How a Remortgage Can Help You Acquire Your Dream Kitchen
The kitchen is the most used room in any home and remodelling it can literally reinvent your entire living space. A kitchen reinvention is one cost efficient way for homeowners to improve their homes and add value. Recently TV property expert Phil Spencer wrote “If you are only going to improve one room, make it the kitchen.”
Refitting your kitchen can provide two main benefits. Firstly, it can give you and your family a better living space, more storage and help you make better use of the room you have available. Secondly, a new kitchen can increase the value of your home and make the property more attractive to potential buyers wither now or in the future.
The cost of installing a new kitchen in your home can be significant. The consumer magazine Which? recently found that Brits spend an average of £8,000 on a new kitchen whilst a bespoke, designer kitchen can easily set you back over £25,000. Even a basic, low cost set of kitchen units and appliances can cost several thousand pounds.
When the time comes for you to redesign your kitchen, accessing the right amount of finance to complete the job is probably going to be one of your most significant challenges. An increasingly popular way that many people are financing their grand kitchen designs by unlocking some of the capital in their homes with a remortgage.
When you remortgage you switch your home loan from one provider to another. Your existing mortgage is repaid and you take out a brand new mortgage with a different bank or building society. And, as part of this switching process, you can normally apply to increase the size of your mortgage to cover the cost of the home improvements you wish to undertake.
So that you can to borrow extra capital in the form of a remortgage, you typically have to have some equity in your home, otherwise you begin to add to you overall burden of debt in an unsustainable way. Remortgages tend to be offered for approximately 90 per cent of the value of your property; although borrowers tend to benefit from lower interest rates if they borrow less than 75 to 80 per cent of their property’s value. Over 90 per cent and banks anticipate greater risk and therefore charge higher rates of interest.
The process will also be much the same as when you first took the mortgage out, and the lender will need to assess your financial situation in terms of income and outgoings. Other credit that you have will also be taken into consideration, including credit cards, loans and finance, so it is always advisable to keep up with repayments in order that your credit rating remains good.
When you remortgage, the new lender will typically allow you to borrow the total amount (mortgage plus additional loan) on the same interest rate. This means that you may be able to fix the repayments on the whole remortgage, or take the whole loan on a discounted deal. Many lenders will also help with the costs of remortgaging by paying for a survey and the legal fees involved in switching lender.
One of the common pitfalls faced by people redesigning their kitchens is an excess of ambition. If you are borrowing to fund a new kitchen, it is important to avoid overspending on your refit. Simple financial calculations should guide you in the right direction. In 2009, it was revealed that a new kitchen adds an average of just £4,147 to the value of a property. Bear in mind that this figure was an average and the amount your property stands to gain can differ, but as a general rule you need to know how much you will add to your property, and compare that to how much you plan to spend. If the latter exceeds the former, you are in effect handing cash over to the next person who buys your house.
With the kitchen being one of the most important aspects of a property, it is important that you get it right, so make sure that you spend time researching before jumping straight in, otherwise it could be an expensive mistake.
Timothy Frodsham writes for JustRemortgages.com one of the UK’s top sites for the latest remortgage rates and best remortgage deals.