Home improvements can be costly, especially if they involve major structural changes or there are several areas that need to be renovated. However, making updates can go a long way towards making a property more comfortable. They can also increase its value, especially if they’re are in line with current trends, such as abandoning the kitchen update for overhauling the garden.
In fact, according to the 2020 Renovation Nation Report by money.co.uk, gardens topped the list for the most popular projects, with 35% of homeowners focusing on their outdoor space over other updates. The living room was next on the list of renovations, with just under a quarter (23%) of homeowners focusing on this space, hinting at the trend towards making living spaces more comfortable over other refurbishments.
Overall, we spent just over £4,000 on renovations such as these when lockdown first began last March. But how are we financing these upgrades? How can we cover the cost of home makeovers in the future? Here’s a look at some of the main ways people pay for significant changes around their property.
Using savings can be an investment, both on a personal level as you’re making your home more comfortable, and from a financial point of view, especially if the changes you make increase the property’s value.
Using savings seems to be a common choice. Money.co.uk’s report revealed that most respondents (26%) had used general savings for home refurbishments, closely followed by 24% who had originally set aside money for a holiday. This is echoed in the 2020 Houzz & Home Renovation Report for 2019 and 2020, which saw 85% of respondents using cash or savings to fund updates in 2019.
Having cash to hand to cover the cost of home improvements is also an easy way to avoid having to borrow money and then pay back what you owe. You’re making straightforward purchases with money that you already have earmarked for such projects.
Over 55s equity release
For homeowners who are over 55, equity release is a potential source of funding. Equity release can free up money if the property is worth over £70,000, so over-55s could tap into extra funds now and make relevant upgrades that increase the property’s value.
While this can be a savvy way to cover the costs of renovations, people have been understandably cautious in the last year. By the third quarter of 2020, just 11% of homeowners were using their equity release for renovations – a drop from 17% in Q1. This fall reflects the caution that people are applying to spending in recent months.
Taking out a loan or credit card
Using a 0% credit card can be a useful way of tapping into funds. As long as you can make the repayments, pay everything back before the 0% deal is up, and you carefully plan how you’ll use it, you could find that you’re in a good position if you choose this type of funding.
This is because if there are any faults with the work you have done to your home or there are other issues with the changes made, such as the company going bust, you can claim back from your card provider.
Taking out a loan is something you might need to do if you’re going to need more than a credit card limit will allow. For instance, you might be adding a £20,000 extension to increase value and make more space. Like a credit card, you’ll need to make sure you can make the repayments and that you can comfortably repay the loan in full by the end of the repayment schedule.
Whether you’re considering a credit card or loan, be sure to do your research before you go ahead and shop around for deals.
Remortgaging your home
Remortgaging is another funding option. This involves switching mortgage providers and, unless you have to meet special introductory terms or you were offered reduced rates with early repayment charges, it can offer you the opportunity to increase borrowing and get into a better deal in the process.
You might need to cover switching costs and you’ll be asked to prove that you can afford the bigger mortgage, but if you have enough equity in the property to raise capital, you can free up cash for your renovations.
If you’re planning on updating your home, it’s worth exploring these options to see if you can fund changes that create your dream property.