Second Mortgage for Home Improvement? Allowed?

Are you thinking about a second mortgage for home improvements? You’ve landed in the right spot! Every month, over 6,900 people visit our website looking for guidance on secured loans.

In this simple guide, we’ll cover:

• What a second charge mortgage is.
• How a second charge mortgage works.
• If a second charge mortgage is the same as a home equity loan.
• If you can use a second mortgage for home improvements or renovations.
• Other ways to fund home improvements.

We know that the idea of a second mortgage might sound scary. But remember, you’re not alone. We’re here to help you understand it all in a way that’s easy to follow. 

So, let’s get started and learn more about second mortgages for home improvements together.

Can you get an extra mortgage for home improvements?

There are different methods of borrowing that can help fund home improvements. One option is to take out another mortgage on your home. This is known as a second charge mortgage. 

We discuss this option in detail and explain some of the alternative methods of financing home improvements towards the end of this guide. 

Can I use a second mortgage for home improvements?

The loan received from a second mortgage can be used to complete all types of home improvements. You could take out a small second mortgage to redecorate your home or buy new electricals and appliances. You may choose to take out a larger second mortgage to fit a new kitchen or bathroom or even add an extension to the property. 

Can I use a second mortgage for renovations?

You can also use the money from a second mortgage to pay for large renovations, which may include remodelling the layout of your house by knocking through walls. The trend in open-plan kitchens and living rooms has seen a rise in people using a second mortgage for these types of large-scale renovations. Other common uses include loft conversions and adding conservatories to a home.

Can I only use second mortgages for home improvements?

The money loaned through a second charge mortgage is the homeowner’s to use as they wish. They could use it for one reason or have earmarked multiple uses for the mortgage. It just so happens that home improvements and home renovations are two of the most common reasons for borrowing against property. 

Another common reason someone may choose a second charge mortgage is to consolidate debts. Some even use the money as a deposit on another property, such as a holiday home.

Why use a second mortgage for home improvements

There are many reasons why using a second mortgage for home improvement projects can be a good idea. The first is that these mortgages can provide a level of additional borrowing that is not available elsewhere. If you have large amounts of home equity, you may be able to access credit way in excess of unsecured loans and credit cards. And it is possible you could get a lower interest rate in comparison too!

Another benefit of borrowing against home equity to fund these types of projects is that they can actually add value to your property and therefore add equity to your home again. 

If you do decide to use a second mortgage, only consider borrowing from a lender that is authorised and regulated by the Financial Conduct Authority (FCA). 

The downside of a second mortgage for home improvements

There is another downside of a second mortgage, other than the potential risk of losing your home if you cannot keep up with long-term payments.

By taking out another mortgage you are subjecting yourself to other loan fees and possibly additional closing costs to pay at the end of the mortgage term. When comparing different ways to fund a home improvement project, you should compare these fees as well as interest rates. Make sure you shop around. 

Can you add remodel costs to a mortgage?

The situation described above is also possible if you want to remodel a home you wish to buy. Instead of just asking for the money to buy the home, you could ask for the money to buy the home and to knock down walls to renovate the property entirely. However, this is more difficult than asking for an extra couple grand to improve the kitchen etc. 

Because you are changing the structure of the asset, there is a greater risk to it and the mortgage lender could be a little more apprehensive about lending to you. They may want to know the fine details of the project or you may even require a self-build type mortgage instead.