With each new year comes inspiration to start considering how you can improve your home. Most of us have clear ideas about what we’d like whether it be a new kitchen, an extra bedroom, or maybe a loft conversion. The main obstacle, however, is deciding how to finance the project. There are several options available, each with their own pros and cons. Here’s a breakdown of your options in the current market.
If you don’t own the property outright and have no savings or other assets, you’ll have to take out a personal loan to pay for the deposit. This is considered the most expensive way to borrow, so ensure that your mortgage lender offers the highest possible advance to minimise the interest payments you’ll have to pay. The amount you can borrow is typically calculated by your income, including any savings you have. If you’re self-employed, you may find it difficult to borrow in the current climate as lenders see your position as more of a risk. Consider looking for a broker who can act as the middleman and find you the best deal.
Bridging loans are short-term finding solutions designed to help people complete the purchase of a new property before selling your existing home. This gives you access to money at a high-interest rate quickly, and can be very useful for landlords or property developers who need to mortgage a property. If you have sufficient equity in your current home to fund the renovation, including the purchase, this is one of your options. It will be easier to arrange than a re-mortgage, even if you’re working on a strict budget. However, it will most likely cost more than remortgaging so you should make sure that the deal is financially viable.
Finally, if you’re fortunate enough to own your own home or another property, the most efficient way of borrowing money would be to re-mortgage. You should check the value of your property beforehand, as it may have increased in value since you last checked. The higher the property value in relation to the mortgage, the more deals may be available to you. Saffron Building Society are currently offering £800 in cashback as well as no arrangement fee. It’s important to take into account all of the fees associated with any deal as well as any charges and penalties you could receive for repaying the advance if you reduce the loan or decide to sell the property early.