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First things first - home improvements or renovations don't have to be funded by a homeowner loan, but there are good reasons why you might favour one for your home improvement project. There are limits on how much you can borrow using a personal loan, especially if you have less than a perfect credit history, and remortgages can be insufficiently flexible.
The most frequent home improvement projects relate to the redecoration of an existing room. Funding issues tend to arise when the project becomes more challenging - gutting a bathroom or kitchen perhaps, or replacing your home's windows. These projects are likely to cost £000s especially when you need to involve skilled labour. A personal loan may fit the bill for this type of work. But there are larger scale projects that will require something "stronger" like a homeowner loan:
(note: these rough guide costs will vary depending on the region you live in and the specification of the work)
You can see that many projects will require higher levels of expenditure perfectly in keeping with what is potentially available via a homeowner loan. The average homeowner loan we see applied for is £28,000 and very often the money is for home improvement purposes.
If you own your home then at the very least you should keep it in good condition to sustain its value. Additionally you may find that you can make improvements to your home that increase your property's value much more than the work will cost. You'll have to make time to plan and oragnise the work but as the tax man doesn't tax you on your principle residence you will pocket all the surplus value later on! If you haven't got the funds to hand to unlock this hidden value in your property then that's where a home improvement loan could help. Don't forget to factor in the cost of the finance when looking at the potentially profitability of a project.
Ask yourself what aspects buyers value most when looking for a new property. This will help you decide whether the project you have in mind is likely to be popular with a potential buyer (even if you don't sell your property until years later). After all there is no point spending money on things that others won't attach a value to.
Space is one of the things most prized by buyers - so it isn't surprising that adding space to your house could be the most lucrative thing to do. Some ideas about how to do this:
Other projects to consider would be:
The options available to you will depend to some extent on the amount of money you think you need. Personal loans are capped at around £15,000 to £25,000 with the larger amounts only available to people with the best credit histories. If you need a larger sum, want to repay over a term longer than 7-10 years or have a less than perfect credit history then a homeowner loan could be an option worth considering. See the summary panel above.
It's really important that you:
Setting a Budget
From the top down work out the value that your project would add to your property. Verify this by looking at similar work done on other local properties. Consider getting one or more estate agents to value your property "as is" and ask them what value they think would be added by doing the work you're thinking of. This increase in value is the absolute maximum you could justify spending - it covers your costs but does not let you profit from the work.
Now, draw up a specification for the work you want doing - be as precise as you can be on an item by item basis. Hopefully this will be much less than your top down estimate. If you're going to involve builders then your bottom up specification is going to form part of the tender document you'll be issuing to multiple builders. Tendering is another way to keep a pressure on the budget. If you commit to a builder get a contract drawn up and make it fixed price. This sum should include a 10-15% contingency to cover unexpected work.
Sticking to your Budget
Avoid changing the specification. And because you have a detailed specification your builder can't easily increase their profit by skimping on your work. A fixed price contract with a built-in contingency means the builder should have little need to come back to you for extras. Track expenditure over time relative you what you were expecting.
It is perfectly possible to keep within budget if you've followed these rules.
Reliability is important. It is always tempting to go for the cheapest price. But if you've done a tender or got competitive quotes then you'll know if someone is under charging. Be wary of such quotes. It is probably more important to look for a builder, tradesman or supplier who is reliable and has a good reputation. Ask your friends and heighbours who they would recommend. For smaller home improvement tasks you can also consider services as Checkatrade or Rated People.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOAN SECURED ON IT. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY
* Actual rate will depend on personal circumstances and credit assessments. To find out what rate you can get apply below. The current Representative APRC is 9.1%, including lender and broker fees.
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