Remortgage (release equity) or additional borrowing?

hughmanatee

I'm currently looking at doing some home improvements on the house to the tune of (for the sake of argument) £50k.

Now, principally, is it better to:

1. Remortgage and release equity from the house (increasing LTV and getting a worse mortgage rate)
2. Take out some additional borrowing and leave the mortgage on a lower %

If I leave the mortgage alone, the LTV is around 71%.

If I extract equity (assuming I can) it'll skew the figures downwards to an 85% LTV. Still fine within lending criteria, but obviously not ideal.

So I'm debating whether it's "better" to take out a homeowner loan (as HSBC term it) to pay for the improvement works, or whether thrashing it all through the mortgage is a more sensible approach.

We're intending to stay in the house for up to another 10 years before upsizing, if that has any sway on the advice*.

*I accept that any advice here is anecdotal and isn't a replacement for proper independent advice from a trained financial planner.

MortgageMamma

The easiest way to look at this is

1. Your attitude to securing more debt on your home, albeit for home improvements

2. Compare the monthly payments, interest rates and total to pay over for each type of borrowing

3. See what you are happiest with

What is your end goal with this? Obviously you will hopefully increase the value of your property so at your next remortgage the loan to value could decrease slightly, but other than this, is it more important to you to pay less overall or pay less every month?

hughmanatee

"What is your end goal with this? Obviously you will hopefully increase the value of your property so at your next remortgage the loan to value could decrease slightly, but other than this, is it more important to you to pay less overall or pay less every month?"

The end goal is theoretically to create a house we're happy living in for another 10 years. The ROI isn't as important (though seeing some return on the spend would be a positive).

Spending less overall is probably better, as we've got comfortable room for higher monthly expenditure if we need it.

Though if we're intending to move on in 10, the fact it's attached to a 25 year mortgage would be rather immaterial, given the deck gets reset when we sell and move anyway.

But, given the nature of your question, I'm expecting it's not a night-and-day difference.