Borrowing money for home improvements
Borrowing for home improvements: Is it worth it?
Is borrowing for home improvements a suitable option for you? Find out more about how borrowing works for renovations and if this could match your goals.
Why borrow money for home improvements?
Borrowing money can give you the freedom to get a renovation project underway quickly. This can be especially important if you want to make your home more liveable. For instance, if you’re planning on adding a room to accommodate your growing family, time isn’t likely to be on your side and you might not have years to save.
It can also make financial sense in some cases. Improvements such as installing double glazing, updating central heating, or adding a loft conversion can increase your property’s value or reduce your energy bills, helping offset the cost of borrowing over time.
If you’re planning to sell soon, well-thought-out upgrades might help your home sell faster and for more. But not every project adds value. Some work might just make your life easier or more enjoyable, which is a valid reason too, as long as you can afford the repayments.
What are the best loan options for home improvements?
When thinking of borrowing money to get renovations underway, it’s important to understand the two main types of home improvement loan that are available. Knowing the difference between these will help you decide what’s the best loan option for the home improvements you want to make.
Secured loans
Secured loans are sometimes called homeowner loans. These allow you to borrow a significant amount, up to as much as £100,000, and usually at lower interest rates than unsecured loans. Lenders see these loans as lower risk because this type of borrowing involves using your property as collateral.
If you choose this type of loan for home improvements, you could spread the cost of repayments over anything from three to 20 years , which can make monthly repayments more manageable.
Unsecured loans
Unsecured personal loans don’t require any security. This means that the amount you borrow is smaller than with a secured loan – typically up to £25,000, depending on your credit rating and income. These loans tend to have higher interest rates than secured loans and shorter repayment periods.
Choosing between a secured and unsecured loan
The best type of loan for home improvement plans will depend on your circumstances.
If you’re leaning towards taking out an unsecured loan, you have the advantage of your home not being at risk if you miss repayments. But because there’s no security, lenders look more closely at your credit score, employment status, and existing debts when making a decision. So, if your credit history isn’t great, you might find it harder to get approved – or only qualify for higher interest rates.
Also, as the maximum amount you can borrow is limited, you’ll have to think carefully about the renovation projects you can undertake that the loan can cover.
With a secured loan, you can borrow more so you may be able to complete a significant number of home improvements that will revive your space.
However, if a secured loan is more appealing, you might need to factor in paying more interest over time and longer repayment terms. And because your home is on the line, only go down this route if you’re confident you can meet the repayments – even if interest rates rise or your circumstances change.
What are the best loan options for my circumstances?
When planning how to borrow for the home improvements you have in mind, start with having a clear idea of what you want to use the money for. This could be:
- Paying for contractors and tradespeople
- Hiring an architect for larger projects
- Building and decorating materials
- Covering the cost of planning permission
With these details, you can then begin creating a realistic budget for your project. You’ll need to get multiple quotes from tradespeople before borrowing. Overestimating can leave you repaying more than you needed, while underestimating can leave you short of cash mid-project.
If you just have a small-scale home update in mind, like replacing a bathroom or updating your windows, an unsecured personal loan may suit you best. Aim to borrow only what you need and pay it off as quickly as you can afford.
For more extensive – and expensive – work, such as extensions or structural changes, a secured loan might offer the amount and terms you need. But always compare the total cost of borrowing, not just the interest rate. Look at the APR (annual percentage rate), any arrangement fees, and early repayment charges.
It’s also important to check your credit score before applying. Sites like Experian and ClearScore offer free tools to check your score and see how likely you are to be accepted.
The exact loan amount you need will depend on your circumstances. Whether you need to take out a seven-year loan or a , it’s important to consider where you are now in terms of your finances, as well as where you could be in the future.
Other ways to fund home renovations
Savings
If you have savings, using them can avoid the stress and cost of borrowing. There’s no risk to your home and you don’t have to follow a repayment schedule.
But there are some things to consider when tapping into your savings to cover the cost of renovations or topping up the money you borrow. The main one is to make sure you keep some money in place for your emergency fund. Leave enough aside to cover unexpected expenses, especially if you don’t have other support to fall back on. Also, have a clear plan for what you intend to do with your savings when using them for home improvements.
Remortgaging
If you have equity in your home, remortgaging might be a cost-effective way to raise funds. You’ll either increase the size of your mortgage or switch to a deal that allows you to release cash.
However, this stretches your debt over the life of the mortgage. A cheaper rate doesn’t mean it’s cheaper overall. Use a mortgage calculator or speak to a broker to see how much more you’d pay across the full term. There may also be fees for switching deals early, so factor these in.
Credit cards
For smaller projects, a 0% purchase credit card could work. Some cards offer interest-free periods up to 24 months. Pay off the balance before the promotional period ends, or you could face high interest charges. This option only suits short-term borrowing, so you might have to consider alternative funding if you’re doing major work on your home.
Release equity
If you’re over 55, equity release (like a lifetime mortgage) might be an option. This lets you access some of your home’s value without selling it. With this, instead of making monthly repayments, the loan and interest get paid back when you die or sell the property.
While this can free up cash, it reduces the value of your estate and can affect your entitlement to benefits. Speak to a qualified equity release adviser and consider it a last resort.
Risks and considerations when borrowing money for renovations
Borrowing always comes with risks. Even if the loan is for a positive reason, it’s still a debt. If your income drops, interest rates rise, or your outgoings increase, your repayments could become unaffordable. With a secured loan, you risk losing your home if you fall behind.
There’s also no guarantee you’ll make your money back. Some renovations don’t add value to a property and housing market can be unpredictable. Over-personalised changes might even reduce its appeal to buyers. Before borrowing, think about how long you’ll stay in the property and whether the improvements make sense for the long term.
Borrow for home improvements with Evolution Money
If you want to make some major changes to your home, a secured loan could match your goals. We have home improvement loans from £5,000 to £100,000 and we’re rated ‘excellent’ on feefo for the services we provide.
Check your eligibility with us today. If you’re a homeowner aged between 21 and 70 living in the UK and can afford the repayments from your income, we may be able to help you – even if you’ve been turned down for finance elsewhere.
You can find out more about other financial topics in our help and advice hub. It’s home to a wide range of useful articles that break things down and provide inspiration.
Representative 28.96% APRC (Variable)
For a typical loan of £26,600 over 180 months with a variable interest rate of 19.56% per annum, your monthly repayments would be £484.00. This includes a Product Fee of £2,660.00 (10% of the loan amount) and a Lending Fee* of £763.00, bringing the total repayable amount to £87,030.00. Annual Interest Rates range between 11.7% to 46.5% (variable). Maximum 50.00% APRC. *Lending Fee varies by country: England & Wales £763, Scotland £1,051, Northern Ireland: £1,736.
Think carefully before securing debts against your home may be repossessed if you do not keep up repayments on your mortgage or any other loan secured against it. If you are thinking of consolidating existing borrowing, you should be aware that you may be extending the terms of the debt and increasing the total amount you repay.
