reflects people’s nervousness about possible impending rate rises. Tracker rates, for the same reason, are at an all-time low in take-up.
Before you decide, check whether any early repayment charges still apply to your existing mortgage and do your sums.
To help you prepare for remortgaging, we’ve created a ‘get remortgage ready’ checklist here.
If you’d like advice on finding the most cost-effective product for remortgaging for your circumstances, you can get in touch with us here