Whether you’re getting yourself a bigger space, a more modern finish or just tidying up those tatty edges, improving your home can be positive for your finances too. Homes and Property found that even a fairly modest programme of works can add up to £40,000 to your home’s value, so your improvement work could even pay for itself!
This all sounds lovely, but it can be an expensive up-front cost, especially if tradesmen are involved – so what is the best way to get the biggest bang for your buck?
Use your home
Remember how we said that home improvements can help your property? Well, this is also an area where your property can help you instead. Depending on the amount you’d need to borrow, banks will often agree to extend your mortgage or take out a separate loan against the value of your home that you can use for the works.
There are two ways you can do this effectively: one is to literally extend your mortgage either with your original lender or a new lender in what is effectively a re-mortgage. This can get you more money in one go, but remember that you may not get as good a rate as your initial one. You will also be liable for the entire amount, not just the small extension, so you need to think carefully about the wisdom of the whole loan amount.
The second method is to get a separate loan that isn’t linked to your original mortgage but is based on the value that your house has gained since you originally took out your mortgage. You’ll probably get less money this way, and your lender may require a valuation of your house before they’ll agree, but this is less of a financial commitment than a full re-mortgage and can happen faster.
If you’re not careful, the cost of borrowing can dwarf the cost of the actual works many times over if you take the wrong kind of loan or use a high-interest credit card, but done right you can borrow the money you need for very little expense. A 0% credit card, or a 0% interest loan, will ensure you have the money you need without paying for it over and above the materials you use. If you’ve already spent the money and your interest payments are starting to mount, you could just get a balance transfer onto a 0% card that will have the same effect. This is a particularly useful method if you’ve had trouble getting finance elsewhere, or if you’d prefer to ‘buy now, pay later’ for your works.
Do It Yourself
It can be tempting to leave your home improvements up to the professionals, but even a generous budget won’t last long if you have a lot of help, so one way of making any budget stretch further is to carry out as much of the work as you can yourself. The Internet can be a great resource for how-to guides on just about any area of home maintenance and improvement, so with a bit of patience and hard work, it is possible to carry out a lot of the tasks yourself.
It’s also a good idea to look into renting the tools you need, rather than buying them. Some tools are highly specialised and liable to spend most of their lives gathering dust, so if you don’t use them regularly, hiring can end up cheaper. You can also go half and half on some jobs, and do the basics while leaving the rest to a pro. Getting a bathroom done to first fix and fitting the appliances yourself, or fitting your own underlay when carpeting, can really cut down the final bill.
If you’re hoping that your home improvements will pay for themselves as a means to get your renovation done, you need to keep your feet on the ground. Don’t opt for a standard of finish that’s disproportionate to the value of your home, because you’re unlikely to be offered enough finance to cover the difference later on if you misjudge what your works are worth.
The law of diminishing returns means that a £6,000 kitchen in a £250,000 house is likely to be much more cost-efficient than a £25,000 one – from which you’re unlikely to recoup the initial investment. As a result, if you’re planning to pay for your project using finance from your home as noted above, it’s a good idea to be strategic about the works you do, using the equity gained from more profitable works to pay for the cosmetic stuff.
Use your savings
It sounds like a no-brainer, but even using your savings will require a bit of planning in order to do it efficiently. For one thing, it can incur a fee to get your money out of fixed-rate products like ISAs and Bonds, so make sure you factor that cost into the whole price of your renovations.
Paying with cash also leaves you open to issues further down the line if you have a disagreement over the works with employed tradesmen or you’d like a refund – because you have no legal protection for your money. Paying with a credit card, even if you pay it off immediately with cash, can ensure that you don’t get left in the lurch if something goes wrong.