Can You Add Furniture To Your Mortgage? Options (2022)

Can you add furniture to your mortgage is a common question when buying a property, as the price of furniture can add up to quite a significant sum when renovating an entire house or buying a new property.

No, you cannot add furniture to your mortgage as the mortgage is based on the price of the property. However, you can get the money to pay for the furniture directly with a variety of methods including putting down a lower deposit, requesting an equity release, or getting a personal loan.

In this post, I’ll run through ways that you can finance your furniture for your new home, including how to effectively add the costs of the furniture or other renovations to your mortgage. Also how you can maximise your mortgage borrowing to help fund any additional costs.

How To Finance Furniture For A New Home

When buying a property, having the cash available upfront can be difficult with all of the other closing costs to pay. Fortunately, there are quite a number of different ways that you can finance your furniture from equity releases to interest-free credit that I’ll explain further below.

  • Save up before you purchase a new property. If you can save up the money to buy your new furniture that can be the best way. You’ll also make sure you’re not putting yourself in any debt to fund these new purchases.
  • Buy with interest-free credit. A lot of furniture stores have the option of interest-free credit, where you can buy the furniture now and not have to pay anything for years or are able to split the payments over multiple years. This is effectively an interest-free loan that the furniture company uses as an incentive for you to buy which can be helpful if you’re struggling to find the cash to pay for it upfront. However, just make sure you can afford the repayments so you don’t put yourself in any financial difficulty.
  • Get a personal loan to buy the furniture. You can apply for a personal loan that is not linked in any way to your mortgage. These unsecured personal loans can be as low as 3% interest depending on how much you’re looking to borrow and can be split over many years. Just make sure you calculate how much interest you’ll be paying so you understand the full cost of the items you’re wanting to buy. At 3% every year you borrow £1,000 you will be charged £30 in interest.
  • Put down a lower deposit for first-time buyers. If you are a first-time buyer, you can put down a lower deposit and keep some funds aside to pay for the furniture directly. This will mean you have to save up a larger sum to purchase the property initially, however, should mean you have an easier mortgage case instead of trying to request additional funding. This is especially the case if you have a high loan-to-value ratio and are close to the minimum deposit level.
  • Request an equity release from your mortgage lender. If you already have a property and have built up some equity, providing you are still over the minimum deposit threshold which is usually 10%, you can request to borrow additional money. This additional money can then be used to pay for the furniture or anything you choose, however some mortgage lenders will ask you exactly how you are wanting to spend the money.

Can You Borrow Extra On A Mortgage For Renovations And Furniture?

Yes, you can borrow extra on a mortgage for renovations and furniture, however, the maximum you are able to borrow will be determined by the value of the property and the loan-to-value ratio that a mortgage lender is willing to offer.

How To Finance Furniture For A New Home

Typically mortgage lenders will require that you have a minimum of a 90% loan-to-value ratio, which is a 10% deposit. You can then negotiate with the lender to agree to borrow any amount within these parameters. This is particularly helpful if you have built up a lot of equity in your property already as you can access this money through an equity release.

There are also options available to get a renovation mortgage that may allow you to borrow more money based on certain conditions. However, after the financial crash in 2008 mortgage lenders’ requirements to get a mortgage became more strict to reduce their risk. This includes minimum deposit levels which is why 100% or no money down mortgages are almost non-existent.

One way to help you borrow extra on a mortgage is to improve your creditworthiness in the eyes of a mortgage lender. This can allow you to maximise your mortgage borrowing by decreasing the perceived risk you pose as a borrower. I’ll explain how to do this below.

How To Maximise Your Mortgage Borrowing

If you are looking to maximise the amount of money you are able to borrow with a mortgage the best approach is to contact a mortgage advisor. They can review your details and help you find a mortgage product that suits your needs and suggest ways that you can improve your creditworthiness.

You can also do it yourself, so here are a few ways that you can improve your creditworthiness to a mortgage lender.

  • Improve your credit score. Mortgage lenders put a lot of weight on your credit score to determine your creditworthiness, so making sure it’s in good standing is vital. This includes making sure you have a good amount of credit history and not having any missed payments that can flag you’re not able to handle money effectively.
  • Increase your income. You can usually get between 3.5 to 4.5 times your income as a mortgage, so the higher your income the more you are able to borrow with a mortgage. If you can demonstrate you have a high income, a mortgage lender may be willing to let you have a higher loan-to-value ratio as you pose a lower risk to them as a borrower as you can more easily pay back the money. This can allow you to access more of the money to use for furniture or other renovations.
  • Improve your spending habits. Mortgage lenders review your spending habits to make sure that you can afford the monthly payments. Even if you have a high income, if you have poor spending habits you can be refused a mortgage, or the finance you want to withdraw. I’ve written a more in-depth post about what mortgage lenders look for with your spending habits that may be useful.
  • Increase your mortgage term. For repayment mortgages (ones where you will fully repay the amount you have borrowed over the term), a large portion of your monthly mortgage payment is capital repayment. If you choose a longer mortgage term, for example, 30 years instead of 20, your monthly mortgage payments will decrease. This will increase your affordability and possibly increase the amount you’re able to borrow or release from your equity. However please remember that this will mean that you will pay more interest as you’ll be borrowing the money for longer.

Is It A Good Idea To Borrow More On Your Mortgage?

Depending on your situation, it can be a good idea to borrow more on your mortgage if the alternative is you borrowing money from another source at a higher interest rate. This can save you money in interest payments and also allow you to spread the repayments over a longer term.

For example, if your mortgage rate is 2.5%, any additional amount of money you add to your mortgage through an equity release or putting down a lower deposit will be at this rate. If the alternative is you getting a personal loan at 5% interest or holding a balance on your credit card that can be over 20% interest, it can save you a lot of money in interest by borrowing the money through your mortgage.

However, it’s also worth noting that the mortgage interest rate typically decreases at each banding of 5% loan-to-value. So for example an 80% loan to value, or 20% deposit will typically have a lower interest rate than an 85% loan-to-value, or 15% deposit.

If you can save up and make the purchases from your savings that could be the ideal solution as you’ll completely avoid having to finance the money.

How Soon After Closing Can You Buy Furniture?

Once you close on your new property, you can buy furniture straight away. It’s usually best to wait until you have definitely closed and you have the keys so you aren’t running this risk of having any delays or losing the property and having to put the furniture into storage.

If the property does fall through, you also run the risk of the furniture not being suitable for the next property. For example, if you’ve bought items that are certain sizes or dimensions such as L-shaped sofas or dining tables, they may not be right for the new property.

Summary

Overall, you can’t add furniture to your mortgage as your mortgage is based on the value of your property. However, you can change your mortgage borrowing requirements to have less equity in your property, releasing money to buy your furniture directly.

There are also a number of other ways you can finance your furniture for your new home without using your mortgage. This includes things such as saving up before you make your new property purchase, utilising interest-free financing offers from retailers or even getting a personal loan.

I hope this post has been helpful and given you some things to think about when choosing how to finance your furniture for your new home. Sure the transformations will be awesome!