How can I finance my home improvement project?
Whether it’s a new bathroom, kitchen, loft conversion or extension, you’ll need to think about the best way of funding your home improvement project. We look at the options.
According to our annual Homeowner Survey, almost 4 in 10 homeowners (39%) have put off carrying out renovations because of the hurdle of financing home improvements. We take a look at the financing options available to you to help you get your projects underway.
What are my funding options?
You can either fund your home improvement project:
- With cash, by increasing your mortgage to release funds, or by taking out a home improvement loan
- Mortgage funding will usually offer the cheapest rates, but use this opportunity to shop around for the best deal — switching mortgages can save you money and help reduce the impact of a bigger mortgage.
How do I go about re-mortgaging?
If you aren’t tied into any special introductory terms or reduced rates with early repayment charges, then re-mortgaging is an ideal way to increase your borrowing and lock into a better deal.
You will need to prove you can afford the bigger mortgage and will need sufficient spare equity in the property to raise capital.
It’s important to factor in any switching costs as well but many deals will offer a free valuation and free legal work for remortgages, which helps to cut set up fees.
Speak to your lender about your options. But also speak to a mortgage broker who can scan the whole market and find the best deal for you. For more information, read our re-mortgaging made simple guide
What if I have a really good mortgage at the moment and don’t want to change?
If you have a really good rate that you don’t want to lose or are tied into a deal with early repayment charges, you could consider additional borrowing from your existing mortgage provider. The rates may not be quite as keen and there could still be fees but it could work out to be the cheapest overall package.
Another option could be a secured loan from another provider. However, these will usually carry higher interest rates.
Are all lenders happy to extend the mortgage for home improvements?
Lenders will ask the reason for raising capital but should allow equity to be released for the purpose of home improvements.
Mortgage rates vary depending on the percentage of the property your mortgage represents, known as Loan to Value or LTV. Lenders will limit the LTV to which they will allow capital to be raised for home improvements, typically to 85% or 90% of the property value. That will be based on the current property value and not a predicted value after completion of the work.
Bear in mind that the higher the LTV, the higher the interest rate will be. Of course, you can review the rate once any deal has come to an end. If the improvements have added value then there may also be an improvement in the LTV which should, in turn, improve the mortgage options.
Other funding options
In addition to using a mortgage or further advance from your mortgage provider, you might consider using a secured loan, unsecured personal loan or even a credit card, depending on the sums required. However, these will generally come at higher rates than mortgages and so it’s important to consider all the options, particularly for larger projects.
Top tips for adding value to your home
A loft conversion is the easiest way to add an extra bedroom and bathroom. If you can increase the number of bedrooms in a property then you will usually add to your sale price, assuming you haven’t gone beyond the top value for your street. See our loft conversion guide for more
Increase living space with a conservatory or extension. See our guide on where to start with your home extension
A bathroom makeover to ensure your bathroom looks, at the very least, fresh and clean is essential. Massive improvements can be made with just a new suite, fixtures and fittings. Add an extra bathroom, especially an ensuite, and you are likely to add value. See our guide for where to start with your bathroom refurb
Improve the kitchen. It’s the heart of the home and where we wall want to be wowed. But keep your spending in proportion with your home. You’re unlikely to see returns on a £25,000 kitchen in a £250,000 home. See our guide, kitchen renovation where do I start?