How to Fund Major Home Refurbishments in an Affordable Way

You’ve found your dream kitchen, you have decided where the extension should go and you have even selected the perfect plantation shutters for your dining room. All that is left to do is figure out how you are going to fund what is clearly an ambitious home renovation project.

This is where things tend to get a little tricky. Not due to a lack of options available, but the exact opposite. All of a sudden, you find yourself with a long list of potential funding options to choose from, which in all cases have pros and cons to consider.

Figuring out which works best for you means considering your goals, your current financial status, your long-term outlook and (of course) your credit score. At which point, you will be in a better position to determine which of the following is most appropriate:

Secured Loans

A secured loan for home improvements can be secured against a wide variety of valuable assets. However, most are provided in the form of a secured homeowner loan – secured against the applicant’s property. Secured borrowing opens the door to higher sums of money, lower rates of interest and minimal overall borrowing costs. On the downside, your home may be at risk of repossession if you fail to keep up with your subsequent repayments.

Unsecured Personal Loan

An unsecured personal loan is easy to arrange, affordable and can be used for almost any legal purpose. Depending on your financial circumstances, you may be able to borrow anything from £500 to £10,000 – no security (collateral) required. However, unsecured loans are restricted exclusively to applicants with proof of income and an excellent credit score. They can also carry higher rates of interest than secured loans.

Bridging Finance

If you plan on selling your home when the renovations are complete, bridging finance is worth considering. Secured against the property, bridging loans can be arranged within a matter of days to cover short-term projects. Interest is charged monthly, often less than 0.5%, keeping costs minimal when repaid early. Consult with a broker to discuss the potential benefits of bridging finance, if your goal is to sell your home for the best possible price.

Credit Cards

Funding relatively minor renovations is also possible with an everyday credit card. This can be a useful option if you are able to make use of a 0% interest introductory offer, typically giving 12 months to repay the balance without paying any interest or borrowing costs. The same criteria apply with credit card applications as with personal loans – exclusive to those with an excellent credit history and proof of financial status.

Personal Savings

The final (and perhaps most obvious) option is to use your own personal savings, which is always the most cost-effective option. However, wiping out your savings in their entirety on a home improvement project is rarely advisable, if doing so means leaving nothing behind. Instead, it may be a better idea to use part of your savings in conjunction with one of the options outlined above, in order to minimise borrowing costs while still leaving you with a vital financial safety net.