Making major improvements to your home can, in the long run, be justified not just by the increased quality of life that those improvements can bring about, but by the uptick in value your home will enjoy. As such, it’s often worth considering debt as a pathway to your desired improvements.
Doing this in the right way, however, often means devising a plan. So, what might that plan look like, and how might this challenge be approached?
Assessing your budget and project scope
You’ll want to first establish exactly what you’re trying to achieve, and how much you’re willing to spend to make it happen. According to the latest ‘How We Live’ report from Aviva, around seven million homeowners intend to improve over the next two years, and the average budget for those improvements is £14,000.
Knowing the size of the project, and how quickly you expect it to unfold, is crucial. You’ll also want to establish a buffer of extra cash to deal with unforeseen contingencies. Think also about whether your improvements will actually add value to your home, or whether they’re simply going to improve your quality of life. In the former case, more borrowing can be justified; in the latter, often, it can’t.
Exploring funding options: savings, remortgage, secured borrowing
Once you understand how much money you need, you can think about how you’ll get it.
The most obvious approach is to simply save money each month until you’ve accrued the desired sum. This means more waiting, however – and if you’re waiting for a project that will yield an improvement in value, and you’re going to suffer from inflation in the meantime, this might not be cost-effective.
Another option is to renegotiate the terms of your mortgage, so that you end up borrowing more. This is a simple option, but the scope for remortgaging might not leave you with enough. Finally, you might use secured homeowner loans, with your home as collateral. This kind of loan will work alongside your mortgage.
Timing, interest rates and the current UK lending environment
The Bank of England’s base rate of interest is constantly changing, in order to bring inflation down to the target of 2%. This rate is reflected by what lenders will actually charge – but it’s worth shopping around. The rate of interest charged isn’t the only test, however – you’ll also need to think about how your lender might cope with the stress. New research indicates that around 9.7% of all borrowing is now intended to support home improvement projects – and thus the marketplace for homeowner loans is more competitive than ever.
Risk management and maximising value for money
If you want to deal with risk, you’ll need to protect yourself through planning. It’s worth not only setting aside money for contingencies, but also borrowing enough to cover your costs. You’ll also need to spend time actively looking for sources of risk and assessing them.