How to finance your home renovation

Planning a new renovation? We explore six main financing options – from home equity loans to retailer finance plans.

To help you secure your funds and embark on your renovation project with peace of mind, we’ve asked experts for top tips and advice. Let’s begin…

How to finance your home renovation

To begin financing your renovation or extension, you need to start with two things. First, take a look at your bank balance. Second, figure out how much your project will cost. This initial part is an afternoon’s work, while the second can take weeks to research and plan.

Begin by taking a cold, hard look at your bank account; take stock of income and outgoings, look at savings and investigate your credit score. Next, you must figure out how much the renovation will cost. You need to collect quotes from multiple contractors and retailers. Then, research raw materials and products and look at other possible expenditures such as permits, design and legal fees.

Once you have worked out your budget, you can then begin gathering quotes from retailers and building contractors. Banks and other lenders may well want to see quotes and plans before they consider funding your project. It is best to be diligent, do your research and understand that it is not always straightforward. 

“When planning the finances for home renovations, homeowners should start by seeking advice from a professional. It could be an architect or contractor, who can advise where to best allocate money,” advises Tabitha Cumming, property expert from The Lease Extension Company. “You should be upfront with professionals about how much you have to spend, otherwise they cannot issue appropriate advice.”

finance your renovation: woman at table in kitchen planning
Look at your current finances, then determine the cost of your renovation.

What are the main ways of paying for a renovation?

Gary Hemming, owner of ABC Finance, has some answers: “Home equity loans and Home Equity Lines of Credit (HELOCs) enable homeowners to borrow against their property’s equity, often at lower interest rates. Personal loans are unsecured options with fixed interest rates, making budgeting more straightforward.

“For smaller projects, or when balances can be paid off quickly, credit cards can be used, though typically they carry higher interest rates. In some cases, government grants or incentives may be available for energy-efficient or
eco-friendly renovations, provided homeowners meet specific eligibility criteria.” You will need evidence of income and employment, plus your credit history when applying for renovation finances.

Speak with retailers about your project because many offer finance options. The options differ from brand to brand, with larger companies offering financing possibilities in-house. While independent retailers use third parties or banks. They will all expect a deposit of at least 10 per cent of the final price and will carry out a credit check.

Talking directly to your bank or mortgage provider about extensions and other projects is another option. Your plans will increase the value of your property, so you should be able to take out loans or remortgage your home, based on the amount your finished project will add to the property. Your bank or building society can advise you on home equity loans and other types of suitable financial planning.

Whichever direction you go in, it is good to feel secure about your plans. Large projects can take years to complete and even longer to pay off, be diligent before you start.

Woman working out her finances
How to finance home renovations? Take your time and diligently research all your different options.

What type of finance option is best?

  • Home equity loans You can borrow against the equity in your property – a method offering lower interest rates, which is secured by the home.
  • Unsecured personal loans These loans are taken out without putting down any collateral. They tend to be for smaller amounts because the lenders will look at your credit status and determine the best interest rate.
  • Credit cards Some homeowners resort to credit cards for minor renovation expenses, but it’s essential to be aware of high interest rates.
  • Renovation mortgages Mortgage products can help to finance projects by adding the costs to the mortgage.
  • Remortgaging The amount you can borrow depends on how much of your current mortgage remains, your credit score, and how much the renovations will increase the value of your property.
  • Retailer finance options These include interest-free credit and an option with interest payments via monthly billing.

Need more help with your project? Check out our complete guide on planning a budget

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