Loans for Home Improvement: Projects Worth Financing

Michelle Tuvey Michelle Tuvey | Loan Underwriter

UK homeowners have the benefit of being able to use the equity in their properties as a financing tool. The loans accessed through equity are known as secured loans, and there are two primary reasons borrowers tend to apply for them. The first is debt consolidation; the second is to make home improvements. Where the latter is concerned, there are some projects worth financing and others for which loans for home improvement are not appropriate.

Deciding whether to finance home improvements means looking at a couple of things:

  • whether the improvements are related to structural or mechanical issues; and
  • whether the homeowner is preparing to sell the property in the near future.

A proper assessment of both issues should make it clear if financing is a wise idea. When it is not, a property owner may have other options for raising the needed capital.

Structural and Mechanical Issues

Structural and mechanical issues are often safety issues as well. Structural issues relate to things such as the foundation and roof. There is generally little room for error when structural problems arise with a property. For example, a damaged foundation could gradually weaken and eventually fail if left unattended.

Mechanical issues are those that deal with things such as plumbing and electrical. Mechanical systems are those that make a modern house liveable. Although they are not necessarily as serious in terms of safety, a home with mechanical issues is one that will definitely be harder to sell.

In both cases, issues need to be addressed as quickly as possible. If a homeowner does not have another means of financing structural or mechanical home improvements, a secured loan could prove very valuable. Lenders tend not to be too concerned making such loans inasmuch as the homeowner is working to improve the property.

Future Sale of the Property

Loans for home improvement may not be a wise idea if the purpose is to prepare a house for future sale. Despite what many people mistakenly believe, not every home improvement actually adds value to a property. Some home improvements can actually hurt. It is entirely possible to spend a tremendous amount of money only to realise no benefit when it comes time to sell.

Experts generally agree that the most important home improvements a property owner can make for future sale are updating the kitchen and bathroom. This assumes that a home has no structural or mechanical issues.

Kitchens and bathrooms are considered among the most important rooms in a home. Buyers are looking for updated rooms when they purchase, and they are willing to pay handsomely for them. If a home improvement loan of £10,000 can add £15,000+ to the value of a property, borrowing is absolutely worth it.

Home Improvements for the Homeowner

There are times when property owners seek out loans for home improvement despite having no structural or mechanical issues and no desire to sell their properties. They want to make home improvements solely for their own comfort and enjoyment. In such a case, financing is then a matter of personal preference.

A home improvement loan can make it possible for a property owner to do some incredible things. For example, imagine a property with equity of £100,000. A significant loan for home improvement would allow the property owner to do something such as adding a conservatory. Doing so would increase his or her enjoyment of the property.

Loans for home improvement are available to anyone who has equity in a property. Just remember, some projects are worth financing and others are not.

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