Home improvements can make your property more valuable and your living space more comfortable. However, they can also be expensive. Whether you’re upgrading your kitchen, adding a conservatory, or renovating your bathroom, you’ll need to think about how to pay for the work. In this guide, we’ll explain different ways to finance your home improvement project, including loans, savings, and other options.  

What are my options for funding a home improvement? 

There are many ways to fund your home improvement project. Your choice will depend on the size of your project, your finances, and your goals. Here are the most common options: 

Remortgaging to pay for home improvements 

One option is remortgaging, which means increasing the amount of money you owe on your mortgage by entering a new agreement at a new rate and term. This gives you extra cash to pay for renovations. Remortgaging can be at a  lower interest rate, but it also means you’ll have to pay off more debt over a longer period. This option is common for big projects when you have enough equity in your home. 

Increase your existing mortgage to fund renovations 

If you’re happy with your current mortgage terms but need more money, you might increase your current mortgage instead of remortgaging. This allows you to borrow more money without starting a new mortgage. Like remortgaging, you’re using your home as collateral, so it’s usually a cheaper option, but you may have higher monthly payments. 

Take out a loan to fund home improvements 

Another option is taking out a personal loan. You can choose between an unsecured loan or a secured loan for home improvement. 

  • Unsecured loans: These don’t require collateral, but interest rates are usually higher. 
  • Secured loans: These are backed by your home, which means you can borrow more money at a lower interest rate. However, you must be careful to make your payments, as you risk losing your home if you don’t. 

For more details on secured loans, take a look at our page on Home improvement loans. 

Using credit cards to fund renovations 

For smaller home improvement projects, credit cards can be an option. If you have a credit card with a low interest rate or 0% interest for a period, this could work well for funding minor renovations. But credit cards are not ideal for larger projects as interest rates can quickly add up if you don’t pay off your balance on time. 

Saving up to pay for home improvements 

If you’d rather not borrow money, saving up for your project is a great way to avoid paying interest. It may take longer, but saving means you won’t have to worry about monthly payments. If you can wait and save enough, this can be the most affordable way to fund your home improvements. 

Should I release equity for home improvements? 

Releasing equity from your home allows you to borrow against the value of your property. This can give you the money you need for renovations. You can do this by remortgaging or taking out a second mortgage. But, using your home as collateral means there’s a risk – if you don’t repay the loan, you could lose your home. 

Before deciding to release equity, carefully consider whether the benefits of the renovations outweigh the risks. It may also be helpful to speak to a home owner loan broker to understand the best option for your needs. 

What should I consider when funding my home improvements? 

There are several things to think about when choosing how to fund your home improvement project: 

  • Cost of the project: Larger projects will need more funding, while smaller projects may only require a personal loan or credit card. 
  • Interest rates: Different financing options have different interest rates. Secured loans usually have lower rates than unsecured loans or credit cards. 
  • Repayment terms: Consider how long you’ll need to repay the loan. Longer repayment terms can lower your monthly payments but may result in paying more interest over time. 
  • Your current financial situation: Make sure the repayments fit within your budget. Look at your income, expenses, and existing debts before choosing a loan option. 

How to manage the cost of home improvements? 

Managing the cost of home improvements means planning carefully. Here are some tips to help you stay on budget: 

  • Set a realistic budget: Before you start, decide how much you can afford to spend. Don’t forget to include materials, labour, and unexpected costs. 
  • Prioritise your needs: Focus on the most important improvements first if you’re on a tight budget. This way, you’ll get the best value from your renovation. 
  • Look for ways to save: Find ways to reduce costs, like doing some work yourself or choosing cheaper materials. You can still get quality results without spending a lot. 
  • Shop around for financing options: Compare rates and terms from different lenders to make sure you’re getting the best deal. 

Conclusion

Financing your home improvement project is an important decision, but with the right approach, it can increase the value of your property and improve your living space. Whether you decide to remortgage, take out a loan, or save up, it’s important to understand the pros and cons of each option. Make sure the choice you make fits your financial situation, and consider speaking with a financial advisor or mortgage broker to find the best way to fund your renovation. If you’re interested in why home improvements are so popular right now, take a look at this article on home improvements on the rise.