How to Pay for Home Improvements

How to Pay for Home Improvements

Have you considered using your home’s equity to access additional funds?

Over the past couple of years, the UK has seen a surge of interest in home improvement projects. The trend was initially driven by lockdown living: spending more time at home prompted people to enhance their properties. In 2020 alone, house-proud consumers spent £110 billion on home improvements – a year-on-year increase of almost 30%.

Although lockdown measures have ended, the home improvement boom continues. According to research published by Property Reporter, 37% of homeowners are now ‘more eager than ever to carry out work on their homes’. People are particularly keen to update areas that are ideal for socialising, such as living rooms, now there are no restrictions on inviting guests round.

Many Projects Require Significant Investment

Perhaps you want to build a kitchen extension, transform your loft space or create a wheelchair-accessible wet room. Major home improvement projects require considerable investment.

Let’s look at the example of a kitchen extension in more detail. As HomeHow’s home improvement cost guides make clear, the average price for a modest single-storey extension is £35,000, while ambitious designs can be as much as £100,000.

Home improvement can be life-enhancing but expensive. So the question for many homeowners is how can I raise enough money to cover the cost?

Savings and Credit Cards May Not be Adequate or Appropriate

A typical adult has savings of around £9,500 – not enough for significant home improvements. Even if you’ve saved more than that, you may feel reluctant to plough it into one project and lose your nest egg.

Using a credit card might be a suitable option when you want to upgrade a domestic appliance, say. But paying for large projects in this way could lead to you exceeding your credit limit or struggling with high interest rates. This Is Money points out that the average interest rate for UK credit cards has reached 21.66%, the highest it’s been for 24 years.

Home Equity and Home Improvements

Fortunately, there are other ways you may be able to pay for home improvements. They involve unlocking some of the equity tied up in your property. Equity means the value of your home minus any amount outstanding on secured loans. ‘Home equity […] is an asset that homeowners can borrow against to meet important financial needs,’ explains Investopedia. This form of borrowing tends to be subject to much lower interest rates than credit cards, because the funds are secured by your equity.

As Devon’s largest mortgage broker, we have many years experience of in helping people who want to release equity review the following borrowing options and make appropriate decisions.

Remortgaging

Remortgaging your home involves exchanging your current mortgage agreement for a new one, usually from a different lender. Our advisors will examine the whole market and identify the most suitable products. We strive to help you save money in the long term, wherever possible, by seeking out better interest rates.

Remortgaging increases what you owe – you’re asking the lender to increase your loan by the amount of equity you want to release. But it can enable you to secure a better deal overall and cover major outgoings, such as when you need tens of thousands of pounds for building work.

Homeowner Loan

Perhaps you’re not very far into your mortgage agreement and it’s subject to high early repayment charges, or perhaps your credit rating has worsened lately. These are examples of situations in which a homeowner loan (also called a second charge or second mortgage) may be more cost-effective than remortgaging.

Homeowner loans are among the specialist products we help people to arrange. They’re straightforward to set up, and there are no upfront fees, though their interest rates can be less competitive than other mortgage products’.

As with remortgaging, a homeowner loan increases the amount you’re borrowing, but enables you to raise additional funds for significant expenses.

Lifetime Mortgage

If you’re 55+, you may like to consider equity release with a lifetime mortgage. The lender could give you a lump sum, a series of smaller sums or both.

Lifetime mortgages increase the amount you owe, but don’t require monthly repayments. Instead, the loan is repaid when your home is sold after you’ve moved into residential care or passed away. So they can be ideal for mature homeowners who no longer earn a salary and have home improvement plans.

Helping Devon Homeowners to Raise Extra Funds

You can rely on The Mortgage Shop to provide independent advice that’s trusted by customers across Devon.

Need additional funds for home improvement? Contact us today to see how we can help you.

Equity Release Health Warning & Regulatory Statement 

We offer a comprehensive range of Equity Release products from across the market. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. All loans are subject to status. Ask for a personalised illustration. You may be required to pay a broker fee depending upon the type of mortgage recommended. Registered in England and Wales 3110231 – Registered Office: Sommerville House, 30 Southernhay East, Exeter, Devon EX1 1NS. The Mortgage Shop is a trading name of The Mortgage Shop (Exeter) Limited which is authorised and regulated by the Financial Conduct Authority. FRN 302305 Check that this mortgage will meet your needs if you want to move or sell your home or want your family to inherit it. If you are in any doubt, seek independent advice.

Standard Health Warning & Regulatory Statement 

Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on a mortgage or any other debt secured against it. All loans subject to status. Ask for a personalised illustration. You may be required to pay a broker fee depending upon the type of mortgage recommended. Registered in England and Wales 3110231 – Registered Office: Sommerville House, 30 Southernhay East, Exeter, Devon EX1 1NS. The Mortgage Shop is a trading name of The Mortgage Shop (Exeter) Limited which is authorised and regulated by the Financial Conduct Authority. FRN 302305 Check that this mortgage will meet your needs if you want to move or sell your home or you want your family to inherit it. If you are in any doubt, seek independent advice.