How Mortgage Lenders compartment home improvement categories.
Home improvements have been an acceptable reason for a remortgage since time immemorial.
The phrase “home improvements” can, however, mean different things to different folks.
I am a professional Mortgage and Finance Broker and importantly I’ll try in this article to demystify how Mortgage Lenders compartment home improvement categories.
Standard Home Improvements
If you plan to raise money and spend it on soft furnishings or white goods. Then this is normally acceptable.
If you have already paid on personal credit for those items and are looking to clear those debts by way of a remortgage this changes the dynamics and reduces the number of Mortgage Lenders to at, particularly if the combined mortgage size takes you north of seventy-five of the property value or the repayment vehicle is interest only. Care should also be taken when consolidating debt as this is moving it onto a secured basis and is putting your home at risk. Also the debt might have a penalty charge for early repayment and a shorter term.
The Mortgage Lender may ask for an itemised list of the home improvements with high level costs, for example, a kitchen for £5,000.
If you are on a good mortgage rate currently and the additional borrowing is modest but greater than a personal loan, a second charge mortgage might work out better for you so it’s worth discussing this option with your Mortgage Broker. Be careful as not all Brokers are licenced for second charges so you, therefore, be receiving inappropriate advice.
Light Refurbishment
The exact definition is Mortgage Lender specific in accordance with their individual lending policy. To guide you “light refurbishment” is hoe improvements within permitted development rights that do not change the footprint of the property. For example, converting an adjoining garage into another room. Fitting a working kitchen, toilet or bathroom.
In the case of a buy to let it may also extend to altering the property to meet with EPC standards for letting. For example new windows and electrics throughout the property and a new boiler.
As a guide, the works should take a few months at the outside. The Buy to Let Mortgage Lenders, in particular, would want to be happy you could cover any tenancy void period.
The Mortgage Lender is likely to request a schedule of the works.
Heavy refurbishment
To obtain the finance you will need planning permission as the property is being reconfigured.
Extensions if in keeping with those already carried out on your street will normally still attract very attractive mortgage rates. The Remortgage Lender will work off the current rather than end value.
Short term finance lenders could consider the end value which may be advantageous particularly if the project is more ambitious such as changing a 6 bedroom house into an HMO or guest house. Once the conversion has taken place a conventional long term mortgage could be used as a replacement.
As a requirement you will need to provide a full schedule of works and the funds may be released in stages following interim valuation assessments.
Niche Advice is a Mortgage and Finance Broker and can arrange remortgages, second charges and short term Bridging finance to fund or repay the cost of home improvements.
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