Home Improvements and How to Finance Them
There are a number of different ways to finance home improvements. Looking to get your house in order without blowing your budget? To help you find the one that suits you best, let’s take a closer look.
Benefits of home improvement
More and more of us are opting to stay put in our current homes rather than buying a new one.
There are a number of home improvement ideas you can carry out, from an extension to changes that make it more environmentally friendly.
Some of the benefits include:
- Increasing the value of your property (when you do eventually come to sell)
- Decreasing bills through increased energy efficiency
- Improving comfort levels
- Giving you more space
- Ensuring your home stands the test of time (and harsh weather conditions)
- Keeping your house well-maintained
- Increasing the security of your property
Best way to finance home improvements
Your reasons for wanting to carry out work on your property might be solid, but they’re meaningless without a proper plan in place.
How are you going to pay for it?
Let’s explore your options.
Take out a secured loan
A secured loan is taken out against an asset you own, usually your home. They’re popular as they’re available to more people, such as those with a poor credit history, and interest rates are usually lower than that of personal loans. It’s a good idea to get your head around how home renovation loans work to see if they’re right for you.
They’re not without their disadvantages though, not least your home being at risk if you can’t keep up with repayments. Should you miss payments, you could risk losing your home. Also, rates are often variable. While you could end up paying less than with a personal loan (which are often fixed), interest rates could jump up in a few years’ time.
Despite the potential risks, they are regularly used by homeowners to pay for home improvements. As always you should consider this option carefully before making any commitments.
Tip: try not to choose a longer repayment term, as you may end up paying more in the long-term.
Remortgage your property
Remortgaging your home is another option, one popular with many homeowners coming to the end of their current mortgage period and looking for an alternative lender. It involves signing up for a new deal, borrowing a bit extra and adding this onto your repayment amount.
This option is often an option for homeowners making significant changes to their homes.
Consider borrowing on your mortgage carefully. By remortgaging, you’ll be increasing your amount of borrowing, meaning repayments will increase over the full mortgage term. So, before choosing this option, always seek professional mortgage advice who can guide you through the process and find the best deal to suit your requirements. Remember, don’t just consider the present, but also how this will impact you in the longer term.
Also consider any fees associated with remortgaging and include all of these in your calculations when considering if it’s a feasible option.
Always do your research here. Shop around for a good remortgage deal and be organised.
We can help you find the right people to make this happen. Get a no obligation mortgage quote below.
Use your savings
Of course, if you have cash to hand, one option is to use money you have saved up. Many people prefer to do this rather than borrowing.
There’s no repayments to keep up with or interest rates to deal with. Not having to borrow and pay back what you owe!
However, depending on how much you have saved up and the scale of your renovation project, this might not be an option for you. You may simply not have enough, or if you did, it could eat into a large chunk of what you have saved up.
Personal loan
Personal loans are also often used for home improvement projects. They’re popular as they’re more versatile, offered by a wide variety of lenders, often open to those with a poor credit history. One of their biggest positives is that the interest rates are fixed, meaning monthly payments stay the same. There’s also no need for collateral, meaning your home won’t be at risk.
You can find some highly competitive interest rates and different repayment terms, but also bear in mind how long you’ll need to repay the loan. With this method, you don’t want to get caught out and end up paying more than you need to. Fixed monthly are also required, meaning you need to be sure you can keep up with repayments before committing.
With personal loans: watch out for hidden charges. From prepayment penalties to origination fees, you could end up spending more than originally planned. Don’t just look at interest rates alone, even if they’re highly appealing.
Release equity
This is usually only available to older homeowners (+55). It allows you to unlock equity in your property and turn it into a cash lump-sum. You don’t need to have paid off your mortgage first.
The main advantage here is that it gives you money to spend now, rather than having it tied up in your home. Releasing equity means that the wealth within your property is accessible – and can be put to good use.
Of course, the downside to this is that you won’t be paid full market value for your home. This means when you come to sell, you’ll receive less.
Think carefully here, as it will also mean there’s less to inherit if you have people to pass your assets onto. This money also won’t be available for long-term care costs.
Credit cards
While this may only be appropriate for smaller improvements, such as redecorating, using your credit cards could be an option.
As with any borrowing, approach with caution and see if you can use a card with a longer 0% interest introductory period, and try to pay it off before being charged interest.
Tips for home improvement
Before you get the ball rolling, here’s some advice:
Check if you need planning permission
In some cases, you can extend your house without planning permission. However, if ever in doubt, always check – don’t assume.
You don’t want to run the risk of spending money on an extension, only to have to take it all down.
Applying for planning permission is easy enough, and could save you plenty of hassle and money in the long-run.
Find the right tradesperson
Having the right person for the job will make all the difference.
When choosing a tradesman, don’t just look at price (however tempting), also consider their experience and reputation.
We can help you find a local tradesman to carry the project out for you.
Set a home improvement budget
Even smaller projects, such as decorating, can go wildly over-budget if you’re not careful. For example, the cost of house extensions can vary widely depending on the type of property and its age. Therefore, always set a budget and try sticking to it.
Monitor the project closely to ensure you’re not overspending.
Ready to get started?
If you need to borrow money but you’re unsure where to start, we can help.
We can help connect you with our five star rated loan provider…click below and explore your borrowing options without impacting your credit score.
Get a free online quote for a home improvement loan below.
Last Updated: November 1st, 2024
