How to fund home improvements

An alternative way to cover part of home improvement costs is by using your savings. Plus, using your savings to pay for something lasting and meaningful can give you a glow of achievement. Planning your outgoings in detail could help you only lay out what you can afford.

If you're over 55, unlocking some of the cash stored in your home could give you free rein to finance that refurb. It may be possible to use your property to cover the cost of your residential revamp by taking out a lifetime mortgage, the type of equity release we offer. A lifetime mortgage is a long-term loan secured on your home. You don't have to make monthly repayments, instead the loan and accumulated interest are repaid, usually from the sale of your home, when you die or go into long-term care, subject to our terms and conditions. A lifetime mortgage will reduce the amount of inheritance you are able to leave and may affect your tax position and ability to claim certain welfare benefits. 

Our lifetime mortgage is designed to be repaid when you (and the second borrower if you have a joint lifetime mortgage) die or move into long-term care, subject to our terms and conditions. However there is an option to make smaller repayments up to 10% per year of the total amount borrowed, without incurring an early repayment charge.

Whether or not you make repayments on the loan, interest continues to roll up until it’s fully repaid. In other words, you pay interest on the loan plus the interest you already owe, which quickly adds up.

With seemingly countless providers available, some credit cards offer thrifty options to handle big-ticket purchases, including interest-free periods, 0% balance transfers and spending rewards. These could offer a cost-effective way of temporarily zapping interest or fees that you might otherwise have had to pay. 

While these perks can seem appealing, making fewer repayments on a short-term loan can make it harder to balance your regular outgoings. For example, borrowing £6,000 within a credit card's 12-month interest-free period would mean you'd have to pay back £500 a month. 

And once your credit card balance is no longer in its 0%-interest period, costs will stack up based on your issuer's interest rates.

A secured loan can run for up to 35 years and uses your home as security— that’s why it's also known as a second mortgage.

Unsecured loans usually run for up to seven years and charge more interest, since lenders tend to view them as higher risk than secured loans. If your credit score's up to scratch, you might still snap up a more reasonable loan than if you have a poor credit rating.

But you can generally borrow a lot more with a secured loan , with some lenders offering up to £500,000, compared to just £25,000 for an unsecured loan.

If you don't keep up with your repayments on secured loans, your home may be repossessed.

A remortgage might be a practical way to get your hands on the cash you need for home improvements. You'll borrow on top of your existing mortgage, whether from your current lender or an alternative one. It’s important to remember that you'll have to pay back more than you borrow, and interest builds up on the balance until it's completely repaid.

Remortgaging later in life can be tricky, as lenders' affordability checks consider age and income. For an accurate estimate of your payments, you need to work out how interest stacks up. Your home may be repossessed if you do not keep up repayments on your mortgage.

It's also worth remembering that while a home improvement could increase your home's eventual sale price, that uplift may not exceed the cost of the upgrade. This is especially true if interest rates rise, or house prices fall. Either of these could leave you with negative equity (where your debt exceeds the property's value).

For professional guidance speak to a financial adviser. 

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