Home Improvement Loans:
A Guide to Home Loans
You may be the proud owner of a new home which needs a little DIY work, or you may want to carry out major repairs to your existing home. Whatever your circumstance, if you want to enhance your property either to add to its value or just for your own comfort or pleasure, you may want to consider taking out a home improvement loan to finance the work.
How can home improvement loans be used?
Many people think they are only eligible for home loans if they are undertaking major home improvements. However, you can apply for a home loan or homeowner loan to cover any size of work related to the home, from as little as redecorating a bedroom to building a loft conversion.
Here are a few more examples of the kind of projects for which you can use a home loan:
- Extending your home by adding new rooms or even storeys
- Buying new furniture
- Landscaping your garden
- Building a swimming pool
- Renovating kitchens and bathrooms
- Adding new flooring and carpets
What types of home improvement loans are on offer?
In general, there are two main types of home loans or homeowner loans to consider:
- A secured home improvement loan: If you are a homeowner with a mortgage, you are eligible for a secured home loan. This type of home loan normally carries a lower rate of interest. It is possible to qualify for such a home improvement loan even if you have or have had a bad credit history.
Lenders are willing to take this risk because you can use your property as collateral. However, be careful as you could end up losing your home if you cannot keep up your regular repayments of the homeowner loan.
- An unsecured home improvement loan: If you do not own a home or property, you will have to resort to applying for an unsecured home loan. This type of home loan carries a much higher rate of interest as there are no assets you can offer to lenders as security.
What is the best home improvement loan to have?
There is no such thing as the best homeowner loan deal. There is only a deal that best suits your personal circumstances. When you apply for a home improvement loan, your lender will need to have the following information, so that it can make its decision:
- Your credit history
- Your annual salary
- Your outgoings
- Type of application - joint or single
- Value of collateral
- Amount to be borrowed
- Length of repayment
A good starting guide to help you decide if a particular home loan is good for you is to compare and contrast the typical APR or Annual Percentage Rate quoted by various lenders. Visit your local banks and building society branches to gather details of their best rates. Alternatively, search the internet for the best home improvement loans deals of the day. While you are deciding, make sure you know exactly what the total repayment cost is going to be as well as any hidden costs or extras.
Some important considerations before taking out home improvement loans
- You may want to consider taking out some form of payment protection plan on your home improvement loan in order to protect yourself against unforeseen circumstances such as unemployment, illness, or accident.
- If you are carrying out home improvements to boost the equity in your home, make sure you do research to guarantee that the work you will do will indeed add value and increase saleability. There are certain home improvements which almost always add value such as a new bathroom or kitchen. However, there are others which may not make any difference and some which may even decrease the value of your home! No sense taking out a homeowner loan or home improvement loan if your renovations don't add value.
- Whatever improvements you choose to undertake, it is crucial that the work is compliant with building and planning regulations. It's important to figure this out before you take out a home improvement loan.
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