Financing your renovation project

The ideal way to finance your renovation is to have existing savings without the need to borrow. But with renovation projects costing a significant amount, it's not always realistic to save up and have all of the funds available before starting the project.

Whichever borrowing option you take, make sure you have a plan to fund your monthly repayments without getting into financial difficulties.

1. Choose a credit card with competitive rates

If you are redecorating, fitting a new kitchen or bathroom then an option is to apply for a credit card with zero percent interest on new purchases. This way you can spread the cost over a period of time rather having to pay for it up front.

Make sure you read the terms and conditions carefully and understand what the minimum monthly repayment is, so you are not stung with charges. A good option if you are financially disciplined and can commit to repaying the debt over a period of time.

2. Take out an unsecured loan

This is another option if you are carrying out a small project or have some but not all of the savings in place. Unsecured loans are normally paid back over a short term (1-5 years) so if you are in the position to repay the loan over a short period then this is a good option, although remember the rates will be higher than a mortgage or secured loan.

3. Remortgage

Remortgaging is the most popular method for funding a renovation of over £25,000. Get in touch with either your existing lender or a indeed a new one to find the most competitive offer.

An experienced mortgage broker is also a great option to find you the best deal tailored to your individual circumstances, although they will charge a fee to do the leg work for you. Do shop around to get the best deals available.

4. Take out a secured loan

Similar to remortgaging, with a secured loan you can take out a larger loan (usually £15,000+) which will fund a significant home renovation project. A secured loan is ideal if you want to keep your existing mortgage in tact.

The loan is normally secured on the value of your home and you will need to have a good credit rating to apply. The rates tend to be lower than an unsecured loan as the repayment is over a longer period of time - but remember you will end up paying more in interest as the repayments are over a longer period.

Other tips to funding your project:

  • Expecting an insurance payout or work bonus? Chat to your builder about paying some of the work at a later date. It's always advisable that you pay your builder in installments and they may be happy to take a larger payment at a later date if you have a good relationship.
  • Before you apply to borrow funds, have quotes from the builders, architects and a budget prepared. This way you will borrow the right amount and not be stuck short.
  • Shop around for the best rates on cards, loans and mortgages - you can save a lot on interest if you have a high amount of borrowing!
  • Add at least 10% on for a contingency fund - you will likely need the money and don't want to be caught short.
  • Don't take on more debt than you can manage. If you don't have the funds you can complete the work in stages to try to manage the costs.

Published: July 12, 2018

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