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How To Finance Your Extension or Renovation

Posted by: aliadmin on 25/02/2021

It is easy to find an architect for your extension, conversion, or renovation on Archilink. When it comes to financing these projects it can be a confusing process so we have put together some information to help you decide which is the best route for you.

To help you assess your options, our team have put together this advice, so you know what are the pros and cons of each option. There are three main ways to fund your project:

1) Savings
2) An unsecured personal loan
3) Remortgaging or using a further advance

Savings provide the only 0% interest way of funding your project. Although, Putting together a large sum of money can take time. If it is not possible to fund your project through personal savings, you may wish to explore an unsecured personal loan or remortgaging or using a further advance on your existing mortgage. Figuring which will be the right one for you will depend on your own financial circumstances, the state of the finance market, where you’re at in your mortgage.

Using an unsecured personal loan

Unsecured personal loans generally work best for smaller projects. You don’t want to be taking on long-term debt of more than £30,000 with this route, otherwise you could face some pretty scary repayment plans.

To get the best deal, you’ll not only need to consider what rates are on offer but also the state of your credit rating. If both seem favourable, you might find this a good option for your home, as typically, there are no arrangement or set-up fees. You’ll also have more short-term options when it comes to your repayments than you would with a remortgage – ideal for anyone looking to quickly pay off the debt. On most of these loans, you can either opt for one, three, or five years.

Pros: You can choose a short-term plan to pay off your debt and won’t have to cover the cost of set-up fees.

Cons: If you have a bad credit history or the market is struggling, it’ll be difficult to secure a good rate. The interest rates will also be unfavourable and limited for projects above £30,000. As this is short term lending, typically over 2-5 years, the repayment amounts can be quite high.

Remortgaging or using a further advance

For anyone taking on a major project costing more than £30,000, then it’s recommended that you look for a loan that uses the existing equity in your house to secure the funds. This could either be through a remortgage of your property or what’s known as a ‘further advance’.

By using the equity in your home, you’ll be able to secure a low-interest rate loan that tacks onto your existing monthly payments.

Pros: For big projects, using the equity in your home can often provide the best interest rates long-term. If done correctly, you’ll also be able to use the value your project creates to get the best deal.

Cons: Depending on when you’re looking to remortgage, you might the deals on offer significantly less favourable than your existing mortgage. Remortgaging might also not be an option for smaller works.

How Archilink can help…

The best way to work out your options is to talk to an expert.

We have partnered with a finance firm that has experts in residential developments ready to help you with your journey, post a project today and a member of our team will contact you to discuss your project further.

Post a Project