Refinancing Your Mortgage to Pay for Improvements

Refinancing Your Mortgage to Pay for Home Improvements

Are you sick and tired of looking at your old, out-of-date kitchen? Maybe you have someone new joining your family soon, and you need some extra space in the form of an extension or conservatory? There are countless ways that you can make improvements to your home to give yourself and your family additional comfort. Unfortunately, all those little extras do cost money, and finding the cash to pay for your home improvements can be a nightmare.

The good news is that it is possible to open some extra money in your bank account, by reducing the cost of your home loan. By switching loans to a provider that can give you better interest rates, more benefits, and fewer worries. So, how do you switch loans to pay for your home improvements?

Finding a Better Loan

The first step in switching your loan to something that’s better for you and your family is shopping around to see what’s available from different credit providers. A mortgage broker should be able to give you a better idea of what different lenders are offering for your specific circumstances. Once you’ve got a list of loans that might offer the features you want, make sure that you ask for a fact sheet on each option, so that you can start comparing features.

Remember, credit providers are required to give you key facts sheets if you ask for them, so don’t be afraid to get the information you need. These sheets will give you the details you need to make a comparison in a simpler format, so it’s easier to shop around.

Figuring Out the Costs of your New Loan

Since the whole point of switching your home loan is to make sure you have enough money to make those crucial home improvements, it’s important to know how much you’re going to have to pay to make the change. Lenders aren’t permitted to charge exit fees on loans that are taken out after the 30th of June 2011, so you might be safe to switch if you began your mortgage somewhat recently.

At the same time, remember that if you’re on a fixed rate loan, you might be required to pay something called a “break fee”. While you’re learning everything you need to know about these expenses, make sure that you check for any start-up fees for your new loan too.

Another thing to keep in mind is that some lenders will only allow you to refinance with a loan of a specific length, rather than allowing you to stick to the number of years you have to pay off on your current loan. This could mean that if you take out a mortgage, you have less to spend in terms of monthly repayments, but the amount of interest you’ll need to pay overall will go up. If this is the case, think about whether you can increase your repayments on the new loan, to minimise the duration of your debt.

Asking Your Current Lender to Do Better

Sometimes, before you switch your loan, you can consider speaking to your current lender and telling them that you’re planning to switch to another, cheaper loan offered by a competitor. In this case, your lender might suggest that you switch to an alternative loan at a cheaper rate, or they could offer to reduce the interest rate on your loan to help maintain your business.

Make sure that you compare any new offers from your lender with the other potential offers you might have been considering. Additionally, remember that discounts below the listed interest rates are often available, so make sure that you speak to potential lenders too, to ensure that you’re getting the best deal.