Making home improvements are a great way to increase the value of your property, or make a house your home, but it’s often expensive. When it comes to finding the money to finance your renovations, there are 4 main options.
You can:
- Use your own money
- Take out a loan
- Use a credit card.
- Pay in instalments
But which is the best way to finance your home improvement project?
The answer depends on your situation. You need to be clear on exactly what renovation work you want to do, and how much it’ll cost to do it.
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How Much Money Do I Need to Finance My Home Improvements?
The first thing you need to do is write down everything you want to do. List all the home improvements you want to make and put them in order of priority. The next step is to work out how much your home improvements are going to cost. When you ask builders to give you a price, ask for a written quote, not just an estimate.
Remember, even with an estimate, the amount you end up paying can change from the original figure that they give you. It’s not fixed. This means you won’t know exactly how much you’ll need to fund your home improvements.
A quote means that the price they give you is the price you pay. The builder may come across an unexpected expense while they’re doing the work. If this happens, they’ll have to agree the extra cost with you first.
You should also shop around to get quotes from at least three different builders. The cheapest one may not always be the best. Make sure you use builders that have been recommended to you by other people you know, or have good online reviews.
How To Fund Home Improvements
We mentioned a few options to finance your home improvements, but which is best for you?
1. Use Your Own Money
If you’ve only got small renovations planned, then you may have the cash to pay for them yourself. This is the best way to fund them, so long as you don’t use all of your savings. If you’re short of money, save hard before the renovation work begins. It’ll be worth the short term sacrifice.
The beauty of paying in cash is that you can go at your own pace. You’ve got the cash there ready, and you’re not relying on a third party to lend it to you. Equally, you’re not increasing the overall cost of the work by paying interest on borrowed money. And you haven’t got years of repayments after your home improvements are finished.
2. Use a Credit Card
If your home improvement project isn’t too big, you could fund it using a credit card. There are always 0% cards on offer. These are ideal if you can pay the money back within the interest free period.
If you can’t get a 0% credit card, look for one with perks. There are credit cards that offer loyalty points, rewards or cashback which could benefit you.
Whatever you do, make sure you can pay back more than just the minimum repayment each month. Otherwise, this could become an expensive way to pay for home improvements.
3. Take out a secured or unsecured loan
A loan is a good option to fund more expensive home renovation projects. The difference between a secured and unsecured loan is that secured loans are linked to an asset. The asset could be a car or a house.
Unsecured loans are an option for home improvements of up to £50,000. If the amount you need is over £50,000 then you’ll need a secured loan. Remortgaging your home is another way of borrowing larger sums of money to pay for the renovations.
Whichever type of loan you take, it will come with interest and other charges. Remember that the repayments might continue long after the renovations are finished. If your loan’s secured against your home, remember you’re at risk of losing it if you don’t keep up the repayments. So, don’t borrow more than you can afford to pay back.
4. Pay In Instalments
You could agree with the builder to pay for the work using instalments. This would help to spread the cost of the renovation work overtime. You could then use a combination of the options above to fund each instalment. You’d also have time to save up some money in between payments.
The advantage of paying the builder this way is that you can agree stages of the renovation. This means that you only pay them once certain stages in the developments have been finished. If they haven’t reached a stage by the agreed date, you could pay them less at that point. Or you could delay payment until each stage is complete.
Final Words
To find the best way to finance your home improvements, work out how much it’s going to cost first. Then you can decide which funding option is best for you. Compare the cost of borrowing with different lenders, so you get the best interest rate. And keep some money back for unexpected costs.
Done properly, renovations can add value and comfort to your home. But don’t borrow more than you can afford to fund them.
Disclaimer: We are not providing financial advice, these are just tips for informational purposes.