How to fund home improvements
Making alterations to your home can be exciting, whether you're renovating your kitchen, upgrading your bathroom, or adding a brand new room to your house.
However, one of the biggest challenges is financing these projects. Fortunately, there are several options. In this article, we'll explore some of the most common methods that can help you turn your renovation dreams into reality.
Savings: If you have a dedicated savings account or a rainy-day fund, tapping into it can be an excellent way to finance your renovations without incurring debt. Home improvements can raise the value of your property by over 10%, depending on their nature, so it could be a sensible use of that money. Plus, funding this yourself will give you the freedom to carry out the improvements at your own pace. However, it's essential to ensure you won't deplete your emergency fund or leave yourself financially vulnerable.
Credit cards: Credit cards can be a convenient way to finance smaller home improvement projects. It could be cheaper – and quicker – than getting a loan. However, it’s crucial to have a repayment plan in place to avoid accruing substantial interest charges.
Increase your mortgage: Another popular option for funding home improvements is by borrowing against your home. However, interest rates have increased recently, so the additional funds may not be offered at the same rate as your current mortgage. Alternatively you could extend your mortgage term, however this would mean paying more interest in total.
Personal loans: If you don't want to tap into your home's equity, a personal loan can be an alternative option. It’s important to think about whether to choose a secured or unsecured deal however. A secured personal loan may be cheaper, but it will be borrowed against your home, which means putting it at risk if you don’t make the repayments.
Releasing equity: Equity release schemes allow you to access the value tied up in your property without having to sell it, by taking out a lifetime mortgage. Unlike a regular mortgage, you don't need to make monthly repayments. Instead, the loan, plus interest, is repaid when you sell the property or pass away. Before considering equity release, it's crucial to seek advice, as it can have long-term implications for your finances and inheritance planning. It may impact your entitlement to means-tested benefits and the value of your estate. Additionally, these schemes typically have eligibility criteria based on factors such as age and property value.
Government loans and grants: Depending on your location and the nature of your home improvements, you may be eligible for government loans or grants. These programs are designed to support homeowners in making energy-efficient upgrades, improving accessibility, or addressing safety concerns. Keep in mind that government loans and grants may have specific requirements and detailed application processes.
Before deciding on a funding method, it's essential to assess your budget, project requirements, and financial goals. Consider the interest rates, repayment terms, and potential risks associated with each option.
Alternatively please get in touch with us and we’ll go through the options with you