What you need to know about remortgaging to fund your home renovation

This post was written with the help of Jeremy Davidson from Mortgage Adviser Directory. He has a strong interest in UK mortgages and property finance and works closely with remortgage advisers nationwide

Home renovations can transform how a property looks, feels, and functions, but they can also be expensive. From extensions and loft conversions to new kitchens or energy-efficient upgrades, many homeowners find that savings alone do not stretch far enough.

We’re hoping to do the extension on our house in 2028, which seems like an age away. I’m writing this article because we’re in the throes of trying to figure out how to afford the renovations we want to do, and planning the entire renovation.

One popular options is remortgaging to release funds for home improvements. This can be a cost-effective way to finance renovations, but it’s definitely not always the right choice for everyone.

With the help of Mortgage Adviser Directory, I’ve tried to explain exactly how remortgaing works, how it compares to a further advance and what you should consider before making your final decision.

 

What does remortgaging mean?

Remortgaging involves switching your existing mortgage to a new deal, either with your current lender or a new one. If your property has increased in value or you have paid down part of your mortgage, you may be able to borrow more than your current balance, releasing extra funds for renovations.

Remortgaging can also be used purely to secure a better interest rate or a more suitable product (e.g., a longer fixed-rate period), even if you aren’t borrowing more than you owe. This is particularly useful if your current deal is about to expire and you’d otherwise default onto a higher standard variable rate.

The remortgage process usually takes around 6 to 12 weeks from application to completion, though it can be quicker if you stay with your existing lender (a product transfer).

The additional borrowing is added to your mortgage and repaid over the remaining term, which can make the monthly cost lower than using short-term or unsecured borrowing.

 

Using a remortgage to fund renovations

Many homeowners remortgage to pay for improvements such as:

• Extensions or loft conversions
• New kitchens or bathrooms
• Structural alterations
• Energy-efficiency upgrades
• Garden rooms or home offices.

If the work increases the value of your home, remortgaging can feel like investing back into the property rather than taking on separate debt. However, most lenders base how much you can borrow on the current value, not what the value will be after the renovations. So if you’re remortgaging before the work, you typically won’t get extra based on projected value, unless you wait and revalue later.

 

To make this easier to understand, here’s a simple real-world example:

Imagine you bought your home for £300,000 with a 10% deposit, taking out a £270,000 mortgage. After several years, you’ve paid the mortgage down to £230,000. During that time, house prices in your area have risen and your property is now worth £380,000.

This means you have around £150,000 in equity (£380,000 value minus £230,000 mortgage). If a lender is happy to lend up to 85% loan-to-value, you could potentially borrow up to £323,000 in total (85% of £380,000).

After repaying your existing £230,000 mortgage, that could leave around £93,000 available to put towards renovations such as an extension, loft conversion or major refurbishment, subject to affordability checks and lender criteria.

That extra borrowing is then added to your mortgage and repaid over the remaining term, which is why remortgaging can often work out cheaper month-to-month than using a personal loan or credit cards for large renovation projects.

 

What is a further advance?

A further advance is when you borrow additional money from your existing lender, without switching your main mortgage deal.

This can be appealing because it is often quicker and involves less paperwork. However, the interest rate on a further advance may be higher than the rate available through a full remortgage, and the additional borrowing may sit on a separate rate and term.

You usually still need to meet your lender’s affordability and credit checks before they’ll approve a further advance, and not all lenders offer them (some are only available at certain times or with specific products).

 

What’s the difference between remortgaging and a further advance?

Both options allow you to borrow more against your home, but there are important differences.

Remortgaging may suit you if:

• You are coming to the end of a fixed or discounted rate
• You want to secure a better interest rate overall
• You have significantly improved your loan-to-value.

A further advance may suit you if:

• You are tied into a competitive fixed rate with early repayment charges
• You only need a smaller amount for renovations
• You want a quicker and more simple process.

Comparing both options can help you understand which is more cost-effective in the long term.

 

How much can you borrow for renovations?

How much you can borrow depends on several factors, including:

• Your income and affordability
• Your existing mortgage balance
• The value of your property
• Your loan-to-value after borrowing.

Most UK lenders will lend up to a certain percentage of your property’s value, usually around 85 to 90% LTV, but they will also base lending decisions on your income and ability to afford repayments. For example, lenders often cap borrowing at around 4 to 4.5 times your annual household income.

This means that even with lots of equity in your home, your income and other debts can limit how much extra you can release.

Lenders will still carry out affordability checks, even if you already have a mortgage with them.

 

Things to consider before remortgaging

Early repayment charges

If you remortgage during a fixed or discounted period, your lender may charge an early repayment fee. These charges are typically a percentage of your outstanding balance (often between 1% and 5%) and can sometimes outweigh the savings gained from a new rate, so it’s vital to calculate this carefully.

Total cost over time

Although remortgaging can lower monthly payments, extending borrowing over a long term can increase the total amount of interest paid.

You should also factor in associated costs such as legal fees, valuation fees, arrangement fees, and exit fees, all of which can add up to anywhere between a few hundred to a couple of thousand pounds. Some lenders offer free valuations or legal work to help reduce costs.

Renovation timing

If renovation work is planned in stages, releasing all funds at once may not be necessary. Some people choose to borrow in phases to better manage costs and cash flow.

Property value assumptions

While many renovations add value, not all improvements increase a property’s value in line with their cost. It is worth considering whether the work is primarily for lifestyle enjoyment or future resale.

 

Why advice can be helpful

Mortgage products and lender criteria vary widely. What works well for one person may not be suitable for another, especially when additional borrowing is involved.

Many homeowners choose to speak with a specialist who can compare remortgage options across the market and explain whether remortgaging or a further advance makes more sense for their plans. Resources such as a Best Remortgage Brokers guide can be a useful starting point when looking for advisers with experience in renovation-related borrowing.

 

What are the alternatives to remortgaging?

Remortgaging is not the only way to fund home improvements. Depending on circumstances, alternatives may include:

• Savings or staged renovation plans
• Unsecured personal loans for smaller projects
• Specialist renovation or self-build finance for major works.

Each option has different costs, risks, and levels of flexibility.

 

Remortgaging to fund home renovations can be an effective way to improve your living space while spreading the cost over time. However, it is a long-term financial commitment and should be approached with careful planning.

By understanding how remortgaging compares to a further advance, considering the true cost of borrowing, and seeking the right advice, you can make an informed decision that will support your renovation goals without pulling you under financially! Always get professional advice.