The Best Options For Financing Home Improvements

Home improvements can be one of the best ways to increase the value of a property. Whether you are expanding your living space, upgrading certain features, or boosting energy efficiency, well-planned renovations can yield strong returns.

However, funding these upgrades can be a challenge, as many home improvement projects require upfront capital. This guide explores the best financing options available, outlining the benefits and drawbacks of each.

What is a Home Improvement Loan?

A home improvement loan provides property owners with the funds needed to renovate, upgrade, or repair their homes. These loans can be used for a range of projects, such as loft conversions, kitchen remodels, or insulation improvements—many of which can significantly increase a property’s value.

According to the Office for National Statistics (ONS), energy-efficient improvements, such as installing insulation or double glazing, can increase a home’s value by up to 14%. Similarly, a study by Nationwide found that adding an extra bedroom can boost a property’s price by approximately 15%.

Types of Home Improvement Loans

There are several types of loans available to finance home improvements, each catering to different needs and financial situations.

1. Remortgaging

Remortgaging involves switching your current mortgage to a new lender or renegotiating with your existing provider, often borrowing additional funds based on the property’s equity.

Pros:

• Typically lower interest rates compared to personal loans and credit cards.
• Long repayment terms make monthly payments more manageable.

Cons:

• Increases overall mortgage debt and monthly repayments.
• Potential early repayment fees if switching before the end of a fixed term.

Best for: Homeowners with significant equity who need substantial funds for large-scale renovations.

2. Bridging Loans

Bridging loans are short-term, high-value loans that provide fast access to capital. They are secured against property and are often used by investors or developers undertaking major renovations. They are also a popular option in auction finance, where buyers need to secure funds quickly to purchase properties at auction.

Pros:

• Fast approval, typically within a few weeks.
• Flexible terms allow custom repayment structures.

Cons:

• Higher interest rates compared to standard mortgages.
• Secured against property, meaning defaulting could result in repossession.

Best for: Property investors or homeowners needing quick funding for major renovations.

3. Personal Loans

Personal loans offer a straightforward borrowing option for mid-sized renovation projects. They are unsecured, meaning they do not require property as collateral.

Pros:

• Quick application process with fixed monthly repayments.
• No need to use property as security.

Cons:

• Higher interest rates than secured loans.
• Limited borrowing amounts, making them unsuitable for large projects.

Best for: Homeowners undertaking mid-sized projects who have a strong credit score.

4. Second Charge Mortgage (HELOC)

A second charge mortgage, or Home Equity Line of Credit (HELOC), allows homeowners to borrow against their property’s value without affecting their primary mortgage.

Pros:

• Access to large sums while keeping the main mortgage unchanged.
• Typically lower interest rates than personal loans.

Cons:

• Additional monthly repayment obligations.
• Higher interest rates than primary mortgages.

Best for: Homeowners with substantial equity and stable finances.

5. Credit Cards

For smaller renovations, credit cards can offer a flexible solution, particularly those with 0% APR introductory periods.

Pros:

• Instant access to funds for minor projects.
• Potentially interest-free borrowing with promotional offers.

Cons:

• High-interest rates if the balance is not cleared monthly.
• Unsuitable for large-scale projects due to borrowing limits.

Best for: Small-scale improvements with manageable repayment terms.

Selecting the Right Funding Option

Choosing the right financing option depends on the size of your project, your financial stability, and how quickly you need funds. Secured loans such as remortgages and bridging loans are great for larger renovations, whereas credit cards and personal loans are better for minor upgrades.

If you are looking for fast and flexible financing solutions, consider speaking with a specialist lender to explore how loans can support your home improvement plans. 

Investing wisely in your property can not only increase its value but also improve its energy efficiency and overall liveability.