A remortgage could help you release equity from your home and use it to pay for renovation work. Whether you're planning an extension, loft conversion or energy-efficient upgrades, it's important to understand the costs involved. We'll explain your options, how much you could borrow and what to consider before making a decision.
“Your home can do more than keep a roof over your head. If you’ve built up equity, remortgaging could give you the money you need to create the space you’ve always wanted. This could be that kitchen you love, a loft bedroom or an extension for a growing family.
The key is to plan ahead. Work out how much you need, what it’ll cost and how the payments fit your budget. And don’t forget to compare options like a further advance. A good adviser can talk you through it all, and check the numbers stack up.”
Rachel Geddes
Strategic Lender Relationships Director
How to renovate your home with a remortgage
Dreaming of a bigger kitchen, extension or a loft or garage conversion? You don’t have to move, if you can get more from your home. If you’ve built up equity, a remortgage to fund your renovation could help you pay for the work.
Can you remortgage to pay for home improvements?
Yes, you can remortgage for home improvements. If your home is worth more than your mortgage, you can usually borrow a little extra when you remortgage and use the cash for building work. This is called a further advance. Lots of lenders are happy with this, as long as the numbers add up.
What releasing equity means
You may have heard about releasing equity, but not necessarily know about the particulars. Equity is simply the difference between your home’s value and the amount you still owe on your mortgage.
This equation puts it simply:
House value – amount owed on mortgage = equity
Say your home is worth £400,000 and your mortgage is £250,000. That’s £150,000 of equity (£400,000 - £250,000 = £150,000).
By remortgaging to a new deal and increasing your loan size, you can turn some of that equity into cash in your account, to put towards renovations.
For example, you might remortgage for £300,000. This would release £50,000 of equity (£250,000 to pay off the old mortgage, £50,000 transferred to your bank account).
Home improvements lenders will usually accept
When you remortgage to release equity, the lender will want to know what the money is for.
Most lenders are happy for you to remortgage for an extension or a loft conversion, and for other projects that improve your home. That could be:
An extension or loft conversion
A new kitchen or bathroom
A new roof, windows or heating system
Energy efficient upgrades (insulation, heat pumps, solar panels)
Structural repairs
Do you need to tell your lender how you’ll use the money?
Yes. You’ll be asked why you want to borrow more, so be upfront. Lenders have different rules on what they’ll lend for, and the reason can affect the deals you can get. They may also ask to see quotes for the work.
How much could you borrow for a renovation?
How much you can get when borrowing for home improvements depends on several things:
Your home’s value
Your income
The lender
Loan-to-value (LTV) limits
Loan-to-value (LTV) compares your mortgage with your home’s value. Many lenders cap borrowing at 75% to 90% LTV when you release equity. If you’ve paid off more of your mortgage, you’ll have a lower LTV – and that usually mean better rates.
Using our example, a £400,000 home with an 80% LTV limit could support a £320,000 mortgage. With £250,000 already owed, that leaves up to £70,000 that can be released (before fees).
How borrowing more affects your monthly payments
Increasing your mortgage means:
Higher monthly repayments
More interest paid overall
As a rough guide, an extra £30,000 over 25 years at 5% would add about £175 a month on top of what you already pay.
Our Remortgage Calculator can give you a good idea of costs based on your own figures.
However, a mortgage adviser is the best placed to help you work out different scenarios so you understand the impact before committing.
The costs of remortgaging to renovate
It’s not just about borrowing (and repaying) more money. Remortgaging to renovate comes with some other costs too. If you get your head around these at the start, there won’t be any surprises later on.
Early repayment charges
If you’re still in a fixed rate deal, leaving early can mean an early repayment charge (ERC). It’s often a percentage of what you owe. Check your paperwork before you start. If your deal is close to ending, waiting a few months could save you money.
Arrangement, valuation and legal fees
Remortgaging may involve:
Arrangement fees
Valuation fees
Legal fees
Some lenders offer fee-free remortgage deals or cashback to help cushion some of those costs.
Your mortgage adviser can compare the full cost of each option, not just the headline rate.
Paying more interest over a longer term
Spreading the cost over a longer term keeps monthly payments down. But you’ll pay more interest overall. A shorter term costs less in total, though payments will be higher.
Here’s an example: let’s say you borrow £25,000 for home improvements at 4.5% interest:
Term length | Monthly payment | Total repaid over the term | Total interest paid |
20 years | ~£158 a month | ~£37,960 | ~£12,960 |
25 years | ~£139 a month | ~£41,690 | ~£16,690 |
As you can see, extending the term from 20 to 25 years reduces your monthly payments by around £19 a month.
But it increases the total interest paid by roughly £3,700.
The key thing to remember is that shorter terms cost less overall, while longer terms keep monthly payments lower. It’s about choosing the balance that fits your budget.
Further advance vs remortgage: which is right for you?
You’ve got a few ways to borrow more against your home. Here’s a quick look.
Further advance | Remortgage | |
Who you borrow from | Your current lender | A new lender or your current one |
What happens to your current deal | It stays as it is | It’s replaced |
Borrowing more from your current lender
A further advance for home improvements means asking your lender for extra money on top of your mortgage. It’s additional borrowing on your mortgage, so it can be quick and simple. The extra borrowing usually comes at its own rate and term, which may differ from your main deal.
Staying in your fixed rate deal
You might want to stick with a fixed rate you are currently on if:
It’s a good rate you don’t want to lose
Leaving early would mean paying early repayment charges
A further advance or second charge means you can keep your fixed rate. The new borrowing will be on a different rate and term.
Will a renovation add value to your home?
Often, yes. But not always – it depends on what you do.
Home improvements that could add value
More space is almost always a winner. These are popular with buyers:
Extensions
Loft & garage conversions
Extra bedrooms
Modern kitchens and bathrooms
Improvements that may not add value
Very personal choices, like bold colour schemes or a high-end finish in a street of modest homes, may not pay back. Overspending for your area can be a risk too.
Energy efficient upgrades and green mortgages
Insulation, double glazing or solar panels can lower your energy bills. They can also improve your EPC rating. Some lenders offer green mortgages with perks like lower rates or cashback for energy efficient homes. Ask your adviser what’s out there or visit our Green Hub.
Ready to chat? Our advisers are ready to call you back today. The first chat costs nothing and is totally free of obligation.
Something to bear in mind...
Frequently asked questions
Yes. An extension is one of the most common reasons people release equity. Your lender may ask for plans and quotes.
You can, but you might pay an ERC. Your adviser can work out whether the new deal saves enough to make it worthwhile. A further advance may be a better fit, as it lets you keep your current deal.
It depends on the size of the project and the rates on offer. Mortgage rates are often lower than loan rates, but you’ll pay interest over a longer time. For smaller jobs, a loan can work out cheaper overall. Compare the total cost, not just the monthly payment.
You don’t need it to remortgage. But some lenders will want to see planning permission for bigger projects. Always check what permission you need for the work itself, including building regulations.
Remortgaging can be harder if you have bad credit, but it isn’t impossible. Some lenders look at your whole situation, especially how much equity you have in your home. A mortgage adviser knows who’s likely to say yes, which can save you time and avoid extra credit searches.