How to fund home improvements

Home improvements, from kitchen suites to loft extensions, new carpets or an outdoor office – ‘improve don’t move’ is a rising trend in home ownership, especially with the costs. We explore how to pay for them.

Home improvements are something many homeowners consider at some point, whether to make their living space more comfortable, to accommodate a growing family or to enhance the value of the property. 

Renovations and upgrades can make a house feel more suited to your lifestyle, but they can also be a strategic investment that pays off when you decide to sell. However, the cost of improvements can be significant, so it is important to understand both which projects are most worthwhile and how best to finance them.

Why people choose home improvements

There are many reasons why homeowners decide to take on home improvements. For some, it is a matter of necessity. Families often outgrow the space they have and may need an extension or a loft conversion to avoid the hassle and expense of moving. 

Others may find their kitchen or bathroom is outdated and in need of modernisation. For many, it is about adding comfort and convenience, whether through improved heating systems, better insulation or simply refreshing the décor.

Another key reason is to increase the value of the property. Buyers are often willing to pay more for a home that already has the features they desire, whether that is a spacious kitchen, additional bedrooms or a landscaped garden. 

In this sense, home improvements can be a way to grow your wealth, provided they are chosen and executed carefully.

Improvements that can add value

Not all home improvements are created equal in terms of return on investment. Some projects may be expensive but add little to the resale value, while others can significantly boost what your home is worth. 

Estate agents and property experts commonly highlight a few types of improvement that can provide strong value:

Kitchen renovations: Modern, practical kitchens are a major selling point. Even a mid-range refit with new cabinets, worktops and appliances can have a strong impact on value.

Bathroom updates: Bathrooms are another high priority for buyers. An additional bathroom, or modernising existing ones, can increase appeal.

Loft conversions: Turning unused loft space into an extra bedroom or office can be one of the most effective ways to add value, often increasing the sale price well above the cost of the work.

Extensions: Adding extra living space, whether through a rear or side extension, can make a home more attractive, though the costs are higher.

Energy efficiency upgrades: Double glazing, improved insulation and solar panels can make a property more economical to run, which appeals to buyers facing rising energy bills.

Garden and outdoor space: Landscaping and creating a usable outdoor area can also help make a property more desirable.

It is important to remember that the value added will vary depending on the location and type of property. Improvements that are desirable in one area may not hold the same weight in another. 

It is worth consulting with experts such as estate agents who will know the local market well and can advise whether a particular renovation will improve your home’s value, or if it is not worth the effort.

Funding projects up to £10,000

Smaller projects such as redecorating, fitting a new bathroom suite, replacing flooring or carrying out basic kitchen improvements often fall in this price bracket. If you do not have savings to cover the cost, there are several financial products to consider.

A personal loan is often the most straightforward choice for projects up to £10,000. Banks and building societies typically offer unsecured loans for amounts between £1,000 and £25,000, with repayment terms of one to seven years. Interest rates are usually fixed, which makes budgeting simpler. 

The rate you receive will depend on your credit history, income and loan amount. It isw important to use a loan calculator available through major credit score companies to see which loans you might be accepted for before applying, otherwise you could be denied and left with a mark on your credit history.

Personal loans can be arranged relatively quickly, making them useful for smaller, time-sensitive projects.

Alternatively, if the cost is on the lower end of the range, a 0% purchase credit card could be an option. Many credit cards offer an introductory interest-free period on purchases, often up to 18 months or longer. Again, use an eligibility calculator to avoid disappointment. 

If you are confident you can pay off the balance before the interest-free period ends, this can be a cost-effective way to spread the expense. However, missing repayments or failing to clear the balance before the promotional period finishes can lead to high interest charges.

Funding projects between £10,000 and £20,000

Medium-sized projects such as a complete kitchen renovation or significant landscaping work often cost between £10,000 and £20,000. At this level, the options for funding shift.

A second charge mortgage, sometimes referred to as a homeowner loan, may be more suitable for larger sums. These loans are secured against your property, which generally allows you to borrow more money at a lower interest rate than an unsecured loan. 

Mouthy Money invited David Coleman from second charge mortgage provider on the most recent podcast episode to give us a full breakdown of the product and what you need to look out for. Check it out here. 

However, your home is at risk if you do not keep up repayments, so this option requires careful consideration. Terms can extend to 25 years or more, which helps reduce monthly payments but increases the total interest paid.

Another possibility is a further advance on your mortgage. This involves borrowing additional funds from your current mortgage lender, secured against your home. 

The rate may be lower than that of a personal loan, but you should take into account that you will be paying interest over the full remaining term of your mortgage unless you choose to make overpayments.

Some homeowners also use a remortgage to raise capital. This means switching to a new mortgage deal that allows you to borrow more than your current balance. If interest rates are favourable, this can be cost effective, though there may be fees for ending your existing deal early.

Funding projects of £20,000 or more

Large-scale projects such as loft conversions, full extensions or structural changes to a property often require budgets above £20,000. Financing this level of work usually requires a more significant borrowing solution.

Remortgaging is one of the more common approaches. By increasing your mortgage, you can spread the cost of improvements over many years, potentially keeping monthly payments manageable. However, the long-term cost can be high, so it is important to weigh affordability carefully.

Second charge mortgages are the other clear option at this level, particularly if you do not wish to alter your existing mortgage deal. They can be tailored to larger amounts and longer repayment periods. The risk to your home remains a key factor, so professional advice is recommended.

For very large projects, some homeowners explore self-build mortgages or specialist renovation finance products. These are more niche and are typically aimed at extensive works rather than standard home improvements.

Why careful consideration is essential

While the idea of transforming your home can be exciting, it is essential to plan improvements carefully. Not every project will add significant value, and some may even cost more than they return when the property is sold.

For example, highly personal design choices may not appeal to future buyers, while overdeveloping a property in a street where homes sell for a modest price may not yield the return you expect.

Before committing to a project, research the local property market to understand what buyers are looking for and how much homes in your area are selling for. Speak to estate agents and gather opinions on which improvements make the most sense for your type of property. It is also wise to obtain several quotes from builders and tradespeople to get a clear view of costs.

Home improvements can enhance your lifestyle and increase the value of your property, but they should always be approached with a blend of ambition and caution. By choosing the right projects and funding them with suitable financial products, you can ensure the benefits outweigh the costs.

DISCLAIMER

This article is produced for general informational purposes only. It should not be construed as investment, legal, tax, mortgage or other forms of financial advice. If in any doubt about the themes expressed, consider consulting with a regulated financial professional for your own personal situation.

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