Borrowing extra on mortgage for renovations

2. Releasing equity for home improvements

If you’re a UK homeowner aged over 55 and exploring ways to fund home improvements, you could also consider a lifetime mortgage – the most widely used form of equity release. It’s still a mortgage secured against your home, but it works differently from traditional borrowing, allowing you to release a portion of your property’s value as tax-free cash.

With a lifetime mortgage, you can choose whether or not to make monthly repayments. In this case, interest will roll up over time and is added to the loan, meaning the total amount owed increases over time. The full balance is typically repaid when the last homeowner passes away or moves into long-term care and is usually achieved through the sale of the property.

Interest roll-up means unpaid interest is added to your loan, and future interest is then calculated on this higher amount. This is known as compound interest.

The Equity Release Council, the industry body that sets consumer-protection standards for equity release products, requires all providers who follow its rules to allow customers to make voluntary partial repayments each year without incurring early repayment charges. The exact amount you can repay is set by your mortgage lender.

It is important to know that by releasing equity from your home today, you will reduce the value of your estate. If you qualify for means-tested benefits, then releasing equity could also affect your current entitlement.

Thinking about funding your renovations with equity release? The Telegraph Media Group Equity Release Service, provided by Royal London Equity Release Advisers, could help.

• Use their free calculator to see how much tax-free cash you could release.
• Request a free guide by post or email.
• Speak to their Information Team and book a no-obligation appointment with a qualified adviser.

Equity release is a significant financial decision, and it’s a requirement to get professional advice so you can understand how it works, whether it suits your circumstances, and what it could mean over the long term.

The Information Team at Royal London Equity Release Advisers will be able to answer any general questions you may have but can’t give advice. Instead, they will help to book a no-obligation advice appointment with an adviser to speak with someone about your specific needs and circumstances.