Home improvement loan vs remortgage: How to finance your renovations

Planning on extending your home or have aspirations to reconfigure your current property? While the prospect is exciting, you may be wondering if you can afford it and what financing routes might be open to you to fund the project.

If you don’t have the funds readily available, the main ways to finance your home improvements will be to secure a home improvement loan or to remortgage. Each have their benefits, and drawbacks, and what suits one project, might not suit the next. In this article, we discuss each financing method to help you understand which route you should take.

Home improvement loan vs remortgage: Which is right for me?

Remortgaging

One way to finance your home improvement project is to remortgage. That means releasing equity from your property to remodel or extend your home. However, that does means you’ll need significant equity in your property to raise the funds required to carry out the project.

For example, if your property has a value of £300,000 and you have an outstanding mortgage of £250,000, you have £50,000 of equity in the property that can be released (although it’s unlikely you’ll be able to release it all).

Usually when you remortgage, your lender will pick up some of the fees, such as the valuation fee and legal fees, so if you think you have enough equity in your home to remortgage, then it can be a really cost effective way of funding your project.

Things to consider when remortgaging

• You will need to inform your lender that you are making alternations to your property and make sure you inform your buildings insurance provider too

• You’ll still be subject to the checks required when securing an ordinary mortgage. Your lender will need to make sure that your income is sufficient and that you can keep making the repayments until the end of the contract

• Your may have to pay redemption charges to your original lender

• By remortgaging, you’ll be increasing the amount of borrowing secured against your home and therefore your monthly repayments might increase

 Home improvement loan

If remortgaging isn’t suitable, then you could finance your home improvements with a home improvement loan.

A home improvement loan works just like any other type of loan. You’ll need to pass a credit check and the lender will assess your income before determining how much you can borrow. Then, over an agreed period (usually up to 5 years) you’ll pay the loan back via monthly direct debits.

With a home improvement loan, you can usually borrow up to £50,000 – but the better interest rates usually come attached to smaller loans of between £5,000 and £25,000.

You can have your home improvement loan secured against your property or not, and although your risk is higher when securing it against your home, your interest rate will usually be better.

Things to consider when choosing a home improvement loan

• Providers can be sneaky with their advertised representative APRs. That’s because only 51% of successful applications need to get that rate for it to be representative and the rate you are offered will be dependant on your income and credit rating

• The best home improvement loan interest rates are usually reserved for borrowers making payments over three to five years. So, if you are looking to pay back your loan in a shorter period than that, your interest rate might be considerably higher

• If you secure the loan against your property, you do risk your home being repossessed if you can’t keep up with the repayments

 Which option should you choose?

The most suitable way for you to finance your home improvements will be dependant on your circumstances. While remortgaging usually comes with cheaper monthly repayments than a home improvement loan, it does require you to have enough equity already in your property.

Alternatively, while you may get an attractive interest rate with a home improvement loan, you might not be able to borrow as much as you had hoped.

In any event, the best option would be to seek the advice of a professional who can talk you through your options and assess your personal circumstances to advise which product would best suit you. You might want to consider talking to your bank, a financial advisor or a mortgage advisor.

If you’d like to talk to a mortgage advisor about raising funds for your home improvement project – why not give The Surrey Mortgage Broker a call? You can find out more about The Surrey Mortgage Broker by visiting us here or you can contact Richard Bousfield on 01252 759233 or info@thesurreymortgagebroker.co.uk.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

YOU MAY HAVE TO PAY AN EARlY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

Coming to the end of your fixed rate mortgage deal? Here’s what to do next

If you’re coming to the end of your fixed rate mortgage deal, there are a few options open to you and the route you take will be dependant on your circumstances. Whether you previously fixed for five years or just two, interest rates and mortgage deals can look very different from when you signed your last contract. So, it’s best to explore all your options before rushing into your next agreement.

What should you do when your fixed rate mortgage deal comes to an end?

There are four main options open to you when your fixed mortgage deal comes to an end. These include:

1) Paying the higher standard variable rate

When your fixed rate mortgage deal comes to an end, you’ll automatically be transferred onto the higher standard variable rate if you do not take action. While this may suit some people, for most, it usually isn’t the best option.

The Pros

If you opt to go onto the higher standard variable rate, you’ll no longer be bound by early repayment charges. That means you can overpay your mortgage as much as you like, or even pay it off in full, without facing any sanctions. That’s perfect if you want to clear your mortgage debt quicker or have found yourself in a position where you can pay the rest of the debt off entirely.

There is also the potential that the interest rate will go down. Although, when you initially move onto a standard variable rate mortgage the interest rate is likely to be higher than what you were previously paying, there is the potential that the lender will lower their rates in the future and therefore your monthly repayments will be reduced.

You also won’t be faced with any arrangement fees or other costs involved with securing a new mortgage deal.

The Cons

The main downfall of standard variable rate mortgages is the higher interest rates they are usually associated with. When you first move onto a standard variable rate, you’ll probably notice that your monthly repayments go up.

The flexible nature of the loan means that at any given moment, the lender can put their interest rates up and you may end up with monthly repayments which you cannot afford.

2) Get another fixed rate deal from your current lender

Once your fixed rate mortgage deal has come to an end, you’ll have the opportunity to secure another fixed rate deal from your current lender.

The Pros

By staying with the same provider, you won’t have to pay the fees associated with legal paperwork and valuations. You would’ve already gone through this process when you first secured a deal with the lender, so they’ll already have all the information they need about your property.

It also means that you can secure your new deal a lot quicker. Paperwork and valuations associated with moving to a new lender can take a few months to sort and organise, but you can often secure a new deal with your current provider within a matter of days.

The Cons

The main issue with moving to a new deal with the same lender is that they may not be offering the best deal in the market. You might find that other lenders will be willing to give you deals with much better interest rates; saving you money on your monthly repayments.

3) Get a different mortgage with your current lender

When you reach the end of your fixed rate mortgage deal, you might realise you no longer want to be on a fixed deal. And if the standard variable rate doesn’t suit, there are other mortgage products you could explore such as tracker mortgages, interest-only mortgages or offset mortgages.

The Pros

While the pros of each of these mortgage types will be different, the one thing they have in common is flexibility. Whether that’s no early repayment charges or flexibility on how you save to pay off your mortgage, they tend to be less rigid than fixed rate deals.

The Cons

These mortgage types can change, the interest rate you are paying could go up and so leave you out of pocket. Generally, as well, if you want more flexibility then that comes at a premium.

4) Remortgage to a new lender

At the end of your fixed rate mortgage deal, you’ll also have the option to move to a new lender.

The Pros

The main reason why you might remortgage to a new lender is to secure a preferential rate. Often, a new lender might be able to offer you a better deal than what your current lender can offer you, and you’ll be able to make savings on your monthly repayments.

Other pros include freebies, incentives, and cashback which many lenders now offer their customers to entice new business. For example, they may pay your arrangement fee for you, or give you a sum of money after you’ve completed (often to cover the legal fees).

The Cons

While some lenders might cover arrangement and legal fees for you, others won’t. So, it’s important to check what costs might be involved when making a move to a new lender.

The Next Steps

If you’re 3-4 months out from the end of your current fixed rate mortgage deal, now is the best time to start considering your options. If you want help determining the best route for you based on your circumstances, why not get in touch with The Surrey Mortgage Broker?

We’ll be happy to offer you a no obligation, free initial consultation to help you understand which of these options are open to you, and which would be the best choice moving forward.

You can contact Richard on info@thesurreymortgagebroker.co.uk or call him on 01252 759233.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

YOU MAY HAVE TO PAY AN EARlY REPAYMENT CHARGE TO YOUR EXISTING LENDER IF YOU REMORTGAGE.

The best places to raise a family in Surrey

Are you starting a family and looking to buy a property in Surrey? Perhaps you’ve been renting, and now you want to buy your first family home?

We understand that buying a family home is a very important decision and choosing the area to raise your children probably relies on a combination of great schools, low crime rates and access to activities.

Based on this, we’ve pulled together seven of the best family places to live in Surrey to kick start your property search. In no particular order:

1. Woking

Woking is one of Surrey’s largest towns, located in the northwest of the county. The town was recently ranked the 54 best place to raise a family in the whole of the UK, scoring particularly well for its NCT community.

Woking has also been recognised as one of the best places to live in Surrey for schools, with its St John the Baptist School ranking number one in the county for state secondary schools and number 23 across the whole of the UK.

Being one of Surrey’s largest towns, there is also a plethora of activities for children including a theatre, adventure play areas, horse riding and arts and crafts events. 

2. Guildford

Guildford is a popular Surrey town. Its location, 27 miles southwest of London, makes it a popular commuter town while also being a great place to raise a family. The town was named as the 6 best place to raise a familyin and around the London area.

If schools are your priority, Guildford is a great choice; housing three or Surrey’s top ten state secondary schools. Its St Peter’s Catholic School ranks 6th in the county (151th nationwide), the Guildford County School ranks 9th in the county (316th nationwide), and the George Abbot School ranks 10th in the county (327thnationwide).

If living in the heart of a busy town doesn’t appeal, then nearby smaller towns of Bramley, Shamley Green, Blackheath, Wonersh, Hascombe, and Winterfold might be worth considering due to their low crime rate; with figures showing this area is the 2nd safest place to live in Surrey. 

3. Farnham

Farnham is an old English rural market town to the west of the county. Although located 35 miles southwest of London, Farnham provides great commuter links into the city. The area is also particularly good for families, with the town housing All Hallows Catholic School – the 3rd best school in the county and 79th best school nationwide.

If busy town life doesn’t appeal, the suburbs of Tilford, Elstead, Thursley, Frensham, Peper Harow & Dockenfield are worth considering due to their low crime rates; with an average of just 24 crimes reported here per month.

4. Walton-on-Thames, Esher, and Chertsey

Walton-on-Thames has been voted the number one place to raise a family in and around the London area. It scores 96/100, with factors such as schools, health, job prospects and crime taken into account. Esher in Surrey was named number four in the same study.

Nearby Chertsey has also been recognised as a great place to raise a family in Surrey, being recognised as the 28th best place for families in the UK and noted for its particularly good childcare. Feltham ranked 52nd in the same report, commended for its good schools.

But it is, in fact, Chertsey and Sunbury with the best schools in this area of Surrey; with Salesian School in Chertsey being ranked 5 in the county and St Paul’s Catholic College in Sunbury ranked 7th.

The areas of South Walton & Ambleside are particularly suited to families; being named the 4th safest area to live in Surrey with just 27 crimes per month on average.

5. Warlingham

Warlingham is in the Tandridge district of Surrey, 14 miles south of London. It’s been voted the 19th best place in the whole of the country to raise a family, particularly commended for its great variety of activities.

Activities for families in Walingham include Zorbing, farm visits and plenty of countryside and woods to explore.

6. Leatherhead and Epsom

The Leatherhead and Epsom area is one of the best family places to live in Surrey if schools are a priority. Leatherhead has the 2nd best state school in the county (St Andrew’s Catholic School), and Epsom has the 8thbest (Rosebery School).

If travel to London is also an important part of your house search, these areas also offer good commuter links.

7. Chobham & Bagshot

Chobham and Bagshot are located in the northwest area of Surrey. They’ve been recognised as particularly good areas to raise a family, with Bagshot known for its range of family activities, and Chobham recognised for its great schools.

Bagshot has been named as the 30th best place in the UK to raise a family and Chobham the 86th.

Kick start your search

It’s important to know how much you can borrow before you start looking. You might have your heart set on a property you can’t afford, or you may be able to borrow more than you realise.

Before you begin your search, talk to a mortgage broker who will be able to advise how much you can borrow based on your personal circumstances. Then, once you’ve found your perfect family home, they’ll be able to find you the best mortgage deal on the market.

Want some advice today? Contact Richard Bousfield, The Surrey Mortgage Broker, who will be happy to offer an initial free mortgage consultation.

Alternatively, why not download our helpful Buyers Guide to Mortgages to help you navigate through the complex house buying and mortgage landscape?

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

Brexit and Interest Rates

You can’t go anywhere or do anything at the moment without Brexit being mentioned. Twenty four hour news channels streaming endless Brexit commentary is leaving the writer somewhat deflated and in search of a convenient wall to bang my head against.

I’m not going to comment on Backstops, Customs Unions or Trade Agreements as they are outside of my sphere. Instead I’m going to talk about the effect of Brexit on interest rates and therefore our pockets.

It is not likely we will be leaving the EU with no deal but if this were the case I would predict at least a year of difficulty for the UK Economy. Traditionally in circumstances where the economy is suffering the Bank of England would look to stimulate the economy with the fiscal measures at it’s disposal. These measures would likely be a cut in interest rates and possibly further quantitive easing. How effective an interest rate cut would be is debatable. The rate currently sits at 0.75% so still historically low. High street lender mortgage rates are currently very competitive, allbeit around 0.3-0.4% higher than they were a couple of years ago. However we are a country that is heavily mortgaged so even a small decrease will give consumers more money in their pocket with which they can spend, spend, spend.

The economy is robust according to the Chancellor, Philip Hammond, having experienced nine consecutive years of growth and further growth predicted. He also stated that wages are still rising. Both these are traditional indicators of a possible interest rate rise. However right now the situation is too uncertain for the Bank of England to start pushing rates up. The withdrawal deal has not been agreed and at the moment there’s no indication of when it will be agreed so this puts pressure on the economy and the Monetary Policy Committee, I feel, would be hard pressed to justify any rise in rates now.

The housing market has most certainly slowed in the last 12 to 18 months with transactions down, supply down and demand down. House prices have not yet taken a big hit but they do not appear to be rising either. I do not think a rate cut will necessarily stimulate the housing market as rates are low as it is. It is the uncertainty that is causing the slowdown. I think concern about jobs and prices in the future is bothering the UK Consumer.

If a deal is reached then this will offer a little bit of certainty as we will at least have an idea of what the future relationship with Europe will be and how this may affect jobs and prices here in the UK. In the event of the withdrawal  deal being finalised I still think we have a period of a couple of years while the various deals are done and withdrawal actually takes place. In this light I can see interest rates staying put for at least the first year before we have an idea of where we are going economically. After this I see the Bank of England increasing rates to around 1.25% by mid 2021.

As I’ve said before, take a look at what the high street lenders are offering for an indication of how they feel. Still available are five year fixed rate deals at less than 2%. That is good value for money and if they are happy lending at that level then they don’t think rates are going too crazy in the next few years.

If you are thinking of borrowing more for a move or a remortgage then I wouldn’t be put off by the prospect of rising interest rates. I guess the decision comes down to your general feelings around job and income security going forward.

For this blog I have given personal opinion and taken influence and material from ftadviser.com and the Chancellor’s Spring Statement 13th March 2019.

Update at 17:30 on 13th March – just seen this article here supporting some of what I have said above.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT. 

What have I learned recently!

I’ve not written a blog for months, in fact the last one I wrote was a bit “woe is me” piece about my home improvement problems.

You will be pleased to hear that the house has finally been completed and we have re-installed our kitchen and have a new floor laid after our flood. It was stressful and the insurance claim is a protracted and painful process that has still not been 100% resolved.

However today I’m going to move away from home improvement and touch on some other areas I have been lucky enough to learn about in recent weeks.

The nice people at HSBC for intermediaries invited me along to a seminar at the end of October which was very interesting. It was held at Mercedes Benz world, which was great even for an anti-petrol head like me.

One of the things I like to mention in Blogs over the years is the Bank of England interest rate. I have made many predictions and I’m quite pleased to say I’ve been pretty accurate so far. The main factor I like to draw your attention to is wages. Once wages are outstripping inflation for a sustained period of time then you can expect a rise in interest rates.

Wages in real terms  are actually less than they were in 2007. I do think this is changing, slowly but surely and this will point towards a rise eventually.

However there is an unknown variable that has cropped up, sorry to bring this up, Brexit.

It is this matter that brings me back to HSBC, the nice chap giving a presentation mentioned this in his analysis (as well as lots of other stuff), and said that their prediction was no further interest rates would happen until 2021.

This is backed up by the proliferation of really competitive five year fixed rate products available right now. With the right equity/deposit you can secure a five year fixed rate at under 2%. That is cheap money.

Another presenter who intrigued me was talking about technology and in particular API’s. This stands for Application Programming Interface. We use them all the time without knowing it. Loads of apps on your phone will use API’s. The point the presenter was making was that soon you will be able to apply to mortgage companies with the help of API’s taking information from other apps (personal information) and pre-populating a mortgage application. This isn’t really available right now and having done a bit of research myself I see it is a little way off yet due to all the lenders being quite defensive over their own then you can expect a rise in interest rates.systems. Plus there is the data protection issue so I think we should watch this space and see what happens.

I’ve been pleasantly surprised and inspired by a number of life insurance companies and their enthusiastic business development managers. Legal and General, Royal London and Vitality Life all have hit home with some remarkable statistics and some really good products.

In particular I have been struck by Vitality Life and how they are encouraging healthy lifestyles. So inspired was I that I have signed up for a policy. They offer a premium discount up front and if you “engage” with them by being active you will continue to receive that discount You can also get offers and discounts on various goods such as fitness trackers, apple watches etc.

In my world very few clients see the benefit of insurance and yet we all have it in one form or another. The cat is insured, the TV is insured, the car is insured but very few of US are insured. Have a think about what would happen if you couldn’t work for a year. What would you give up? Have a look at this old blog from 2016 for a bit of useful information.

If you would like to discuss what insurance and protection policies are best for your individual circumstances, please get in touch. Or if you have a question about any of the above, leave a comment in the box below.

A MORTGAGE IS A LOAN SECURED AGAINST YOUR HOME OR PROPERTY. YOUR HOME OR PROPERTY  MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.