When it comes to those big home improvements, it can be difficult to know where to start when it comes to financing the project.
Often, as a result, many people approach their bank for a remortgage, only to find the process complicated, time-consuming, and often unsupportive. So, where can you turn?
Homeowner Loan
Homeowner loans are designed to work alongside your current mortgage product and are essentially a secured loan that uses the surplus equity in your home.
How much you can borrow will depend on both the value of your home and how much of your mortgage you’ve paid off to date.
For example, if your home is worth £500,000, but your mortgage balance is £100,000, you’ll have £400,000 in equity to play with.
They do not affect your current mortgage product, meaning no early repayment charges (though permission is requested) and they allow you to borrow large sums of money at competitive/secured rates - over terms of up to 30 years.
Homeowner Interest Only Loan
Interest only loans work very much the same way as homeowner loans - apart from you only pay the interest back on a monthly basis.
For example, if you borrow £20,000, each month you would be paying off the interest that occurred, not the actual £20,000 you borrowed. This will be settled at an agreed date.
These loans are great if you have a windfall of cash coming to you in the future, but you want to get a move on your project ahead of time. This lump sum might be an inheritance, investment payoff, or a pension.
The terms on these tend to be shorter, as there is no capital repayment, and the monthly outgoings will be significantly smaller than those of other loans. However, if opting for this finance option, make sure you definitely have a plan for that big payment in the future.
Bridging Finance
Bridging Finance is generally for the more experienced renovator, but an option all the same.
The way this works is that all the money is drawn upfront, with no payments until the end of the term (generally a maximum of 12 months).
At this stage, the property is revalued and the original sum plus interest and fees are rolled up and put on a longer-term loan or remortgage program.
Great for the longer more complicated projects - though can be a little pricey.
Consolidation
Home renovation is expensive and one option that you may not have considered is some consolidation to reduce your monthly outgoings.
By wrapping up loans and credit cards at the same time, it could allow you to reduce the impact of the additional borrowing.
Fancy learning more? Book in a free consultation with our team, and discover your home’s hidden potential.
