Revamping, refurbishing and renovating your property is always less expensive and less stressful than upping and moving to a new house entirely, but it’s critical that any home improvements are done properly and professionally. This doesn’t come cheap, however, and for many homeowners will involve some kind of financial borrowing to achieve (dependent of course on their financial status and the scope of the work to be completed). Affordability is a key consideration and no one should ever borrow more than they can afford to reasonably pay back – but there are plenty of finance options out there to suit all; you just need to make an informed decision on which to use.
Please note that nothing in this article constitutes financial advice, which should always be sought from a professional before any financial commitment is made.
Unsecured Personal Loans
A personal loan that is ‘unsecured’ is a loan that is not secured against your property or assets – so if you fail to repay it or are late with repayments, the lender can’t repossess your home.
Generally speaking, unsecured personal loans are only available to those with very good credit ratings; with the deals improving in competitiveness the better your score is. Unsecured personal loans can usually be obtained for amounts between £500 - £25,000 and are paid back on a monthly basis for a period of between one and five years (although details may vary between lenders). Longer term loans are considered the most attractive often because the amount paid back is lower per month but interest rates will mean that more is paid back overall. If you have time on your side before a renovation is imperative, it is worth improving your credit score before applying for such loans in order to benefit from a better rate. It is also worth enquiring what the options are for larger or one-off repayments – as often such small loans will penalise you for diverting from the standard monthly amount.
Personal loans are most commonly used for smaller renovation projects such as bathroom or kitchen design and builds or replacement doors or windows. Larger projects such as conversions or extensions are often unable to be funded through the smaller amounts that unsecured personal loans provide.
Secured Personal Loans
Personal loans secured against assets such as property provide larger amounts of capital against longer term repayments than those unsecured, but at a higher risk. Failure to repay a secured personal loan can result in the repossession of your home.
Secured personal loans are sometimes provided in the form of a further advance on your mortgage (if with the same provider) or as a lump sum to be repaid on a monthly basis. These generally start at £15,000+ with hugely varying interest rates and fee scales, so it is always worth shopping around and gaining quotes from several lenders before committing to anything. The exact amount available to borrow as a secured personal loan will depend on a credit check being completed and then calculated from your personal credit score, the available equity in your home, your other outgoings and financial commitments, and what it is you intend to spend the money on. The monthly repayments do tend to amount to less than those on a short term loan, but overall may cost more conditional on the leveraging in place.
Homeowners primarily use secured personal loans for large home improvement projects such as extensions, additions or architectural projects; due to the higher sums of money available.
Credit Card Funding
Traditional loan lending isn’t the only way to raise capital for home improvements or renovations. Credit card providers go through fluctuating trends of offering 0% interest deals that can arrange short term finance – ideal for smaller projects that require lesser amounts.
Available deals vary and lenders tend to get into one upmanship type competitiveness between themselves and so if you spot a great deal, be sure to check in with other providers to see if they’ll match it. If managed correctly and paid in full each month, 0% credit cards can be the cheapest way to obtain a short term loan. Short term really does mean short term when it comes to card lending though, as typically 0% deals last less than two years; and any amount remaining to be repaid after that point will be at an increased rate.
Remortgaging refers to switching an existing mortgage to a new deal where a homeowner has either reached the end of a fixed mortgage term or are on a standard variable rate. It allows homeowners to find a mortgage with a lower rate than that they’ve been paying to borrow more money.
There is usually an arrangement fee for a new mortgage, which applicants need to be mindful of; and early repayment may cost even more. Further advances are often wise, which can sometimes be taken as a separate loan to an existing mortgage.
Remortgages are paid over a longer term than even long-term loans and so although monthly repayments may seem low, they will add up over time. Homeowners usually must have paid their existing mortgage payments on time and in full to qualify for a new mortgage deal, with no serious damage sustained to their credit rating in the period since the original mortgage was granted.
Home improvements and renovations are hugely exciting projects, and in some cases, very much an essential. Realistically, few people have the money to pay for property projects upfront and there is certainly no shame in borrowing to cover the cost. The key is affordability. If planned and budgeted thoroughly, lending can be done responsibly, repayments made on time and your home beautifully future-proofed. What’s more, Refresh Renovations always visit your home to scope out the project and help you understand the fees involved as accurately as possible – no estimations or guesstimates!
To find out how Refresh Renovations can help you with your future home improvements, get in touch today for a no fee no obligations chat with our renovation specialists.
Costs are accurate at the time of publication. Plan ahead to reduce the impact of industry changes or disruptions. For more information see here.