How to fund your renovation project
Rising interest rates, soaring living costs and ever-inflated building material prices have probably got you wondering how you'll ever be able to afford your renovation projects 🤷Don't despair just yet. We speak with the financial experts at Meet Margo about the funding options available to anyone looking to improve their home in 2023 and 2024.
Meet Margo’s founders, Claire & Matt 👋
Renovating your home in 2023 🏡
This is the “don’t move, improve” era
As a nation, we've decided that we're in our houses for the long run, according to Houzz. Of those who renovated their property in 2022, 62% said that they intended to remain put for the at least the next 11 years.The cost of a renovation project
Houzz also reported that the median amount spent on a domestic renovation project in 2022 was £16,250. In 2023, around 50% of homeowners are planning a new project, though they only intend to spend around £10,000. Understandable, what with everything in life being that much more expensive at the moment.The most popular renovation projects
Whilst improvements to outdoor and garden spaces are on the rise, 78% of UK homeowners are most concerned with updating the indoors of their home. Unsurprisingly, it's the functional spaces that are high on peoples' list, with the kitchen and bathroom ranking as first and second most popular projects to undertake in the next year. They're also two of the more expensive rooms to invest in, with kitchen renovations estimated to require a median investment of £13,000.Out with the (c)old, in with the new
Modernising period properties, including home energy-proofing, is a key focus for many of the 47% of people who live in a pre 1940s home. Updating heating systems, as well as investing in new windows, better ventilation and insulation, are all means for creating a more carbon efficient, cosier home. A direct response to the soaring energy costs in the past couple of years, no doubt. Living in a material world
The rise in the cost of materials isn't slowing down. In April this year, construction material costs in the UK jumped up by nearly 5% compared to last year (source: ONS). To play it smart, savvy homeowners will know to collect quotes from at least three different builders or tradespeople.
Friendly advice, from Meet Margo 🤝
Okay, so you're fully inspired to get cracking with your renovation project. Your Pinterest boards are abundant with #InteriorGoals imagery. But, how are you going to fund it?If you've got savings set aside, you could tap into those to kickstart your project. But if your cash reserves are limited (whose aren't right now?), it might be an idea to explore other borrowing options.The five most popular ways to fund home renovations are:
Additional borrowing on your mortgageReleasing equity in your homeHome improvement loansCredit cardsUsing your savings
In this article, we will explore additional borrowing on your mortgage, because, at Meet Margo, that's its bread and butter 🧈
It’s at this point we want to be super clear that taking on debt, be it equity release, loans, credit cards or through your mortgage, is debt at the end of the day. So, we strongly recommend you seek expert advice before making choices that impact your finances.
Professional mortgage advice, at the end of your finger tips 📱
What is additional borrowing?
Additional borrowing is when you borrow extra money from your mortgage lender, which bumps up the total amount you owe on your mortgage. To do additional borrowing through your mortgage, you have a few options… Further Advance ⏩
A further advance is essentially borrowing more money from your current mortgage lender. This is typically at a different rate to your existing mortgage and can make sense if your lender's existing rate or further advance is competitive and you want to avoid paying early exit fees. If you choose to get a further advance on your mortgage, this may affect your ability to remortgage in the future. This is because it increases your loan-to-value (LTV) ratio, which compares your loan amount to the current value of your home. If your home is worth £400k and your mortgage balance is £300k, your LTV would be 75%. Having a lower LTV gives you access to more competitive mortgage deals. So, it's worth considering the potential long-term effects before taking on additional borrowing.Remortgage 🔁
Remortgaging is switching your current mortgage deal to a new one. You can do this with your current lender or choose a different one. You can apply to borrow extra money when you remortgage, increasing your mortgage loan. During the application, you'll need to explain what you intend to use the additional funds for and, in some cases, provide proof (for instance, builders quotes or plans). Second Charge Mortgage 🥈
A second-charge mortgage is like a second mortgage for homeowners. It's a loan secured against your property. "Secured" means your property backs the loan, so if you can't repay it, the lender can take and sell your home. In contrast, unsecured loans, like personal loans and credit cards, aren't tied to your home. The amount you can borrow on a second charge mortgage depends on your home's equity and you meeting the lenders affordability. As an example, if your home is valued at £400k and your current mortgage is £250k, your equity is £150k. You can then potentially borrow up to 80-85% of your equity, potentially releasing up to £127,500.
Am I eligible for additional borrowing?
How eligible you are for additional borrowing on a mortgage will depend on a few things:Purpose of the funds 💸
Using additional borrowing for renovations is usually seen as more favourable to a lender as it often adds value to your home, making it less risky for them. What you can afford 💰
Lenders will check how much you earn and what you spend on bills and regular payments as part of their affordability assessment.Credit History 💳
Your past payment behaviour tells lenders if you're good at handling money. They look at your credit history for this.Loan-to-Value Ratio (LTV) 🫰
LTV is what you owe on your home compared to what it's worth. The lower your LTV, the safer you seem to lenders because you own more of your home.A mortgage broker, like Meet Margo, can help you search the market for lenders most suited to your situation and hold your hand throughout the hold process – even if it means exploring added borrowing with your current lender. 
Property perfection doesn’t have to be a pipeline dream 💭
Is additional borrowing on a mortgage a good idea?
Additional debt through a mortgage may be convenient. Still, it could increase your monthly payments or extend your mortgage term. This extended duration could result in you paying more over time.It's also important to remember that the money you borrow is against your home. This means your home is at risk of repossession by the lender if you can't keep up with your repayments.Next steps?
If you're considering additional borrowing on your mortgage to make your reno dreams a reality, don't hesitate to contact Meet Margo. Its expert team of brokers will give you access to a panel of 70+ lenders and exclusive deals you won't find yourself. They'll help determine how much you can borrow, assess your eligibility and suggest the most suitable deal tailored to your needs. And the best bit? Meet Margo doesn't charge a broker fee because it gets paid by the lender on completion of your mortgage.Fill out this contact form, and they'll be in touch.*YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP YOUR MORTGAGE REPAYMENTS*
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