Home improvements can be costly, so using the right finance or method of funding is key to do the changes you want, save money and also increase the value of your home.
A typical kitchen renovation could cost up to £25,000, a new bathroom up to £15,000 and a new loft conversion up to £75,000.
Whilst savings might be the best method, one has to consider other forms of more structured funding to make the necessary improvements.
Pay For Home Improvements Through Savings and Cash Payments
Using savings is often the cheapest way to pay for home improvements, as it avoids interest charges and debt.
Many UK homeowners choose to save for renovations over time, ensuring they can afford the upgrades without financial strain. According to the Office for National Statistics, around 35% of homeowners use savings for home improvements. However, this method requires patience and discipline, especially for larger projects that need significant funds.
Personal Loans For Home Improvements
Personal loans are a common way to fund home improvements, offering fixed monthly repayments and competitive interest rates.
Many UK banks and lenders provide personal loans specifically for renovations, making them accessible to a wide range of homeowners.
Research from the Bank of England shows that the average interest rate on personal loans in 2023 was around 6.9%.
The rates are lowest for those with good credit scores, but rates can be as high as 18% or 30% APR for those with less than perfect credit scores.
Home Improvements Paid Via Credit Cards
For smaller home improvement projects, credit cards can be a useful option, particularly those with 0% interest introductory periods.
Some UK credit cards offer up to 24 months of interest-free spending, allowing homeowners to pay for any essentials such as furniture, appliances and electronics and pay when the credit card bill is due, which could be up to 30 day’s time.
Importantly, this could be an excellent way to accumulate some airmiles.
Remortgaging and Home Equity Loans For Home Improvements
For significant renovations, remortgaging or taking out a home equity loan can provide the necessary funds. This falls under the guise of secured loans - meaning that your home is used as security to help borrow the largest sums possible.
Remortgaging allows homeowners to borrow more against their property, often at lower interest rates compared to personal loans or credit cards.
According to the Bank of England, the average mortgage rate in the UK was around 4.5% in 2023. This option is best suited for those with sufficient home equity and a stable income, as it increases the mortgage balance and repayment period.
Uk Home Improvements Government Grants and Schemes
The UK government offers various grants and schemes to help homeowners improve their properties, especially for energy efficiency upgrades. The Energy Company Obligation (ECO) scheme provides funding for insulation, heating, and renewable energy installations.
Additionally, local councils sometimes offer grants for essential repairs, particularly for low-income households. Checking eligibility for these schemes can reduce the overall cost of home improvements.
Choosing the best way to pay for home improvements depends on individual financial circumstances and the scale of the project.
Savings remain the most cost-effective method, while personal loans and credit cards offer flexible solutions for smaller renovations. Remortgaging can provide larger sums at competitive rates, and government grants can help reduce costs for specific upgrades.
By carefully assessing the available options, UK homeowners can find a suitable way to finance their home improvements without unnecessary financial strain.
