People are getting more and more motivated to make changes to their homes thanks to the rise of do-it-yourself stores and shows. But making changes to your home can be expensive, and you may need a loan to do the work you want or need to do.
Getting a loan to make improvements to your home can be a great idea. If you do the right things, you can raise the value of your home and make it easier to sell in the future. But what kinds of ways are there to pay for home improvements?
Here are some ways to pay for both small and large home improvements, as well as things to watch out for when you do:
Small projects
You don't have to take out big loans or add money to your mortgage for a lot of small home improvement projects. Most of the time, savings or credit cards can be used to pay for these kinds of changes. If you have enough money in your savings to pay for something, it will be much cheaper than getting a loan or adding more to your mortgage. Some examples of this would be painting or redecorating one or two rooms.
Large projects
When making bigger changes to your house, like adding on or remodelling, you will need to borrow money to pay for the work. Large home improvement projects might be best paid for with unsecured loans and remortgaging.
Unguaranteed loans
If you have good credit and need to borrow between GBP5,000 and GBP20,000, you should probably get an unsecured loan. Unsecured loans are good because you don't have to worry about losing your home if you can't pay, and the length of time it takes to pay them back is usually shorter than mortgages, between 1 and 7 years. Even though the interest rates are higher, if you can pay back the loan quickly, you may end up paying less overall.
Remortgaging
If you have bad credit or need a bigger loan for home improvements, you might be able to remortgage your home. This means you can get a new mortgage for the amount you still owe on your property plus the amount you need for home improvements. For example, if you need GBP25,000 for home improvements and have GBP100,000 left on your mortgage, you can remortgage for GBP125,000.
The benefit of this is that mortgage rates, which are around 5 or 6 percent, are much lower than those of other loans, and you may not notice the payment as much when it is added to your mortgage payment. The downsides are that you could lose your home if you can't make the payments, and it will take you a lot longer to pay back the money.
Should you change things?
Before you take out a loan for home improvements, the most important thing to think about is how much the changes will help you in the long run. If the gains are just extras that you don't need, you might not want to take out a loan to pay for them. If, on the other hand, the changes will make your home a better place to live and raise its value, a home improvement loan might be a good idea.
