As the average home price in the UK peaked at £277,000 in Q1 2022, it became apparent that British homeowners continue to sit pretty in the marketplace.
Overall, UK house prices soared by 10.8% in the year ending December 2021, and while the growth rate is set to slow down slightly, there has arguably never been a better time to sell your home.
If you want to carry out major improvements on your home, what steps can you take to achieve this objective? Let’s check out the best funding options:
1. Use cash or savings if you can
Given the impact of rising inflation, we’re guessing that most of you don’t have huge wads of spare cash lying around.
In fact, this situation may worsen before it gets better, as the base interest rate in the UK continues to rise and the cost of borrowing (or mortgage payments increase accordingly).
However, if you do have excess cash available or some savings set aside, this is the optimal way to fund your home improvements as it enables you to minimise borrowing and your long-term debt commitment.
If you don’t, you may want to consider browsing the available tax-free cash ISAs and similar account types to start accumulating wealth as soon as possible.
2. Borrow from friends or family
We’ll admit that this isn’t always the best possible option, but it may carry preferable fiscal terms when compared with an institutional lender such as a bank or peer-to-peer platform.
Of course, borrowing money from family or friends can be fraught with risk, but the fact remains that more than one-in-two first-time buyers aged under 35 receives significant financial support from their parents (or the so-called “Bank of Mum and Dad”).
So, there’s nothing to say that you can’t borrow from the same resources as an existing homeowner, especially if you’re relatively young and have recently completed your purchase.
This way, you can optimise the value of your home and repay the money once the property has been sold.
3. Borrow from a lender
If you choose to borrow from a lender, you’ll find that many list home improvements as a viable reason for approving loans.
However, this type of borrowing is usually unsecured. This means that while the money isn’t borrowed using the house as security, it will come at a higher interest rate as lenders look to offset their additional risk and compensate for the lack of collateral.
The good news is that this enables you to borrow large sums of money, enabling you to make more expensive modifications such as converting a loft space or adding an extension.
4. Extend your mortgage
Increasing your mortgage is another way to finance home improvements. You will need enough equity in your property for your lender to approve the additional funds.
5. Green grants
You may also want to consider green grants from the government, especially if you’re committed to making sustainable improvements such as installing a heat pump on the property.
