Ways To Increase House Value Without Remortgaging Home
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At some point or another, the majority of us will look to improve the aesthetic of our homes on a larger scale. Be it a fancy kitchen kitted out with all the top appliances, a sprawling extension or a shiny new bathroom, investing in such work not only enhances our quality of living, but increases the value of our property, should we look to sell up in the future.
Of course, these renovations and refinements come at a cost, and not everybody has the cash to hand to fund each and every job. The process of remortgaging has always been a popular means of freeing up cash from your home to help fund any home improvements. However, a surge in mortgage rates has left many reluctant to go down this route. The question is: Can you afford to improve your home without remortgaging?
Historically, remortgaging a property in order to pay for home improvements has been a fairly popular thing to do. In today’s market, however, this course of action is becoming evermore unappealing. For those with a cheap fixed mortgage deal, the prospect of remortgaging house at this moment in time could result in a much pricier mortgage than your existing one.
The property market in general is evoking a sense of nervousness and reluctance to act in haste, but fortunately, for those looking to improve their homes without remortgaging, there are a number of alternative options available.
How does remortgaging work?
First things first, what is the remortgaging process? When you remortgage a property, it means you take out a new mortgage with a new lender, whilst living in your current home. Remortgaging your property typically takes around 4 to 8 weeks after application.
Is it worth getting your house valued before remortgage?
Yes, you should. More often than not, mortgage lenders will require you to have a house valuation done before you can start the remortgaging house process. Lenders require this for two reasons:
To ensure that the value of your home is adequate security for the mortgage
To work out the loan-to-value ratio of your property. If it is lower, you may be able to get a better deal when remortgaging
When you remortgage, your lender assesses the property's value through a valuation. This ensures adequate security for the loan. Here's how it works:
Types of Valuations:
Full Valuation: A surveyor physically inspects the property inside and out, providing a detailed report.
Drive-by Valuation: The surveyor assesses the property's exterior and surrounding area from the road, suitable for lower-risk situations.
Automated Valuation Model (AVM): A computer algorithm estimates the property's value based on data, mostly used for low-value properties.
The valuation helps the lender determine the property's market value based on comparable sales data. It's independent of the lender, ensuring an objective assessment. The valuation influences your LTV ratio, which is the percentage of the property value you borrow. A lower LTV (more equity) usually means better interest rates and loan terms. A higher property valuation leads to a lower LTV, potentially securing a more favourable remortgage offer with lower rates and fees.
What to consider before remortgaging house?
If you want to remortgage your home as a way of funding a home improvement project, there are a couple of considerations you may wish to make before you start the process:
1. Long-term impact: Remortgaging means a larger, longer-term loan. Consider if you can comfortably handle bigger repayments even if your financial situation changes (e.g., job loss). Remember, it's not just repaying the borrowed amount; interest adds up too.
2. Avoid early repayment charges: Stuck in a fixed-rate mortgage with early repayment penalties? Remortgaging might trigger these charges. Check your agreement and consider alternative financing options like personal loans if applicable.
3. Renovate for the right reasons: Don't assume renovations automatically boost your home's value. Research "highest-return improvements" to understand which projects offer the most bang for your buck, like converting unused spaces (cellars, garages) or revamping bathrooms.
4. Start small, think big: Focus on cost-effective ways to increase value first. Enhance your curb appeal with landscaping or minor facade improvements before diving into major construction. Consider seeking professional advice before making hefty investments.
When is remortgaging a bad idea?
You should also consider if remortgaging is the right option for you. Although it may sound appealing, there are certain situations where it may not be the best avenue to explore:
1. Stuck in a Fixed Rate: Ditching a fixed-rate deal early usually comes with hefty early repayment charges (1-5% of your remaining balance!). Consider waiting until the fixed term ends, or exploring other options with your current lender like increasing your loan amount, if possible.
2. High Loan-to-Value (LTV): If you're still early in a 90-95% LTV mortgage, you won't have built much equity. This makes lenders less likely to approve a remortgage for more money, or they might offer less desirable rates. Wait until your LTV improves before remortgaging.
3. Renovating for Value Gain: Don't assume renovations automatically equal increased value. Research carefully which improvements offer the best return on investment. Taking on extra debt without guaranteed value growth is risky.
Can I release equity without remortgaging?
Whilst the remortgage process may work for some, it is not the best fit for every homeowner. If you are looking at raising the funds to complete some home improvement projects and want to release equity without remortgaging, here are some alternatives to consider:
Second Mortgage (aka Secured Loan):
Like a second mortgage, this loan uses your property as collateral but sits behind your existing one. This can allow you to potentially borrow more compared to remortgaging and can help you to avoid losing a good current mortgage rate. It is also a more cost effective option if you are facing high exit fees on your current mortgage. However, it is worth noting that a secured loan can also bring higher interest rates than a first mortgage and will also add debt on top of your existing mortgage.
Personal Loan:
If you are only looking at making small home improvements and don't wish to undertake the hassle that a remortgage brings, then a personal loan may be worth exploring. These are ideal when you only wish to borrow smaller amounts of money (up to £25,000). They are often quicker than remortgaging however they have a shorter repayment period which leads to higher monthly payments but less total interest. They are not secured by your home, but they may come with higher interest rates due to the increased risk for the lender.
Bridging Loan:
A bridging loan is best for short-term needs while waiting for another financing option like a remortgage. They are fast-processing but have significantly higher interest rates. It is often recommended as a last resort due to its expensive nature.
It is important to remember that each of these options has its own advantages and disadvantages. You should always consult a financial advisor or mortgage broker before making important financial decisions such as taking out a loan or remortgaging a property. You need to carefully consider your financial situation, repayment ability, and long-term goals before choosing any option.
How to fund home improvements without refinancing
If you want to improve home value with bigger changes made to your property but want to avoid the remortgaging house process, then there are steps you can take to achieve the house of your dreams without remortgaging first. Below, we take a closer look at how to fund home improvements without remortgaging your home:
1. Arrange to take out a further advance
In essence, the action of taking out a further advance enables homeowners to borrow more money from their existing mortgage lender. Taking this route, as opposed to remortgaging, removes the concern that your entire mortgage could be moved to a much higher rate. It also alleviates any worries relating to repayment charges.
Of course, there are pros and cons to every approach, and taking out a further advance is absolutely no exception. If you do choose to take out additional borrowing, the size of your mortgage will inevitably increase, making it absolutely imperative that you can afford that new repayment cost.
2. Explore a second charge mortgage or a homeowner loan
Also known as ‘’secured loans’, second-charge mortgages enable property owners to lend money from an alternate source, with your home often used as security. Proceeding down this route is becoming an increasingly popular way forward, with statistics from the Finance & Leasing Association highlighting a 10% increase in these mortgages over the last 12 months, in comparison to the previous period.
Again, the drawback with second charge mortgages is that they are deemed as ‘higher risk’, and therefore attract much higher rates than traditional mortgages. That being said, taking out a second charge mortgage allows you to access money without interfering with your existing mortgage deal. There’s also no early repayment charge and the rates are typically more competitive than those you’d be offered by taking out an unsecured personal loan.
Still, it’s important to consider the risks involved. As with any mortgage, failure to repay could result in losing your property, so you have to be confident that this is the right option for you.
3. Fund home improvements via equity release
Those aged 55 or over benefit from the added option of equity release - another means of funding home improvements without remortgaging.
The most popular type of equity release product is a lifetime mortgage, and if you choose for the interest to be rolled up, you won’t be required to make any monthly payments. What will happen instead is that the interest, together with the amount you lend, will typically be repaid to the equity release provider at the point in which the last remaining homeowner passes away or goes into some form of long-term care.
As with anything else, it’s essential that you do your research. Our article ‘Is Equity Release a Good Idea? What’s the Alternative?’ should help clear up any grey areas.
4. Look into an unsecured personal loan
Although an unsecured personal loan may not enable you to borrow quite as much as a secured loan plan would, this type of lending scheme enables you to borrow money without having to put up an asset - your home, for example, as security. The rates with unsecured personal loans tend to be considerably higher, but for those taking on smaller projects, this needn’t necessarily be a deal-breaker.
5. Explore credit card options
Depending on how much money is needed, applying for a credit card to help pay for the work you’re having done may be a worthwhile option. Credit cards are a particularly viable option for those having relatively small jobs done - in which case a 0% interest credit card is ideal. Better yet, credit cards also offer some additional consumer protection for that extra peace of mind.
6. Use your savings
Whether or not you are in a position to pay for your home improvements using your savings is something only you can answer. In any case, it’s worth knowing that savings account rates have recently risen. So, if you’re considering taking the money out of your savings account and utilising these funds to pay for home improvements without remortgaging, take the time to properly assess things.
What increases home value the most?
If you are looking to increase your home value, there are several small home improvements you can perform in order to do so, without breaking the bank.
Boost your curb appeal and first impressions:
Redecorate:
A fresh coat of paint in neutral colours can drastically update your home. Don't be afraid to get creative!
Fix minor issues:
Address peeling paint, dripping taps, and other small problems to avoid creating a neglected impression.
Spruce up your entrance:
A clean, inviting front door with a new doorknob or house number can grab attention.
Declutter ruthlessly:
Create spacious, calming rooms by removing unnecessary furniture and personal belongings.
Create a comfortable and inviting atmosphere:
Light and warmth:
Ensure comfortable temperatures and good lighting throughout, especially during viewings.
Garden magic:
Tidy up your front and back gardens, trim pathways, and consider adding seating areas for a relaxed feel.
Add value through smart enhancements:
Parking solutions:
Off-street parking can be a major selling point in many areas. Explore your options.
Embrace efficiency:
Highlight smart home features, energy-efficient appliances, and double glazing.
Kitchen refresh:
Consider updates like painting cabinets, replacing handles, and ensuring cleanliness.
Bathroom glow-up:
Re-grout tiles, remove limescale, and add fresh bathroom accessories for a modern touch.
Bonus tip: Consider staging your home to showcase its potential and help buyers envision themselves living there.
For all the latest in the world of buying and selling homes, head over to our Property News hub. Alternatively, if you’re looking to sell your home, allow us to help. As leading cash home buyers with an excellent rating, we offer an efficient property sale experience and to help make the process as easy as possible, we handle everything from start to completion - including funding solicitor costs. What’s more, we offer the flexibility to choose a completion date within a minimum of 7 days, absolutely free of charge and entirely hassle-free. For more information, just give us a call on 0800 024 8444.
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