Mortgages

There are several ways to raise money for extensions and remodels - research carefully to find the best option for you

There are a number of options available for homeowners looking to borrow money for home improvements. The best one depends on your circumstances and on how much you need to borrow.

Credit cards

This could be particularly useful if you take advantage of some of the 0% deals around. For example, some lenders allow you to make purchases, interest free, for 3 months or more. This is great for the small budget plans and for those who are in a position to repay the loan before interest starts being charged.

Personal loan

Ideal for people who want to borrow a slightly larger amount, typically up to around £25,000. There are some very competitive rates around and some providers allow you to overpay, enabling you to clear the debt more quickly. This could suit a home improver who likes to keep their money arrangements simple and separate. It offers a fixed rate option so those on a budget can plan easily.

With either loans or credit cards, it is always worth shopping around for the best deal. DIY stores do not often offer the most competitive deals so don’t opt for a store card or store finance without checking what else is on offer.

Mortgage lender

Those looking to carry out significant changes to their house may look towards their mortgage lender to raise funds, particularly if they have some equity in their property. This can often be the source of the best rates. However, be aware that typically mortgages are repaid over a long period of time and if you repay your home improvement loan over the same term, you will end up paying more in interest than if you repay the loan more quickly.

There are two common types of mortgage that can be used for home improvements - advance and flexible advance.

Further advance enables you to borrow a lump sum of up to 95% of the value of your home. You can keep the rate variable or choose a fixed rate but it’s worth noting that the term i.e. the period of time you take to repay the loan, must be the same as your main mortgage.

Flexible advance allows you to borrow up to 85% of your home’s value on a variable rate. A sum of money is reserved for you to use as and when you need it. The benefit of this is that if you have a long term project, you only get charged for the amount you have actually used. This means you’re not paying interest on money you haven’t yet spent.

The other benefit here is that you choose the term of the loan independently from your main mortgage and can pay it off early, without penalty, if you wish to. As this rate is variable you will need to be prepared for changes to your monthly repayments.