Borrowing on a mortgage for home improvements or releasing equity

Senior couple who consider borrowing on mortgage for home improvements.

High house prices and stamp duty mean many people opt to stay put and improve their existing properties. However, would borrowing on your mortgage or releasing equity be the best way to fund home improvements?

Many of us haven’t put money away for a home improvement fund, so if you’re considering making changes to your property you’ll need to think carefully about how you’ll pay for them.

Releasing equity is one way to fund home improvements. Homeowners 55 and over can release tax-free cash from their home and use that money to pay for costly renovations. Borrowing on a mortgage for home improvements could be another way to take care of the cost.

According to Real Homes, the price for a basic loft conversion starts from £15,000, with anything more substantial costing on average between £30,000 and £50,000.

Here, we look at a few ways to cover the cost of home improvements including equity release, remortgaging and credit.

Borrowing on a mortgage for home improvements

If you’re making significant changes that require a larger sum, borrowing on your mortgage is one way to raise capital. However, remortgaging isn’t always straightforward for older borrowers, as lenders want to see evidence that you will still have a stable income once you retire. They may also only agree to lend over a shorter term, which can mean steep monthly costs.

Releasing equity for home improvements

Older homeowners can release equity from their homes to cover the cost of home improvements.

Rather than monthly repayments, the loan and interest – which rolls up over time – are usually only repaid to the equity release provider when you die or enter long-term care.

Steve Wilkie, managing director of equity-release specialist Responsible Life, said:

“Historically, equity release has been driven by homes and holidays, with two-thirds of our customers naming improvements to the home and a third listing holidays as the main usage.”

Popular home improvements

A new kitchen tops many home-improvement wishlists, with John Lewis Finance revealing that 22% of us would like to update our kitchens.

Extensions are also among the most popular home improvements, giving homeowners more living space or an extra bedroom so they can have guests to stay. Around 10% of those questioned said that this would be the change they would most like to make.

Separate research by AA Financial Services found the average planned spend on work relating to an extension in the final three months of 2018 was £12,902. Some 15% of respondents ended up spending more than £20,000.

The average cost of a new kitchen is around £8,000 according to Household Quotes, although this excludes appliances and the cost of any preparation work.

Although these costs can seem steep, improving your home can make a big difference to its value. Property Price Advice says that adding a side-return extension to the kitchen can add 15% to your property value, while adding a conservatory could boost its value by 10%. It’s a good idea to get quotes from at least three different builders, as costs can vary widely.

Using credit cards to fund home improvements

If you’re only making minor changes to your property, you may decide to use a credit card to cover costs.

For example, you might be planning to give your property a fresh new feel by redecorating, which can cost anything from hundreds to thousands, depending on the extent of the change.

When choosing a credit card, opt for one with a lengthy 0% introductory period, as you could pay off what you owe before you’re charged interest.

Home improvement loan

Loans are another way of funding home improvements if you don’t have enough in savings.

Rates are often most competitive if the amount you seek to borrow is between £7,500 and £15,000, but are likely to be higher if you’re borrowing more or less. Think carefully about how long you’ll need to repay the loan if you’re considering this method. A home-improvement loan may not be the best option for older borrowers because this will cause them to be in debt in retirement. With equity release, you will never owe more than the value of your property.

By taking money out of your property now, a lifetime mortgage may reduce the value of your estate. A lifetime mortgage may also affect your entitlement to means-tested benefits, but an adviser can walk you through the impact of this before you decide to proceed.

The Telegraph Equity Release Service is provided by Responsible Equity Release. Responsible Equity Release is a trading style of Responsible Life Limited. Responsible Life Limited is authorised and regulated by the Financial Conduct Authority and is entered on the Financial Services Register ( under reference 610205. Only if you choose to proceed and your case completes will Responsible Life Limited charge an advice fee, currently not exceeding £1,490.

The above article was created for Telegraph Financial Solutions, a member of Telegraph Media Group Limited. For more information on Telegraph Financial Solutions, click here.

Information correct at date of publication.