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The best ways to finance and budget for home improvements

So, you're exploring the prospect of renovating your home? What an exciting journey you're about to get started with! But first thing is first, you need to work out how you're going to fund this.

Let’s be honest, home renovations can cost a pretty penny, particularly conversions and extensions. So before finalising your ideas, what are the ways other people decide to finance their home improvements?

Well, there are many financing options for home improvements. The ways that people decide to pay for renovations include:

Take a look at what projects could add the most value to your home.

Please note: This article only sets out some options available to you and we recommend you contact a financial advisor to help choose the correct financial product/option for you.*

plans for house renovation loan

Savings

Many people decide to save up enough money to pay for their home improvement projects before starting the work. This gives them instant access to funds right from the get-go.

It’s worth bearing in mind that using savings means you will have to take time to save the money up first, so it could delay the start of your project.

However, using savings means you avoid paying interest rates that come with different types of financing.

Loans (secured or unsecured)

When it comes to finding the right solution for your home improvement loan, we understand that people have varying financial positions. That’s why we always recommend seeking professional advice to explore the right option for you and your finances.

There are two different types of home improvement loan options for people to choose from – unsecured and secured:

Unsecured loans

  • These are personal loans that don’t require collateral
  • Most unsecured loans are designed for anyone looking to borrow between £1,000 and £25,000
  • Generally, you’ll need good credit to take out an unsecured loan

Secured loans

  • Often referred to as homeowner loans
  • Secured loans are usually secured against your home or another asset
  • They can be taken out for higher amounts than unsecured loans

Remember, the terms and rates for these types of loans will vary due to your personal circumstances.

Credit cards

Another way people finance home improvements is by using a credit card.

This can give you quick access to funding, especially if you use an existing credit card. Credit card interest rates vary between lenders and your circumstances, so do make sure to check these.

The terms of your credit card may mean that this is one of the more expensive options.

Home improvement mortgages

Borrowing on your mortgage for home improvements is an option that people choose, but there may be time limits and conditions set by your mortgage provider.

Similar to a loan, a home improvement mortgage involves borrowing extra funds to renovate your home. The debt is added to your current mortgage. It can free up funds to cover any necessary renovations or alterations to your home.

The process of signing up for a home improvement mortgage can be complicated. It may require detailed research and professional advice. This may be a more difficult and complex option that will require additional paperwork and take longer to complete.

Re-mortgaging is one option, but the amount you can borrow will depend on your credit rating, how much equity is available in your home, and the amount your renovations will increase the value of your home.

To learn more, check out our home improvement mortgage guide.

Warning: Missing payments on your mortgage could result in you losing your home.

Borrowing from a friend or family member

Another option that people choose to fund their home renovations is to borrow money from a friend or family member. This option does bring its own set of challenges.

Borrowing from others can cause disputes that rapidly escalate into extremely emotional situations that can be hard to resolve.

Putting the loan and repayment terms in writing is the best way to go about this, as everyone will know where they stand. Anyone who chooses this option may also agree to pay interest on top of the total amount borrowed. Putting arrangements in place that cover what will happen if you’re unable to make payments is also something many people decide to include in their written agreement.

As with other financing options, we recommend you seek professional advice before you commit to anything.

Budgeting for home improvements

Once you’re sure renovating your home is the right choice for you, you’ll need to create a budget.

Budgeting for your home improvements may be intimidating, but using the below tips can save you a lot of wasted time and energy:

  • Decide what areas of your home need to be renovated
  • Sit down with your tradesperson/people and, if necessary, your architect. You can then discuss your requirements and come up with a rough budget for the alterations
  • Break down the different costs for each stage of your renovations. We’d recommend planning every part in detail
  • It’s also worth contacting a few professionals to get multiple quotes and a fair price for the labour
  • One of the biggest mistakes homeowners make when planning their home improvement finances is to get carried away with expensive finishing touches on the job. This can quickly burn through your carefully planned out budget. Try to decide everything upfront
  • Think about working with your contractor to plan how long your project will take. This means you can set payment amounts and dates. This will make sure you’re prepared for your financial commitments
  • Finally, don’t overextend yourself financially and enjoy the amazing project!

Ready to transform your home?

After you’ve got a good idea of what you want to do, the first step is to start looking for the best tradespeople to carry out the work. We can help you with that.

At Checkatrade, we know inviting a stranger into your home can be daunting, but our members all pass up to 12 rigorous checks so you can be sure that you’re hiring a trustworthy, experienced tradesperson.

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*DISCLAIMER
This is information – not financial advice or recommendation. The content and materials featured or linked to on this blog are for your information and education only and are not intended to address your particular personal requirements. The information does not constitute financial advice or recommendation and should not be considered as such. The Checkatrade website is not regulated by the Financial Conduct Authority (FCA), its authors are not financial advisors, and it is therefore not authorised to offer financial advice.
Always do your own research and seek independent financial advice when required. Any arrangement made between you and any third party named or linked to from the site is at your sole risk and responsibility. Checkatrade blog and its associated writers assume no liability for your actions.

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