It is well known that a property that suits your immediate needs when you first move into it might eventually become more limiting, which might prompt you to think about the options of moving house or renovating. Over the last few years, for example, with the trend to work from home more and more, a lot of people have required a more permanent office or study.
You might think that moving house is the only or best option, but it is surprising how renovations can transform your current home, so the question is: should you make home improvements?
There are some valid reasons why you might want to invest money into renovating your home:
- To make your house more personal and fully centred around your current needs.
- To create more space or convert space that you already have in order to accommodate working or family changes.
- To update and modernize your home.
- To make your home more energy-efficient.
What types of home improvements can you make?
Home improvements can include some fairly small tasks that add up to have a big impact on your house by freshening up a tired-looking house and making it more visually appealing. These include painting the walls and or doors, replacing sealant, installing new taps, changing lighting, and replacing tiles cabinets and worktops, to name a few.
Other more major improvements will be more expensive and cause more disruption, but the temporary discomfort will be worth it in the longer term. Examples of some bigger renovation projects include a loft, cellar or garage conversion, an extension, reconfiguring the layout of your house, a new kitchen or bathroom, adding a conservatory, replacing flooring, adding double glazing, installing a more energy-efficient heating system or some outdoor garden work such as a patio or decking.
Will it add value to your house?
Ultimately the amount that renovations can increase a property’s value will depend on the individual house and the local demand and what buyers want in that area. It is worth remembering that spending £10,000 on home renovations won’t necessarily increase the property’s value by £10,000! Some renovations may even devalue your home, so it is worth doing some research before you go ahead to make sure you are not damaging your property’s market value. If you are interested to find out what property features are valued in your area, then a local estate agent should be able to give you some insight on this.
A recent study conducted by Halifax indicated that a loft conversion adds the most value, increasing the value of a home by approximately £11,020.
Some of the other top ten upgrades, with the approximate value they add in brackets, are:
- Bi-folding doors (£5,256)
- Garage conversion (£4,847)
- Renovated/restored period features (£4,731)
- Extension (£4,129)
- Under-floor heating (£3,961)
- Add or remove garage (£2,610)
So, is it better to relocate or to renovate?
Although with money and some imagination there are a lot of changes that you can make to your property, there are still limits to what can be done. You can only add so much space and if you want an extra bedroom or bigger garden, then these could be almost impossible to achieve. In a similar way, renovations can’t remove space. So if you are rattling around in a big home once your children have flown the nest, you might want to consider downsizing or moving to a house that is more accessible if you are getting less mobile as you grow older.
There are a few things you will need to consider when making the decision to renovate.
- Check if you will need to get planning permission.
- For any larger home developments, get a structural survey to check for any limits or potential issues that may arise with the works.
- Enlist the skills of specialists for major work such as plumbers and electricians.
- Check if your renovations may affect your home insurance policy and make sure you tell them about any relevant changes.
- Think about the disruption that the work will cause. You may even want to stay somewhere else while the work is completed.
Ready to renovate but how will you fund it?
A growing number of homeowners are turning to remortgaging to release funds in order to improve their homes and raise their value. A recent Natwest survey sound that now 6 in 10 homeowners are at least considering remortgaging to renovate. If the money for the building work is raised by remortgaging to release equity, then the eventual net cost to the homeowner may be low, zero or even negative, depending on how much value then gets added to the property as a result. So in the right situation, this could be a really good strategy for using a mortgage to improve someone’s overall financial position.
Remortgaging to renovate isn’t always the right move, but in the very best scenarios, it can be seen as a way to get ‘something for nothing’ by releasing capital from your home to boost your home’s resale value by more than it costs you – and all without increasing your monthly mortgage repayments.
If you have got some savings that you can put towards the renovation, you might consider using them. If you then also remortgage, you can afford to borrow a smaller amount.
Here are my top tips for remortgaging to renovate:
- Check your home’s value – if it has risen in value since you bought it, then you can usually remortgage for a higher sum without increasing your monthly payments. However, if it hasn’t increased significantly then remortgaging might not be cost-effective.
- Be aware of early repayment charges – an early repayment charge might set you back a few thousand pounds if you try to remortgage within a set number of years, so make sure you are aware of this first.
- Look into the other costs of remortgaging – Don’t forget that taking out a mortgage can involve an arrangement fee, booking fee and valuation fee on top of an early repayment charge penalty, so it is important to know what these will be.
- Keep an eye on your Loan to Value – In order to release the capital, you are borrowing more money which means you will end up paying more and it will take you longer to pay back the loan. The LTV will be increased which means that if the property price falls, you could end up finding yourself in negative equity.
- Look at doing work which will increase your home’s value – If you are savvy and thinking about the value of your property as well as your home suiting your needs, you should look at renovations that will boost your house price by more than their cost. Extra bedrooms and ensuites often tick both boxes.
- Use a mortgage advisor – Your current mortgage lender will want to keep you as a customer, but there is nothing to stop you from shopping around to find the best deal all round. A mortgage broker like myself has got access to a much wider range of deals, some of which will not be available on the high street and if you find that your equity has risen, you might be eligible for better offers than you think, which I will alert you to.
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Your home may be repossessed if you do not keep up repayments on your mortgage.
You may have to pay an early repayment to your existing lender if you remortgage.
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