Garage conversions are a popular home improvement that add significantly more space to the average UK home. The total amount for a garage conversion is normally less than the value they add to the property. Therefore, financing via a mortgage or more accurately remortgages and further advances are an attractive option.

Get professional advice

Although I’m a CEMAP qualified Mortgage Advisor that was a previous career and I’m no longer registered with the Financial Conduct Authority (FCA) . Subsequently I cant offer personal advice and recommend you speak with a local independent broker.  Use this free service. before making any decisions. Read on to learn about releasing equity and borrowing on your home’s value makes sense and can help you transform your home for next to nothing.

Mortgages & Other Secured Lending Options

Mortgages

A mortgage is the initial loan you take to buy the home and will be based on the homes valuation and the deposit you contribute. If you are looking to convert the garage of a home you have not purchased yet, you can finance the conversion by contributing less deposit and borrowing more. Although this may not always be possible due to loan to value restrictions.

Agreeing a mortgage

Remortgages

Most people are looking to convert the garage on the home they currently own. Subsequently we are often asked “can I get a mortgage for a garage conversion?” In this case your options are either a remortgage or a further advance. Remortgages are an opportunity to borrow more money and switch banks if necessary. They are more applicable if you are at the end of your current deals term as leaving early could incur a cost. This cost is designed to be a penalty and known as an early repayment charge.

Further Advances

Further Advances are granted by your current lender and are useful if you are tied into a fixed period and want to borrow more money. Especially as they avoid the penalty that would come from remortgaging and switching banks. Banks will normally have rules about further advances such as minimum amounts, for example £20,000. This is to cover the amount of work that is required when arranging additional borrowing and for smaller sums a personal loan may be more suitable.

Further advance borrowing rates will also be different to your initial mortgage rate so make sure to compare these against your other options.

Equity Release

While remortgaging and obtaining a further advance are ways of releasing equity, they should not be confused with equity release deals. The former requires you to prove affordability and have an income, whereas equity release deals are aimed at older borrowers who do not have an income but still want to release cash from the value locked within their property. This is a heavily regulated area of financial services and tailored personal advice is required.

The benefits of equity release include not having to make monthly repayments. However, this comes at the cost of reducing the inheritance left to your loved ones.

Benefits of secured lending

As the name suggested the money you borrow is secured by your home and failure to make repayment could result in repossession of your home. Because the bank has your home as collateral, they offer low rates of interest and long loan periods. The result of this is monthly payment that will probably be less that your Broadband and TV subscription. Seriously, be prepared to be amazed at how affordable your garage conversion project is. Get a quote on a £25,000 further advance here.

Other Financing Options

Personal loans

Most single garage conversions should be achievable with a personal loan. Home improvements are an accepted use of funds and banks upper loan limits should be enough for most projects. Rates here will probably be higher than the mortgage options. Monthly repayment can be much higher due to the shorter loan periods offered by banks. Mortgage could be spread over 25 years. Whereas, a personal loan is 5-7 years which results in the much higher monthly cost.

Self Funding

If you already have more than £15,000 savings in the bank, then a garage conversion is well within your grasp. Be careful to get accurate quotes and avoid draining your savings entirely. Keeping an emergency fund of readily available cash is recommended by most personal finance experts. Should you end up spending more than originally anticipated and feel you need to top up your savings, then exploring the mortgage options after the garage conversion is even easier.

The reason is the post conversion value of your home is likely to have risen, this in turn reduces the loan to value percentage (LTV). LTV is an important metric to banks who measure risk by how much equity/money you have committed to the property’s value. The more money you have locked in the property the more likely you are to continue making repayments and avoid a repossession. 

Summary

Your garage conversion must be paid for somehow, even if you are doing some of the work yourself it still going to cost several thousand pounds. The good news is that the money isn’t gone like if you spend it on a holiday for example. Rather it is transformed into equity and value on your properties market price.

While secured lending isn’t for everyone it could enable others to afford a garage conversion now that would take years to save for. How you pay will vary the total cost of the garage conversion so it’s important to weigh up your options and speak to a mortgage adviser if required.

About the Author Michael NEGC


Michael is the Architectural Designer and Surveyor at North East Garage Conversions.
Michael has a HNC in Civil Engineering and a HND in Construction Management. Previous experience includes multiple renovations, a self build plus working as an Architectural Technician, Designer and Project Manager.

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