The ever increasing competition in the mortgage market has made the remortgage option to raise capital for home improvements more popular than ever.

Why remortgage?

Often when you approach your existing lender for a further advance they can only offer the loan at the going mortgage rate. By completely remortgaging the whole loan, the entire mortgage marketplace is open to the borrower and by shopping around you can find a very cheap mortgage rate. When remortgaging, it will be an appropriate time to look at fixed, capped or discounted rates. A typical three-year fixed rate is currently around 5% and a five-year capped rate is currently around 6%. These rates will move up and down in relation to Bank of England base rates and expectations about inflation. A three-year fixed rate for a £75,000 loan (including a home improvement cost of £7,500) would be approximately £590 per month. This is for a 15-year mortgage on a repayment basis. A 25-year loan would cost £430 per month.

Hidden costs of remortgaging

Although a remortgage will allow access to a much cheaper rate, there are a number of points to be aware of:

You will generally be "tied in" to your new lender for a number of years, usually five to seven years. If you leave the lender during this period, there will be penalties to pay.

There may well be an arrangement for a fixed or capped rate. (Average £200-£300).

Some lenders will insist that you take their insurance, such as buildings and contents cover, which may be expensive.

You will invariably need to pay for a new survey.

There are legal costs to be met as you are transferring a security from one lender to another. This could total up to £500.There are lenders who will offer to meet the expense of remortgaging. However this is usually traded off by higher interest rates.When deciding on whether or not to remortgage you have to weigh up your long term savings on repayments against your short term expenditure. To improve or not?

Home improvements are made to increase or improve the standard of living accommodation of the occupier. Once a major improvement is made it is unlikely that the owners will move quickly, although in today's more fluid job market, moving is often inevitable. So, if you have to move, do not expect to make money, or even break even, on the cost of your improvements. Any improvements you make may certainly help in the sale of the property, but remember a prospective purchaser's taste could be very different from your own. Your home is for living in so improve for your own pleasure and comfort, not necessarily for future financial gain.