How to get a home improvement loan for a home office | moneyfacts.co.uk

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Michelle Monck

Michelle Monck

Consumer Finance Expert
Published: 12/01/2021

More of us are working from home now due to Coronavirus restrictions and the indications from many employers is that home working is very much here to stay. As a result, many people are now considering transforming a spare room into an office, adding an extension onto their house or a installing a studio in their garden. We explore the different ways to finance home improvements and the options can depend upon how much you want to spend and your credit history and score.

A 0% credit card for small home improvements

A credit card can be a suitable option for those with a smaller budget of a few hundred pounds and some credit cards offer 0% interest rates for purchases for a set period. Right now, the longest 0% promotional period on purchases with a credit card is from Santander. The Spanish bank’s All in One Credit Card offers 0% on purchases for 26 months with an APR of 21.7%. This credit card does have a monthly fee of £3. The longest zero interest rate for purchases with a credit card without a monthly fee is from TSB; its Platinum Purchase Card offers 0% for 20 months on all purchases. The APR is also lower at 19.9%.

An unsecured loan for home improvement projects of less than £10,000

For home improvements of less than £10,000 an unsecured loan might be considered. Currently the best rate for a £5,000 loan over three years is 3.40% APR from Tesco Bank. Remember this is a representative rate, meaning that at least 51% of those taking out this loan are offered this rate. Your own credit score and history will affect the rate you are offered.

A remortgage or secured loan for larger extensions and new buildings

Significant home improvements such as adding an extension or building a studio in the garden could potentially need a budget of tens of thousands of pounds. If you are a homeowner, then a remortgage or a secured loan could be used to finance this type of project. Choosing between a remortgage or a secured loan will be a decision based on the cost of the finance, any fees involved and the speed at which the borrower needs the money.


Those needing to remortgage could choose to add the cost of their home improvements to their mortgage balance. If a borrower is now at the point where they are due to remortgage, they should check the early repayment charges involved of ending their mortgage deal early in order to borrow more. This can be as much as 5% of the outstanding mortgage balance.


The stamp duty holiday has also boosted the housing market and has increased demand for mortgages. This means that some mortgages are often taking many months to reach completion. If the home improvement project is urgent then a secured loan can provide funds in weeks and sometimes in days. Borrowers need to consider the interest costs when deciding between a secured loan or a remortgage. Currently the best secured loan rate is from Paragon Personal Finance at 3.80% for a £25,000 loan over a minimum 5 year term plus any fees to have this organised by a loans broker. This is compared to the best five-year fixed rate remortgage at 1.29% fixed until 1 May 2016 from Virgin Money. This mortgage rate increases to 4.34% variable after the fixed term and has a fee of £1,495.


Borrowers can opt for a secured loan over a short period and then repay this when they are next due to remortgage. Borrowers must remember that with mortgages and secured loans these are secured against your property and may therefore be repossessed if they do not keep up repayments.

Speak to our experts

Speak to our preferred loans broker and find out how they could help you with a secured loan or to our preferred mortgage broker if you want to explore a remortgage.

Remember to tell your insurer if your property has changed

Those changing the use of rooms, purchasing new items or extending their property should also inform their home insurer. This is because these additions may also lead to increasing the amount of cover required for buildings and contents. Being under insured can lead to an insurer reducing the size of any potential claim made and not informing them of changes may lead to your policy being deemed invalid.


Compare five star-rated insurance policies – Moneyfacts reviews the home insurance policies of many insurers each year and independently rates these for their features and benefits to consumers.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfacts.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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