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How to pay for property renovations
The UK is known as a nation of DIY-ers, and as home is where the heart is, it’s no surprise we want ours to look perfect.
However, some home improvements can be quite expensive. You might not have the cash spare to pay for a loft conversion or extension, for example.
In this blog, we’re going to take a look at the different ways you could pay for your property renovations; what they offer and the pros and cons of each. Read on for a clearer idea of your options.
If you have a cash pot you’ve been saving into for a rainy day, your home improvement project could be just that.
The Bank of England recently cut the central interest rate to just 0.25%. Even before this, the base rate had stood at 0.5% for several years, so it’s a while since most savers saw a healthy return on their savings.
The interest you’ll pay to borrow is likely to be higher than the interest you’ll make on your savings right now. As a result, it’s probably more cost-effective for you to dip into your savings than borrow the money you need for your home improvements.
Credit card or personal loan
We understand that not everyone has a savings pot, and if they do, it may not be big enough to pay for the work they have planned. If this is the situation you’re in, you may have considered borrowing what you need to cover the work.
You should think carefully about this, as you’ll need to have room in your monthly budget to cover the repayments you have to make. Your new bathroom might look a whole lot less shiny if you’re struggling to pay for it!
For smaller renovation projects like redecorating or a new bathroom, you may choose to pay using a credit card or personal loan. These are short-term lending solutions and you should work out a repayment plan so that you clear the debt as quickly as possible and keep the interest you’re charged to a minimum.
If you decide to pay for the work with your credit card, don’t be tempted to keep on spending on top of this. You’re simply making the balance even bigger, which could mean clearing it becomes an uphill struggle.
Secure the cash against your home
If the renovation work you have in mind is more ambitious, like an extension, for example, the price tag may also be bigger. It might not be possible for you to cover this bill using just your savings, or with a personal loan or credit card.
A secured loan may provide the answer – if you’re a homeowner, that is. Also known as a homeowner loan, it lets you borrow more money over a longer time than a personal loan because the credit is secured to your property.
This provides an additional layer of security for the lender. If you were to stop making your repayments, they would have the right to repossess your home in order to make back the money outstanding on your home improvement loan. It’s important you understand this risk before you apply for a homeowner loan and that you keep up with your monthly repayments, or you could end up without a roof over your head.
To borrow or not to borrow?
Some of the most popular home improvements can come with a price tag that runs into the tens of thousands. You may, therefore, have no choice but to borrow if you want to pay for the work – and this can be daunting.
Only you can decide whether borrowing to pay for property renovations is the right thing to do. The work may help to push up the value of your property so that when you come to sell it you make back the money you spent. And the project might also let you get more from your home right now so you don’t have to consider moving for a few more years. If it achieves these goals, you could look at it as money well spent.
We advise you to consider carefully what work you need done and work out how you will pay for it. If the repayments on the loan you want right now are too expensive, it might be worth waiting and saving for longer so you can get the results you want.