Here, we look at how home improvement loans work and some things to consider.
You may consider a home improvement loan to help fund:
A home improvement loan allows you to borrow a fixed amount of money, which you pay back in monthly instalments, including interest, over a set period of time.
When you apply for a loan – either online, over the phone or in branch – you’ll be asked what you’re planning to use the money for. ‘Home improvements’ is one of the options.
At HSBC, you can borrow from £1,000 to £25,000, or up to £50,000 if you’re an HSBC Premier account holder. Repayments can be spread over:
Your monthly repayments will be fixed, which means the rate of interest you pay will stay the same over the period of the loan. This can make it easier to budget.
Keep in mind – the longer your loan term, the more interest you’ll pay overall. Our loans are also subject to status and eligibility criteria apply.
Unlike a home improvement loan, a home loan is a type of secured loan. You can borrow money against the equity in your home and use it for home improvements.
Your property acts as ‘security’ for the lender, which means they can repossess and sell the property if you were unable to meet the loan repayments. For this reason, interest rates are typically lower for secured loans, and you could potentially borrow more.
You can take a home loan in addition to your existing mortgage (if you have one) or it can be your only form of secured borrowing.
Keep in mind – if you have an existing mortgage, and take out a home loan, your monthly payments may increase. If property prices fall, you could also end up owing more than your home is worth (known as negative equity).
Explore: Borrowing more against your property
From modest home improvements to extensive building work, the cost will vary depending on what you’re looking to do. It’s important to compare quotes from reputable traders and suppliers to get the best value for money.
Consider how much you’ll need from start to finish. The price of materials can also change, as well as the time it takes – so you may need a contingency fund if the cost goes up during the project.
With any form of borrowing, you need to be able to pay it back, including any interest.
Creating a budget will give you an idea of how much you could afford to pay each month. Look at your income for the last three months and compare it to your spending over the same time.
If you find the cost of the loan is more than you can comfortably pay, you may want to rethink your plans. Perhaps you could renovate in stages or wait until you can save more.
If you can, try and use savings to help fund your home improvements. That way, you can reduce the amount you have to borrow, and how much interest you’ll pay.
It’s important to keep enough in savings to cover any unexpected costs, though.
Some improvements will increase your home’s potential and add value to your property, but not all will. For example, a loft conversion could add value by giving you extra living space, whereas some DIY projects may not.
It’s important to plan carefully and fund home improvements in the most affordable way. You want to make sure any expensive work done adds lasting value.
Think carefully before securing other debts against your home.
Your property may be repossessed if you don’t keep up repayments on your mortgage.
