Borrowing extra on a mortgage for renovations First Time Buyer

Can First Time Buyers borrow extra money on a mortgage for renovations?

It can get quite confusing if you don’t understand the logistics of how a deposit and a mortgage works against a property purchase. First Time Buyers looking to buy their first property often want to get a new bathroom or new kitchen. Or, they fall in love with the property but all the decor needs changing, or they need to do a loft conversion.

Let’s say, you’re buying a property for £200,000. You might wonder if you can get a mortgage for £230,000, giving you £30,000 to carry out the renovations. But generally in that scenario, lenders will say no.

The reason is that you can’t get a mortgage for more than 95% of what you’re paying for the property. Lenders won’t allow that. But if you have a 15% deposit you were planning to put down, a better way to do it is to reduce that deposit contribution: that 15% might go down to 5%.

Then, the money you were going to put towards the property as a deposit is instead used to renovate the property.

How much can I borrow extra on my mortgage for renovations as a First Time Buyer? What would the minimum deposit be?

The minimum deposit for buying your first home is generally 5%, at the time we’re recording in January 2025.

If you’ve only got a 5% deposit, it would be really difficult for you to use any funds to renovate the property.

Like Neezam said, if you’ve got more than a 5% deposit, perhaps 10% or 15%, you could use some of that towards the renovations, bringing it down to that minimum of 5%.

Can you borrow more than the purchase price to fund renovations?

Generally, that is not something you can do. When you buy a property, your deposit and the mortgage combined cannot be more than the purchase price or the property value, whichever is lower.

For example, if you are buying a house for £200k, you cannot ask the lender for £220k just so you have an extra £20k to spend on a new kitchen or an extension. If you are planning renovations, you normally need to have separate savings or cash aside to pay for those. For most first-time buyers or people upsizing, you cannot borrow extra on the mortgage to fund renovations when you buy the property.

How do lenders assess whether to lend extra for property improvements?

This depends on when you are asking to borrow the extra money. If you are asking at the point of buying the property, the majority of lenders will not take planned improvements into account. They will base the mortgage on what the property is worth today, not what it might be after the work is done.

If you are looking to borrow more after you have owned the property for a while, the lender will look at how much your home is worth and how much you still owe on the mortgage. They will look at whether you are able to afford the higher payments and what the money is being used for. In effect, they will be looking at a full affordability assessment.

The lender will be checking things like your credit score and creditworthiness as well. They will also ensure you do not exceed a certain percentage of the property value. With a lot of lenders, that usually sits somewhere between 80% and 90%, and sometimes more.

What types of renovations can you include in your mortgage borrowing?

There is no real fixed list, but people commonly borrow extra for things like a new kitchen, a new bathroom, replacing windows, or rewiring their home. You could also install a new boiler, or take on something much bigger like an extension or a loft conversion.

The important thing is that the bank or building society you are applying with is checking that you are able to afford and sustain the repayments going forward.

They do have a duty to check what the money is for, and it needs to fit a purpose they are comfortable with. For example, if you are asking for £50k to do just a downstairs toilet, there might be questions around whether you are borrowing more than you need.

Home renovations cover a broad umbrella, and lenders will want to sense-check the project. You might occasionally be asked to provide builders’ quotes and plans, especially if you are borrowing a significant amount against the property valuation.

Whether you are making cosmetic updates or tackling bigger renovation projects, there are often options to borrow more. This works as long as it fits affordability, meets lender criteria, and your total mortgage borrowing does not exceed roughly 80% to 90% of the property’s current valuation.

Is it better to borrow extra on your mortgage or take a separate loan for renovations?

There are lots of pros and cons when you are deciding whether to remortgage to raise extra money for renovations or take out a personal loan with a bank. There are a few options available to you, but the answer depends on your own circumstances, the loan options you qualify for, and the interest rates you are looking at.

Your goals also play a part. Someone might have the goal of keeping payments to an absolute minimum, in which case a remortgage may be more suitable because you are able to stretch that borrowing out over a much longer term.

However, the downside is that you may end up paying a lot more interest back in the long term. You are also securing additional borrowing against your home, which puts your home at risk if you fall behind. A personal loan is usually unsecured, so you do not have that same level of risk.

Ultimately, it is about getting advice and speaking to an adviser like us. We’re able to help you understand what those options look like, lay out the pros and cons, and make sure it is clear and meets your preferences and plans.

Can you remortgage to raise funds for home improvements?

Yes, you’re able to remortgage to raise funds for home improvements, and in our experience, it is one of the most common reasons people remortgage. If your home has increased in value or you have paid down some of your mortgage, you may be able to borrow extra to carry out renovations.

This additional borrowing could fund a new kitchen, a fresh lick of paint, or an extension to your entire downstairs. Ultimately, the lender will look at how much your home is worth, how much you want to borrow, and whether you are able to afford the monthly payments.

Lenders need to ensure they are happy lending to you, and that the extra borrowing will not put you in a financially difficult position. They will look at your income and financial backing to validate the additional borrowing, ensuring you meet their affordability checks.

Every lender looks at these situations a little differently, meaning there is no black and white answer as to what the right option is for you. A conversation with an adviser allows us to ask the right questions, understand your circumstances, and review your priorities and budget to guide you through your options.

If you are planning to buy a property that needs work, or if you are thinking about improving your current home, it is worth getting advice early. This helps you understand your options clearly and avoid nasty surprises down the line.

What documents will a mortgage advisor need to see for me to be able to borrow more on my mortgage for a renovation as a First Time Buyer?

You will need to have prepared the standard documents that most banks and building societies request when assessing your affordability and deciding whether to lend to you. You need photo ID and proof of income. If you’re employed, usually that’s the latest three months’ payslips. If you have annual bonuses, commission or overtime, they might want to see a P60 or additional payslips.

They’ll also want to see your latest three months’ bank statements to assess your everyday spending and bills. They also use those to verify if you’ve got any loans or credit cards you’re paying off.

A credit report is very helpful. When we talk to clients, we don’t necessarily have any of those documents before the call, but we’ll leave the client with a clear understanding of what we need to get them an Agreement in Principle, which would be the next step.

If you’re self-employed, it depends on how you’re set up. We often need the latest two years’ tax returns or tax calculation summaries, which you’ll get from HMRC when you submit your self-assessment. There’s also another document called a tax year overview.

If you’re a limited company director, lenders might also want to see your company accounts showing your turnover, net profit and profit and loss breakdown. We talk people through those documents specifically based on their circumstances, but having those prepared will put you on the front foot.