Which Home Improvement Loan Should I Choose?

Home improvement can be a great way to add value to your property. Most people are planning to prepone their projects to cope up with the third lockdown. But how to choose the best way to finance such an expense? Read on to find out ⭐Home Improvement ⭐Money Management ⭐COVID-19

Home improvement can help you make the best of your home. From quirking up your garden by adding an outdoor bar, re-doing your kitchen or bathrooms, to converting your attic – the list is endless. Home improvement can be a great way to increase the value of your property. At the same time, working on a home improvement project can therapeutic for some.

Home improvement is, however, a costly affair. Financing your home improvement project out of your pocket may not be the smartest move. Home improvement loans can help you fund the upgrades. Plus, you’ll be able to spread the cost across a certain period, making repayments more affordable.

This article explores ways in which you can finance your home improvement project. Read on to find out more about home improvement during COVID-19.

Home improvement during COVID-19 

Research reveals that over one-fifth of homeowners will continue to carry out their home improvement projects. This comes from the third lockdown announced in the UK, owing to the second wave of COVID-19. Over 18% of homeowners prioritize their home improvement projects.

The consensus is that people want to incorporate elements in their homes to help them cope with the third lockdown. Furthermore, we embraced some newfound habits and inhabited a different lifestyle during the initial two lockdowns – DIY gardening, home office projects, etc. The pandemic has transformed the way we live and work, and the best we can do is to accustom ourselves to bear these circumstances. Home improvement will help us accommodate these needs. So long as you adhere to the COVID-19 guidelines, your home improvement project will sail smoothly.

How to finance your home improvement project 

Home improvement projects can undoubtedly break the bank if you decide to fund them with your savings. Besides, if your family grew during the pandemic, it’s not wise to tap into your savings. A loan can take some burden off your shoulders. Here are some ways to finance your home improvement project:

• Home improvement loan: A home improvement loan is essentially an unsecured personal loan to help you finance your renovation projects. An upside to home improvement loans is that they don’t require collateral security. The interest rate, however, may be comparatively high. Your creditworthiness and affordability will dictate your chances of success for this loan. You may qualify for competitive rates with a good credit score. Home improvement loans can be a great way to finance minor changes since you may not borrow substantially. LoanTube can help you find your ideal home improvement loan at the click of a button. Compare rate-locked loans with APRs from multiple lenders to find the most suitable option.

• Home equity loan: A home equity loan can help you leverage your equity in a property. It is a secured loan that allows you to borrow against your home equity. Home equity loans can help you finance significant changes in your property since you can borrow a relatively large amount on lower interest rates. Although it may jeopardize your property – the lender can repossess your home to recover their loss in the event of a default. So weigh the pros and cons of this option before making the final call.

• HELOC: HELOC refers to the Home Equity Line of Credit. HELOC, too, is a form of secured credit that allows you to leverage your property against credit. HELOC is a revolving credit wherein a lender sets a borrowing limit based on your equity. You can borrow and use this money at your discretion. You’ll only have to pay interest for the money that you use. Typically, people looking to borrow a large amount at low-interest rates can consider HELOC. All those expensive ventures you planned for your home can be funded using HELOC. However, HELOC, too, poses a threat to your property since the lender can repossess your property to recuperate their loss if you default.

• Mortgage refinance: Mortgage refinancing is the method of replacing your existing mortgage with a new one. All your repayments help in building your credit score. If you’ve sincerely been paying down your mortgage, you are likely to qualify for a new one with competitive rates. You can use refinancing to accommodate improvement costs by borrowing more than your current outstanding balance.

• Green Homes Grant scheme: The UK government rolled out the Green Homes Grant scheme for homeowners and landlords in England. It is a financial voucher that homeowners can avail to make energy-efficient improvements in their property. As per the project, the voucher will cover two-thirds of the cost of energy efficiency saving work, capped at £5,000. For benefit claimants with low income, the government may cover up to £10000. You must redeem the voucher and complete the upgrade by 31 March 2022. Check your eligibility by completing this Simple Energy Advice Questionnaire.

•  Credit card: Credit cards can help you fund all your urgent cash needs. If you’re planning to get a credit card, find options with promotional periods of 0% interest. You won’t have to pay any interest on your balance if you successfully repay it within this promotional period. Credit cards levy high-interest rates, which kick in as soon as the promotional period expires.

What type of home improvement loan is best for me?

Here are some questions to help you find your ideal home improvement loan:

Do you have some equity in the property?

If you’re planning to carry out a largescale home improvement project, chances are you’ll need more money. Having equity in your home can help avail a home equity loan, mortgage refinance, or HELOC. If you only want to minor changes, there’s no point in putting up collateral. A home improvement loan can cover such costs.

Are you buying a house that’ll need fixing?

Fixing up an entire house can cost you extra. If it’s a new property that you know will need fixing, try getting a mortgage that covers both. Not only is it less complicated, but it’ll also save you on closing costs.

How urgently do you need the funds?

Emergencies require your urgent attention. If it’s a pressing but minor issue – such as plumbing, you probably won’t need a lot of money. In such cases, a personal loan or a credit card may come in handy.

Conclusion

Regardless of the form of credit you choose, it is crucial to prioritize your repayments to minimize the chances of a default.

When you borrow a lump sum through HELOC, home equity loan, or mortgage refinance, you are free to use the extra cash as per your convenience. You may use it to buy a new vehicle or fund a vacation abroad. But think twice before spending it on depreciating assets. Property appreciates, and upgrades increase the value of your property.