How to finance a home renovation
Getting stuck into some home renovation and putting your own stamp on a property can be an exciting prospect. But extensions and remodelling costs quickly add up. If you don't want to start a renovation and realise partway through that you can't afford it, you'll want to plan your personal finances carefully beforehand.

Wondering how to finance home renovation? Read on for our advice. We'll be looking at:

  • The costs involved in home renovation
  • How to finance an extension
  • How to finance smaller renovations
What costs are involved in home renovation?
Whether you're upgrading your roof, building an extension, or remodeling your garden, home renovation can be an expensive project. While it can add value to a property in the long run, in the short term you may need to look into financing options to cover the costs.

Of course, the cost of your renovation or remodelling will vary depending on your vision, but it's a good idea to plan every step of the project carefully so you can budget accordingly.

Expenses to be aware of may include:

  • Surveys and planning permission fees
  • Legal fees
  • Demolition
  • Structural changes
  • Plumbing
  • Rewiring
  • Plastering
  • Painting and decorating
  • Appliances
  • Furniture
How to finance an extension
Extensions are an excellent way to increase your home's square footage and boost its value. However, whether you're adding a conservatory or building a new bedroom, extensions come with a lot of upfront expenses.

You might want to consider one of the following financing options to carry out your project as stress-free and debt-free as possible.

Remortgage your property

One option for financing your extension is to remortgage your home. Remortgaging involves transferring your mortgage from one provider to another to raise funds. This usually means you commit to a longer repayment plan in return for a lump sum loan. Many people are keen to go down this route as it's a quick way to get some money upfront. It can also be a way to consolidate your debt into one monthly payment.

If you decide to remortgage your property to cover the costs of an extension, it's important to be fully confident that you can make your monthly mortgage payments. With remortgaging, you increase the amount you owe. If you default on your repayments, you run the risk of repossession. It's a big decision so always weigh up your options before choosing to remortgage.

Consider a second mortgage

A second mortgage is different from remortgaging. Also referred to as a secured loan, a second mortgage gives you the opportunity to borrow from a second lender. Your original mortgage remains the same, but you have another alongside it. Taking out a second mortgage gives you more money upfront, but it does mean you have to make two sets of repayments. Your second mortgage may also have a higher interest rate than your first.

Use your savings

If you've managed to put aside money for a rainy day, you could use this to pay for your extension. The benefit of using your savings is that you don't need to worry about repayments. However, you may also want to consider how long it will take you to save the money back up again and whether an extension is the best use for those finances.

Take out a personal loan

If you are unable to save the amount of money or your property is not eligible for remortgaging, you could take out an unsecured loan. Unlike secured loans (including mortgages), unsecured loans are not tied to an asset. Unsecured personal loans are often more accessible than remortgaging your house or getting a second mortgage.

When comparing loans, it's best to look at the annual percentage rate (APR). This will give you a more accurate picture of what you'll need to repay than focusing on interest rates alone. Many lenders will let you borrow up to £50,000. Taking out an unsecured loan also tends to be a quick process and you won't need to put your property at risk. As with all personal loans, always make sure you can make the monthly repayments.
    How to finance other home renovations
    Single storey extensions can cost anywhere from £30,000 to £60,000 (excluding fitting). Because they cost so much, remortgaging and unsecured loans are the best options for a lot of people.

    But what about smaller renovations that cost less? If you're looking to refurbish your kitchen, landscape your garden or fix up your bedroom, you may be looking at a far lower price that won't require a secured loan.

    For minor home improvements, you might find that using a credit card is the most efficient option. Many credit cards come with an interest-free introductory period which means you won;t pay interest on top of your monthly repayments. However, it's worth bearing in mind that renovation projects often fall behind schedule. If your project faces delays that take it beyond the interest-free period, you'll need to start paying interest.

    Taking out a credit card will also require a credit check so you will need to ensure your credit rating is high enough for a provider to lend you the money.
    Affordable loans for DIY
    If a credit card isn't for you, you could also use an unsecured personal loan for smaller DIY projects. Low-interest loans are an affordable way to borrow money upfront and pay back over a couple of years.

    When looking for a suitable loan, you may find that some lenders focus solely on your credit score. While this is no problem for those with an excellent credit rating, it might seem daunting for those with poor credit or a thin credit file. You may be concerned about your loan application being rejected. Fortunately, at Fintern, we offer affordable, fixed term loans that don't rely solely on your credit score.

    Instead, we use Open Banking to look at your entire financial situation and assess your affordability. You can borrow anywhere between £1,000 and £7,500 to help pay for your home renovations. With our flexible repayment terms, you can take control of your borrowing. If you'd like to see how much you can borrow for your home renovations, why not download the Fintern app today?
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