5 min read

How to fund home improvements and adaptations

There are several good reasons to upgrade your home, including making room for family members, ensuring the home is  suitable for elderly or disabled residents and to increase its value.

Whether it’s upgraded bathrooms, a new kitchen or energy saving upgrades like double glazing, solar panels or boiler replacement, research has found upgraded properties increase property value by £40,000 on average.

A bearded workman smiles at the camera while using his drill on a piece of decking. In the background, another workman carries a piece of wood across the garden.

How to fund home improvements

Whether you’re planning on getting stuck in yourself or calling in the experts, you need to work out the best way to pay for such improvements.

Grants

Home improvement could be easier than you think, as there is funding available for specific types of home improvement from several companies and organisations.

For example, you may be able to get a grant to help with the cost of replacing a boiler if you fulfil certain criteria. E.on, EDF and Npower currently have new boiler grants available for customers receiving particular benefits.

For elderly or disabled people and those on a low income, the Home Improvement Agency can help repair, improve, maintain or adapt a home. Find your local Home Improvement Agency on the Foundations website.

Disabled people can apply for a Disabled Facilities Grant to help towards the cost of adapting a home by contacting their local council’s housing or environmental health department.

Savings

Using your savings is usually be the best option to fund home improvements. Stella, a teacher from Manchester, used savings and a work bonus to fund £20,000 of improvements to her family home. “We knocked three rooms across the back of the house into one large kitchen, we converted a fifth bedroom into a split office and utility, and we had bifold windows fitted. We moved house in November and my husband gets hisbonus in October so we just put it straight in to his account ready for the work to start.”

Gayle, a designer from West Sussex, carried out a complete renovation of her home using money she received as an inheritance. She said, “We wanted to make our home open plan and to our taste. We spent £60,000 including building work, knocking through three rooms, a new bathroom, a new kitchen, garden landscaping, decoration, damp and chimney work.”

Loans and credit cards

If you are undertaking modest home improvements, you may be able to pay for them using a 0% purchase deal on a credit card. Usually this gives you a fixed period over which to repay the balance without paying any interest, but you can only borrow up to whatever credit limit you have.

For most people, this means a credit card won’t be enough to cover substantial renovations. There are also risks to think about. When the deal ends after the fixed period, you would need to either consider switching to another 0% deal or else clear the balance to avoid paying interest on the outstanding amount. If you miss a payment, even accidentally, you could lose your 0% deal. And you’ll need to keep in mind that, depending on the balance and APR, the repayment cost could be high.

Loans are another option, but only if you don’t need a very large pot of cash to complete the works you want, and you need to find a loan with a good interest rate.

Both of these options require careful planning to make sure you have a strategy to pay off the balance within a set timeframe.

Remortgage

Another option is to remortgage to pay for home improvements. If you have some equity in your home, meaning you owe less on the mortgage than the house is worth, you could consider remortgaging. This involves borrowing money against your house by switching to a new, larger mortgage.

If you switch to a new provider, you might be able to get a better deal on the rate, but you should take into account any early repayment or other fees. Work out how much the new borrowing will actually cost you over the term of your mortgage. Because you are borrowing the money over a long period, it can end up being expensive.

You should also think about what will happen to your monthly repayments if interest rates rise. It makes sense to take financial advice before you even think about remortgaging, because it’s not suitable for everyone.

Nick, a communications consultant from London, remortgaged to cover the £50,000 cost of converting a loft into a third bedroom. He said: “We decided to remortgage to cover the cost of the renovations because we could get a cheap five-year fix and we wanted the flexibility to pay the money back over a longer period.”

Equity release

One way to release equity from your home is with a lifetime mortgage. It works by allowing you to take out a loan secured against your property. You can choose to make interest repayments each month or as and when you wish (called an interest-paying mortgage) or not at all (called an interest roll-up mortgage).

The loan capital and the interest you owe can be repaid when your house is sold after you die or go into long-term care. The advantage of this is that you can release some of the wealth tied up in your property without having to sell up and move out. However, it should be used with caution because it can be an expensive way of borrowing and it will reduce the value of the inheritance you can leave to your family.

The majority of providers will guarantee you will not go into negative equity or have to pay back more than the value of your home. Using equity release can also affect your right to claim certain state benefits. You should always take financial advice if you are considering releasing equity from your home. Find out more about equity release and OneFamily lifetime mortgages here.