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​How To Use Equity Release For Home Improvements

equity release for home improvements

Equity release for home improvements can be an excellent way to upgrade and personalise your home. It’s a cost-effective way to borrow against the equity you’ve built up in your property, allowing you to make significant improvements or tackle multiple renovation projects.

With a home equity loan, you can take advantage of tax deductions and enjoy lower interest rates than other types of loans. Plus, you don’t have to worry about making monthly payments.

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If you are in your fifties, there are numerous opportunities to bolster the finances of your family. Equity release plans let people extract the value from their homes and benefit from competitive interest rates, high loan-to-value ratios and long-term protection.

Despite economic uncertainty throughout the UK, there are still hundreds of equity packages with interesting options. Whereby, users can choose the plan that aligns with their personal needs in later life.

Take, for example, inheritance protection. This safeguards a portion of your estate so that even if the amount loaned out becomes large over time, you can still provide something to your beneficiaries.

Why not fill out our short form above and receive a free equity release quote? It’s safe and fast too; only taking a few moments of your time.

Equity Release ​Explained In Brief

​Last year (2022), there was an 18% rise in the number of homeowners over the age of 55 turning to equity release for home improvements.

For some, it’s the only financing option available as traditional lenders are keener to lend to younger borrowers than they are to take on new customers over the age of 55, especially for larger home improvement loans that are likely to have repayments continuing into your retirement years.

A common reason for older borrowers raising finance for home improvements is because it’s cheaper to boost the quality of your home and personalise it to your décor tastes than it is to buy a new modern home with all the mod-cons included.

Besides, it’s much less stressful to adapt your current home for senior years living than it is to downsize to a smaller home.

When Equity Release For Home Improvements Is A Good Financing Option

For equity release to be a viable financing option for home improvements, it tends to be more attractive to those borrowing higher sums of money that would take the repayment terms into their retirement years and eat into their disposable income, perhaps to the extent where you’d struggle to make the monthly repayments.

When your repayment terms on other types of home loans take you past the retirement age, lenders will enquire about your repayment strategy. They’ll want to know you have a pension pot that can support your lifestyle and that it can be used to afford the monthly repayments.

For those with a problematic credit history, that can also hinder your ability to access traditional finance options.

For home adaptations that would allow you to remain in your home in later life, those are the types of scenarios where equity release can be beneficial.

That being said; so too can downsizing to a better-suited accommodation. There are a variety of lending options suitable for later-life borrowing, some of which can be a more affordable borrowing method.

As equity release is highly regulated and requires plan providers to include a no negative equity guarantee among other safety features to protect your financial well-being and your loved ones, it’s always a requirement to speak with a professional equity release adviser.

This ensures you have explored all your options and reached a joint conclusion that equity release is indeed a viable option for home improvement loans. If there are other options better suited, those are always discussed with you prior to equity release plans.

Can I Use Equity Release To Pay For An Extension?

Yes, you can use equity release to pay for an extension – but there are a few things you need to take into consideration first.

First and foremost, when using equity release, you essentially take out a loan against your home’s value. This means that the amount of debt will increase over time due to interest being applied to the outstanding balance.

Therefore it’s important to make sure that whatever equity release plan you choose is sustainable in the long run so that any future plans don’t become difficult or unaffordable.

Also, consider how large (or small) of an extension project this will be – as this may impact how much money needs borrowing and potentially how long/what type of loan would best suit your needs in order to make these payments without having too much difficulty down the line.

Depending on its size, it may even be worth budgeting for smaller renovations at first before fully committing yourself to invest heavily in such a project with only one source of funding available.

Determining the Costs Using an Equity Release Calculator

When comparing various equity release plans for home improvements or any other reason you need to raise capital, one of the terms the majority of people will search online for is an equity release calculator.

These are available for a number of providers and brokers, but they aren’t always reliable. A lot of brokers have an online calculator that lets you put in data about your home’s value, the amount you have left to repay on your mortgage, your age, whether you’re a single or joint loan applicant, in retirement or nearing retirement and the list could go on.

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What you can find once you’ve put in all your personal data is that you need to input a valid email address and/or phone number to get your personalised calculation detailing what you could borrow based on the details you provided.

This is a way for equity release broker firms to generate a list of people interested in taking out an equity release plan. It’s essentially a marketing tool to generate qualified leads for their agents to follow up to sell you on equity release plans and related services.

One of the very few equity release calculators that give a good indication of how much you could borrow with an equity release plan is the one from debt charity, Step Change.

The Step Change equity release calculator requires minimal personal data and no requirement to give your personal email address or phone number to get a baseline indication of how much you could borrow through equity release for home improvements.

​Is Equity Release A Safe Option?

Using equity release for home improvements gives you the cash to splash on upgrading your tired-looking kitchen, adding a conservatory, putting a new bedroom in, or getting a garden outhouse installed to extend your functional living space into your garden.

There’s a lot you can do to your home with the funds released through equity release. However, as these are lifetime mortgages, it’s best to consider if you want or need to use equity release to fund the renovation projects you want to do.

Alternative Ways to Fund Home Improvements

When financing home improvements, it’s generally a better idea to find an alternative method of financing your home improvement project so you can keep equity release there as an option for later-life borrowing. The reason is, spending on home improvements, should, theoretically, increase the market value of your property.

As an example, having a lean-to conservatory added to your property, costing up to £10,000 could increase your property value by around 5%, adding an extra £15,000 to your home’s market value. There are more high-end conservatories that could cost more than £30,000, potentially increasing your home’s value even more.

The reason alternative financing is best explored before equity release is that the amount of money you get is based on your home’s valuation report at the time you apply for an equity release plan. The more your home is worth, the more equity you can release.

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How to Finance Home Improvements That Increase Your Properties Valuation

Remortgage your home

If you can remortgage your property, it can be a decent way to finance your home improvements, but you do need to let lenders know what you intend to do to your home. After all, your property is the security on all mortgage products.

If you’re going to start knocking down walls to create an open plan living space, perhaps install French doors that open out to a raised timber decking area or even get a hip-to-gable loft extension done on an end-terraced home – which would require altering the roof of the property.

Lenders may be hesitant to approve a remortgage when they know you’re planning extensive alterations to the property structure.

There are other considerations for remortgaging as there are more fees involved than meet the eye. First, you need to find the right deal, which is trickier than you’d imagine. Most people will use comparison sites to find the best deals. The thing is, the best isn’t really the best if you go by interest rates alone.

The arrangement fees are stacked against you on comparison Best Buy tables. Lenders know people want low-interest rates, so they’ve effectively rigged the best deal sites with low interest rates and pushed their profits into arrangement fees instead.

Once you find a remortgage deal with a decent interest rate and low fees, you’ve then hoops to jump through to be approved. Affordability checks will always be a factor as lenders are required to make sure you can afford the monthly repayments across the entire term of the loan.

For those over the age of 55, you’d likely only be considered for a mortgage deal that would be repaid before you retire. If you need to borrow into your retirement years, that’s when equity release for home improvements may be your better option as it lets you borrow for life with no requirement to make monthly repayments.

There is, however, plenty of equity release providers that will allow you to repay some of the capital each year to lower the interest payable on lifetime mortgages.

Another aspect of equity release that can be beneficial over remortgaging is the ability to raise finance without a credit check. Not all equity release providers require credit checking, instead having ID verifications for legal requirements as they don’t need to verify your creditworthiness because they don’t need you to repay the loan.

They have security by owning your property, so they know they’ll get the loan repaid when your home is sold. You still retain the right to live there for the rest of your life, though.

If you can borrow enough to cover the cost of home improvements with a remortgage that can be repaid before you retire, that could be the way to go, and it could increase the amount you could borrow through equity release when borrowing later in life.

Keep in mind that any remaining balance on a mortgage product must be repaid using the money raised from an equity release plan. For that reason, remortgaging for home renovations or improvements is usually only a viable option when you can repay the capital with interest before you retire.

Home Improvement Personal Loan

Home improvement loans can be secured or unsecured. The advantage to using either is that you get to know in advance what the fixed monthly repayments will be each month for the duration of the loan.

These are only usually suited to those with good credit ratings (on both secured and unsecured loans) and even then, only half the applicants to apply for a loan will get the advertised APR or better.

The rate of interest advertised is only representative. The rate a lender offers you is based on your credit history. If that’s lacking credibility such as having a CCJ or accounts in default, the cost of borrowing using a home improvement loan will be high.

Generally, for smaller home improvements costing under £10,000, a secured loan can get competitive interest rates. Unsecured loans will have much higher interest rates pushing them into an unrealistic category for financing home improvement projects.

For smaller home improvements or upgrades such as installing a downstairs toilet, making it easier for bathroom trips in your senior years, estimates on priceyourjob.co.uk put the cost at around £4,000 for a downstairs loo to be installed, and that includes a toilet and washbasin supplied and fitted, a privacy window installed, plastering, decorating, flooring, and an extractor fan.

A project like this may be feasible for a secured or unsecured loan taken over terms under 5 years to limit the amount of interest payable.

Equity Release For Home Improvements 2024 and 2025

Getting equity release for home improvements is a great way to access the funds needed for renovations and updates. It can be done quickly, with minimal paperwork and hassle, and does not require taking on more debt or selling your property.

In addition to releasing cash for repairs and upgrades, Santander equity release can also provide a tax-free lump sum of money to use as desired, making it an attractive option for many homeowners. With careful planning, getting equity release can be a smart move to improve the value and look of your home while still keeping ownership intact.

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Equity Release For Home Improvements Costs

You should look at the full lifetime costs when it comes to equity release for home improvements. The costs of renovating run down houses for sale can be substantial.