If you are planning an extension, a new kitchen or other improvements, remortgaging can be a cost-effective way to fund the work by borrowing against your home. This guide explains remortgaging to pay for home improvements: how it works, why it can be cheaper than other borrowing, and the points to weigh first.
Why people remortgage for improvements
Home improvements can be expensive, and remortgaging lets you borrow the money against your home, often at a lower rate than other forms of borrowing. By releasing equity through a remortgage, you can fund work such as an extension, loft conversion or renovation, as our guide to releasing equity explains. For larger projects, this can be a more affordable way to pay than a personal loan or credit.
How it works
To fund improvements, you remortgage for more than you currently owe and take the extra as cash for the work. For example, if you owe £150,000 and need £30,000 for an extension, you might remortgage for £180,000. The lender assesses affordability for the larger mortgage and whether the property supports it. Once complete, you have the cash for your project and a larger mortgage to repay over time.
Often cheaper than other borrowing
A key attraction is that mortgage rates are usually lower than rates on personal loans or credit cards, so borrowing for improvements through a remortgage can cost less in interest each month. The trade-off is that you may spread the cost over a long mortgage term, which increases the total interest. So while the monthly cost is often lower, the long-term cost deserves attention, as covered below.
Improvements that add value
Some improvements can add value to your home, which may partly offset the cost of the borrowing, though this is never guaranteed. Extensions, additional bedrooms and modernised kitchens or bathrooms are often seen as value-adding, while very personal or over-specified work may add less. Thinking about whether the improvements are likely to increase your home's value, as well as your enjoyment of it, helps you judge whether the spending is worthwhile.
The cost over time
Because you are likely to repay the extra borrowing over your remaining mortgage term, possibly decades, the total interest on it can be significant, even at a low rate. A £30,000 improvement spread over 25 years costs far more than £30,000 once interest is added. Weighing this long-term cost against the benefit of the work, and considering a shorter term for the extra borrowing if affordable, helps keep the cost reasonable.
Affordability and the larger mortgage
As with any remortgage that increases your borrowing, the lender will check that you can afford the larger mortgage, now and if rates rise. Your home is the security, so it is important to be confident the bigger payments are manageable. Borrowing for improvements should sit comfortably within your budget, so that funding your project does not leave you financially stretched, as our guide to remortgaging explained covers.
Alternatives to consider
Remortgaging is not the only way to fund improvements. You might use savings, a personal loan for a smaller project, or a further advance from your existing lender, which is extra borrowing on top of your current mortgage. Each has pros and cons, and the best choice depends on the size of the project and your circumstances. Comparing the options, as our guide to remortgaging versus overpaying touches on, helps you fund the work cost-effectively.
Further advance versus remortgage
One alternative to a full remortgage is a further advance, which is extra borrowing from your existing lender on top of your current mortgage, often at a different rate. This can be quicker and avoids switching lenders, but the rate may not be as competitive as remortgaging the whole amount elsewhere. Comparing a further advance against a full remortgage helps you find the cheapest way to fund your improvements.
Borrowing the right amount
It is worth borrowing only what you need for the work, plus a sensible contingency, rather than rounding up substantially. Because the borrowing is secured against your home and spread over your mortgage term, every extra pound adds to the long-term cost. Getting accurate quotes for the work and borrowing close to that figure keeps your additional mortgage, and the interest on it, no larger than necessary.
Choosing the term for the extra borrowing
Some lenders let you repay extra borrowing for improvements over a shorter term than the rest of your mortgage, which increases the monthly cost but reduces the total interest. If you can afford it, repaying the improvement borrowing more quickly can save a lot compared with spreading it over decades. It is worth asking your lender or adviser whether this is possible, as it can make the borrowing much cheaper overall.
Improvements and your home insurance
Significant improvements, such as an extension, can change your home's rebuild cost and value, which may affect your buildings insurance. It is sensible to tell your insurer about major work, both during and after, so your cover remains adequate. Forgetting to update your insurance after improvements could leave you underinsured, so it is a useful step to remember alongside arranging the finance for the work.
Planning and budgeting for the work
Before borrowing, plan the project carefully, including any planning permission or building regulations, realistic quotes, and a contingency for overruns, which are common in building work. Borrowing based on a solid budget avoids running short partway through. Funding improvements through a remortgage works best when the project is well planned, so the money you borrow matches the cost of the work you actually carry out.
Weighing it all up
Remortgaging for improvements works best when the project is well planned, the borrowing is no larger than needed, and the larger payments sit comfortably in your budget. Weigh the long-term interest against the benefit and any value the work adds, and compare a remortgage, a further advance and other options. Approached this way, borrowing against your home can be an affordable route to the improvements you want, without overstretching your finances.
Match the finance to the project
The guiding principle is to match the finance to the project. A small job may be better funded from savings or a short loan, while a large, value-adding project can justify borrowing through a remortgage or further advance. Get firm quotes, borrow close to what you need, choose as short a term as you can afford for the extra, and keep your insurer informed. Matched well, the borrowing supports your plans without becoming a long-term burden.
Done sensibly, funding improvements through your mortgage can give you the home you want at a manageable monthly cost, provided you keep one eye on the long-term interest and only borrow what the project genuinely needs.
In short
Remortgaging to pay for home improvements lets you borrow against your home, often more cheaply than a personal loan or credit, to fund projects like extensions or renovations. It works by releasing equity through a larger mortgage. Some improvements add value, but spreading the cost over a long term increases total interest, so weigh the long-term cost, ensure the larger payments are affordable, and consider alternatives like savings or a further advance.
Where to get help and next steps
Read our guides to releasing equity and remortgaging versus overpaying. This is general information, not mortgage or financial advice.