Remortgaging for Works

Remortgaging for an extension can reprice your whole mortgage, and a £40,000 further advance usually does not

A single storey rear extension under construction with new blockwork walls and timber roof joists

If you are borrowing around £40,000 for an extension, the biggest cost is often not the rate on the new money. It is what happens to the money you already owe. Bank of England figures for July 2026, published on 1 September, put the effective rate on the outstanding stock of UK mortgages at 3.97%, while newly drawn mortgages averaged 4.45%. A remortgage moves your whole balance onto a new deal. A further advance prices only the new slice and leaves the old deal alone.

So the first step is not to compare products. It is to find three numbers.

  1. Your current interest rate, and when your fixed or discounted period ends.
  2. Your early repayment charge, if any. That is the fee for leaving a deal early, usually a percentage of the balance repaid.
  3. Your balance and an estimate of the property value, which give your loan to value, or LTV. LTV is the balance as a percentage of the value, and it decides which rates you are offered.

Then ask your existing lender for a further advance illustration. That quote is your benchmark.

What do these three ways of borrowing actually do?

A remortgage moves your whole mortgage to a new lender, or a new deal with your current one, at a higher amount. Every pound you owe is repriced.

A further advance is extra borrowing from your existing lender, held as a separate account with its own rate and term. Your original deal carries on untouched.

A personal loan is unsecured, meaning it is not tied to your home. Terms are shorter, usually one to seven years, and rates higher.

A second charge mortgage, or secured loan, sits against the same property behind your first mortgage. The Finance and Leasing Association notes these came under the FCA’s mortgage conduct rules when the Mortgage Credit Directive was implemented in 2016, so they are advised sales with the same affordability testing as a main mortgage. No official average rate is published for them, which is why they sit outside the table. The borrowing routes section covers the application process for each.

What does £40,000 cost on each route at August 2026 rates?

Bank Rate has stood at 3.75% since 30 July 2026, with the next decision due on 17 September. The figures below price the £40,000 of new borrowing only, so the routes are comparable.

Route Rate assumed Term Monthly cost Total repaid Interest paid
Added through a remortgage 4.78% (5 year fix, 75% LTV) 20 years £259 £62,195 £22,195
Further advance 4.92% (2 year fix, 75% LTV) 20 years £262 £62,933 £22,933
Further advance, shorter term 4.92% 10 years £423 £50,724 £10,724
Unsecured personal loan 6.90% 7 years £602 £50,547 £10,547
Unsecured personal loan 6.90% 5 years £790 £47,410 £7,410

Rates: Bank of England quoted household interest rates, August 2026. Payments are capital and interest, rounded to the nearest pound, excluding fees and any early repayment charge. The personal loan rate is the Bank’s quoted rate for a £10,000 loan; at £5,000 it was 12.08% that month, and no quoted rate is published at £40,000.

Term moves the total far more than rate does. Taking the further advance over ten years rather than twenty saves about £12,200 in interest, several times any rate gap in the table.

Why can a remortgage cost more than the table shows?

Because the table prices only the new £40,000. A remortgage reprices the rest.

Owe £160,000 at 3.5%, move the whole £200,000 onto 4.78%, and the extension has also cost you the difference on that £160,000 for the length of the new deal. On the Bank’s July figures, the average existing borrower sits at 3.97% and average new lending at 4.45%, so this is the common case.

Add an early repayment charge, arrangement and valuation fees, and term extension, because lenders often reset to a fresh 25 years, which lowers the monthly figure and raises the total.

A further advance avoids the first two, but you are limited to one lender’s criteria, you may be quoted above new-customer rates, and you end up with two accounts to line up later.

How many homeowners take each route?

The FCA’s mortgage lending statistics for the first quarter of 2026, published on 9 June 2026, put further advances and other mortgages at 5.3% of gross advances, up 1.0 percentage point on the year, and owner-occupier remortgages at 28.1%, up 6.8 points. UK Finance, forecasting on 15 December 2025, expected about 1.8 million fixed rate deals to mature during 2026.

The FLA reported on 27 August 2026 that June brought 3,828 new second charge agreements worth £205m, with loan consolidation accounting for at least 60% of that business.

A finished bright kitchen extension with bifold doors open onto a small garden

Can a grant reduce how much you need to borrow?

Only for specific measures. Where the work replaces a fossil fuel heating system, the Boiler Upgrade Scheme in England and Wales pays the amounts below, taken off your installer’s quote rather than paid to you.

Measure Grant
Air source heat pump £7,500
Ground source heat pump £7,500
Biomass boiler £5,000
Air-to-air heat pump £2,500
Extra for air or ground source where the home runs on oil or LPG with no mains gas connection, until March 2027 £1,500

Source: GOV.UK, Boiler Upgrade Scheme, what you can get. Hybrid gas boiler and heat pump systems are not funded.

Insulation is thinner. The Great British Insulation Scheme’s GOV.UK application service has closed, with installations required to complete by 31 March 2026. The grants and builders section tracks what remains open.

Is borrowing against the house worth it when prices are barely moving?

Here is the case against. The Federation of Master Builders puts single-storey extensions at £1,800 to £3,000 per square metre across the UK, and £2,300 to £3,400 in London, so a 20 square metre rear extension is a £36,000 to £60,000 job before fees, VAT and contingency. Nationwide reported on 1 September 2026 that annual house price growth was 1.6% in August, and HM Land Registry’s June index, updated on 2 September, put the average UK property at £272,000.

On a £272,000 home, 1.6% a year is roughly £4,350, while twenty years of interest at 4.78% on £40,000 is about £22,200 on top of the build. The work may be well worth doing for how you live in the house. As an investment it is weaker, and secured borrowing puts the home behind the debt in a way an unsecured loan does not.

What order should you do this in?

  1. Collect the three numbers above.
  2. Get the build priced by at least two builders.
  3. Ask your existing lender for a further advance illustration.
  4. Get a remortgage comparison for the full new balance, with any early repayment charge and fees added in.
  5. Price an unsecured loan over the shortest term you can comfortably afford.
  6. Check whether any element attracts a grant before fixing the amount.
  7. Compare on total cost and monthly cost, then decide which constrains you more.

Frequently asked questions

Does a further advance use the same rate as my main mortgage? No. It is a separate account with its own rate, and your existing deal keeps its rate. Bank of England quoted rates for August 2026 ran from 4.78% on a five year fix at 75% LTV to 5.52% at 95% LTV, so the LTV after the extra borrowing matters.

Is an unsecured personal loan cheaper than a mortgage? The rate is higher and the total usually lower, because the term is shorter. On £40,000 at 6.90%, five years costs about £7,410 in interest against about £22,195 over twenty years at 4.78%. The monthly payment is roughly three times larger.

What happens to my early repayment charge if I remortgage mid-deal? You pay it, and it belongs in the comparison. It is usually a percentage of the balance repaid, stepping down each year. A further advance normally avoids it because the original loan stays in place.

Do I need planning permission before arranging the borrowing? Not to obtain a quote. But a build that later turns out to need permission can stall while borrowed funds sit drawn, so settling the planning position first avoids borrowing against a design that then changes.

Sources

This article explains how the borrowing routes work and what published rates were in August and September 2026. It is not financial advice.

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