1 day Ago By Joanne Hunt
Typical renovators are at least three to five years into their mortgage, says Margaret Barrett, managing director of Mortgage Navigators. Some have caught their breath enough post-purchase to tackle planned upgrades, others have expanded their family, or perhaps their mortgage fixed rate is about to expire and a better home energy rating will help nab them a cheaper interest rate. There are two main types of homeowners looking for renovation finance right now, says Barrett.
One is adding space with an extension and the other is insulating, switching heating systems or adding solar panels to what they have. The cheapest way to fund such home upgrades is from savings. The alternative is to borrow.
And for bigger home improvements, topping up your existing mortgage can be cheaper than taking out a separate loan. There is typically a minimum mortgage top-up amount of €10,000 to €25,000. For smaller home improvements, a personal loan is an option.
For a renovation involving retrofit works, the Government-backed Home Energy Upgrade Loan scheme offers competitive rates. [ How to access a low cost loan to retrofit your home Opens in new window ] Rapidly increasing house prices mean many homes purchased five years ago or more have risen in value. Mortgage repayments over the years will also have reduced the loan-to-value ratio.
The result is some homeowners have amassed a good bit of equity in their home. This means the ratio of how much they owe on their mortgage to how much their home is now worth is pretty favourable. For example, if your house is now valued at €650,000 and your outstanding mortgage is €380,000, you have €270,000 equity in the property.
The ratio of your loan to the value of the property is 58 per cent. This lower ratio gives you bandwidth to top up your mortgage borrowings at a low interest rate. Figures show an increasing number of people are borrowing by mortgage top-up, for reasons including renovation.
The number of top-up mortgage drawdowns rose by 14 per cent year on year in the first three months of 2025, according to Banking and Payments Federation figures. People are topping up their mortgage by more too, with the value of top-ups increasing by 27 per cent year on year. [ Should we invest in retrofitting our home as pensioners? Opens in new window ] “Most lenders will allow you to release the equity [or value] in your home, to remortgage for renovation,” says Aisling McNamara of Mortgage123.
ie. But you won’t want your topped-up mortgage climbing above 80 or 90 per cent loan to value because mortgage interest rates are higher at that ratio. Policies for home improvement top-up loans vary by bank.
Some will lend up to 90 per cent of the current value of the property; others will lend for structural works that will increase the value of the property after the works are complete, says Barrett. The borrowing process can be more straightforward if you are not doing structural works. Non-structural works include insulating your home, changing the heating system, replacing the kitchen, bathrooms or windows, or adding solar panels.
“All of that can be done by getting quotations and this will satisfy the bank,” says Barrett. “You are self-certifying with quotations that you can get this work done for €70,000 or €75,000, and the loan will usually be given as a lump sum.” If your loan is linked to the value of your home being increased by the renovation, the bank may stage the payment, sending a valuer to verify works before releasing the final amount.
For structural works, such as a more costly extension requiring planning permission, money is usually released in staged drawdowns and an engineer will be involved at every stage, says Barrett. “The engineer provides a costing report. An independent valuer goes out and values the property, looks at the planning permission, looks at the cost of the works and gives an estimated future value,” says Barrett.
“At the very end of the build, the engineer will give you a compliance certificate to say the works have been completed in compliance with planning permission.” If borrowing to renovate, shop the market for a better mortgage interest rate. “If you are spending between €70,000 and €200,000 on a property and you are expecting to increase the energy rating, the pillar banks in particular are geared towards eco mortgages with Ber-linked interest rates,” says Barrett.
Switching can save you hundreds of euro on your monthly mortgage repayment, making your topped-up mortgage more affordable. “There are stark differences in mortgage rates. The cheapest lender at the moment might be 3 per cent versus the highest at 6.
5 per cent, so your existing bank may not be the most competitive lender for a renovation,” says Barrett. She gives the example of a €250,000 mortgage with a 25-year term on a standard variable rate of 4.15 per cent and monthly repayments of just over €1,340.
Switching to the more competitive 3.1 per cent rate with another bank reduces the monthly repayment by close to €142. That’s an annual saving of €1,704.
The interest savings alone over the four-year term amount to €6,807, a decent chunk towards your renovation. “The underwriting for a mortgage switcher is easy because you have proven repayment capacity with your existing mortgage,” says Barrett. If you are adding to your mortgage debt by borrowing more to renovate, you will have to prove you can afford the increased repayments, but the lending criteria and documentation will be easier than taking out a first mortgage, she says.
“For equity release for renovations, there is a thorough assessment to make sure lending isn’t stressing you out at this point in time, but there can be significant cost savings,” says Barrett. Borrow enough, as it can be hard to borrow again, says Barrett. “We encourage clients to over-borrow, to have that comfort blanket.
For structural works, the banks will enforce a 10 per cent contingency to be included anyway, to cover over-runs,” says Barrett. Before borrowing, check with your bank that overpaying your mortgage is allowed – this way, unused borrowings can be used to overpay your mortgage, reducing the cost. [ Home renovation: simple tips to manage budgets, time and expectations Opens in new window ] Borrowing more money and increasing your loan to value will increase your monthly mortgage repayments.
There are some ways to reduce the impact. If your existing mortgage is already termed-out to the maximum age, borrowing more means your monthly mortgage repayments will increase. If your mortgage is shorter than the maximum term, you will have the option to lengthen the term.
This can reduce the monthly repayments. “If there is term remaining and you are looking at borrowing a significant sum of money, we can term it out and make sure the mortgage repayments are still comfortable,” says Barrett. The overall cost of finance will be cheaper if you tag the borrowings on to your existing mortgage term – stringing out repayments over a longer term will increase the overall interest you will pay.
If your renovation achieves a higher building energy rating (Ber), this can mean you are eligible for a lower interest rate. “If an engineer can sign off that the Ber on completion is going to be B2 for example, some lenders will apply that interest rate,” says McNamara of Mortgage123.ie.
With other banks, you can contact them with the higher Ber cert on completion of works and they will apply the better interest rate then, she says. If you are retrofitting your home, the Government’s Home Energy Upgrade Loan scheme, offered through the main banks, is an option. Those availing of Sustainable Energy Authority of Ireland (SEAI) grants to improve the Ber rating of their home can borrow between €5,000 and €75,000 over one to 10 years.
The money is unsecured – which means, unlike a mortgage, the lender has no security, such as your home, against the loan. The loan must be used for retrofit works only, which must be carried out by an SEAI-registered provider. Bank of Ireland is offering this Home Energy Upgrade Loan at a variable rate of 3 per cent APR.
A loan of €20,000 over five years with that bank will mean monthly instalments of about €360. The total cost of credit is €1,532.20.
This Government-backed loan is more competitive than a home improvement loan which, from Bank of Ireland right now, has rates from 6.5 per cent APR for works that improve the energy efficiency of your home and 7.1 per cent APR for other renovation works.
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