With so many options available to homeowners looking to raise money for their home improvements, the only issue is choosing the right deal and terms for you. Below explains some of the differences when considering raising funds for your home improvement project.

Unsecured Loans & Credit Cards

When considering these options, it does allow you to apply for funds quickly but there is always a downside, this option can prove to be expensive and it all depends on your credit history, employment status and income.

For being able to receive funds quickly although there are some great deals available, an unsecured loan and credit cards generally charge a higher interest rate that a mortgage or a secured loan. The reason for this is due to the lender taking on more risk.

The maximum period on an unsecured loan is normally 5 years (60 months). This does mean that your monthly payment could be higher compared to a secured loan or mortgage where you can spread your payments over a longer period of time, but it does really depend on whether this is suited to you or not. Maybe you are in a position to pay the money back over a shorter period of time, but what if this wasn’t the case? If you prefer to pay the amount back over a longer period of time then there are other options available.

Lenders that offer unsecured loans tend to have little or no tolerance at all when it comes to late payment. They are quick to take legal action to recover the missed payments but also they look to recover the full value of the loan along with legal costs incurred with interest.

There are some loan providers that are willing to advance the funding you seek especially if you are not successful in getting more money from your bank or building society. Some deals are tailored to home improvements which means that money is released in stages throughout the term of the home improvement project.

With many loan arrangements it’s best to ensure that you only borrow the money you need for your home improvement.

Secured Loans

As per the name of this loan arrangement, it means that the loan is secured against your home, as a second charge behind your mortgage lender.

The benefit of this type of loan is that it does give you flexibility on the repayment term, because the lend has an interest in your property it does mean that they can offer a lower rate of interest compared to other loan arrangements.

With this arrangement it means that you have the option of spreading your payments over a period of 5-25 years, in some case it can be more. This means lower monthly payments and the amount you can borrow is higher, lenders can advance up to £250,000, sometime more.

Because secured loans gives the lender a degree of safety they will allow some leeway as they usually take more of a long term view knowing the property is there are collateral. It is also not necessary to own your house outright, just sufficient equity to cover the amount borrowed, although some lenders advance against negative equity.

Your credit history, employment status or income are not important factors when being considered for this type of loan, it’s all down to the available equity in the property and your ability to keep up the repayments.

There are hundreds of secured loan products available, catering for people from all walks of life and all situations, including interest only.

Remortgages

Remortgaging your home allows you to pay off your mortgage along with paying back the additional funds borrowed. The main advantage with this form of finance is you have just one single monthly payment to make, and with competitive interest rates, you could even be better off each month.

Many homeowners take this option as it is a great way to raise additional cash for home improvements, debt consolidation or for any other reason. A remortgage is considered by many ‘experts’ as the cheapest and smartest way for homeowners to raise money.

There are literally thousands of mortgage products on the market to cater for all circumstances, making it a ‘buyers market’. There are many options available, choose from a tracker, interest only, variable rate, fixed rate, discounted, capped, cash back and so on, but be sure to take advice from a regulated mortgage advisor before making any decisions.

One of the major benefits of a remortgage is the available equity in your property and your ability to meet the repayments.

If you wish to receive information on any home improvement along with information on financing it, then please click here to visit our request form.