The benefits of home improvements & how to fund them
At Lending Works, one constant since we launched in January 2014 has been that home improvement loans have been one of the chief loan purposes among our borrowers. In fact, more than one in six of those approved for loans use the money for home improvements, and this trend is gradually increasing given that, of the near £5million which has been borrowed for this purpose, more than £3million has been in the last 12 months alone.
This isn’t necessarily a surprise, given that recent surveys suggest Brits are increasingly favouring home improving over moving; allowing us to infer that many believe such enhancements add significant value in the current housing market.
Therein lies a key difference in the psyche specific to home improvement loans too. Although it has dwindled in recent years, there remains something of a stigma in the eyes of a few relating to unsecured debt. We, of course, don’t see it that way, and every day we see people using personal loans for dynamic purposes that improve their lives – both in the short and long-term.
But that said, there is no doubt that taking out a loan for the purpose of enhancing your home is easier to reconcile with yourself. That’s because it will almost certainly add asset value to your property, and often such that the value added exceeds the cost of the loan itself, thus making it a worthwhile investment.
While having their applications underwritten, our DIY-savvy borrowers have informed us of all kinds of improvements that they plan to do. But among the most popular are kitchen and bathroom upgrades, extensions and loft conversions. Below we take a look at the merits of each as an investment…
- Kitchen enhancements: Kitchens are often the focal point of the house, and are arguably the key selling point. If you’re willing to go the whole hog and put in an entirely new kitchen, on average you’d be looking at an expenditure of roughly £8,000 to £10,000. However, a recent study by Move with Us suggests it can add as much as 6 per cent to your property value.
- A new bathroom: The same research by Move with Us found that an extra bathroom can jack up the value of your home by 5-6 per cent, although the costs can vary considerably depending on size, the types of tiles, fittings etc. You’d generally be looking to keep the total cost under £6,000 if you can though.
- Building extensions: Again, there is huge variation when it comes to extensions in terms of required outlay and return, and it depends what you want to do. Nevertheless, extensions have become all the more popular since the coalition government relaxed rules on planning restrictions in 2012 – something the current parliament has extended until 2020. It’s a given that you should ensure you are up to date with the planning permission regulations in your local area, but given that some reports suggest that extensions can add up to a quarter in value, it’s understandable why so many are taking the plunge.
- Loft conversion: Again, it is Move with Us who have it that the addition of an extra bedroom courtesy of a loft conversion adds 9 – 10 per cent to the value of your home on average, while a similar study by Nationwide found that increases of 20 per cent were commonplace. The great appeal of a loft conversion is that it doesn’t eat into existing living space, although it’s important to bear in mind restrictions relating to the staircase, ceiling height, insulation and fire safety. The price tag could also be anywhere between £15,000 to £30,000, but this one is proving to be a winner among Britons.
Financing home improvements
Clearly renovations are an expensive exercise, and more often than not such projects will require professional expertise; whom, by and large, are not noted for their charity when it comes to quotes for jobs. Should you not be able to fund it with savings, you do have multiple options. Credit cards are a convenient way of doing so, but can be a reckless choice given that APRs can be as high as 20 per cent, making it a costly form of debt.
Many home improvers are also inclined to remortgage their house in order to access the funds they need, and negotiating a good rate with a secured loan like this is certainly viable. But the process can be littered with paperwork, and will seldom be concluded in less than two weeks.
For us, the merits of unsecured home improvement loans speak for themselves. Rates are at record lows; as a homeowner you’ll be in the box seat to get a good deal (especially if you have a sound credit rating), and the process is quick and hassle free. What’s more, with a platform such as ours, you can settle your loan early at no extra cost, giving you the flexibility to make your debt work for you while the value of your home goes through the roof.
Get email updates for future blogs:
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
Related articles
With the retail sector enduring its fair share of challenges, companies are looking at new ways to attract customers, and drive conversion. In an overcrowded, dog-eat-dog marketplace, with behemoths such as Amazon flexing their muscle, it’s easier said than done.
On 4 June 2019, the Financial Conduct Authority (FCA) released its new regulatory framework for peer-to-peer lending (P2P); a Policy Statement known as PS19/14. As you might imagine, it's a document which, following a three-month consultation, is a hefty read of no fewer than 102 pages.
When it comes to investing, there are numerous questions that need to be asked, and lots of things which need to be properly understood before committing your hard-earned money
For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
The housing crisis in the UK is widely mentioned in the media, but the extent of it is often underestimated.
Featured
In a difficult climate, customer acquisition and lead generation present stern challenges for UK retailers, and a great deal of marketing spend invariably gets directed towards getting feet through the door.
There is a variety of literature and research illustrating the importance of building brand loyalty, albeit with some degree of variance.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The idea of peer-to-peer (P2P) lending is a simple one; you lend money to those who wish to borrow, with a view to receiving a great return for doing so.
The peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
Most popular
Numerous theories have emerged as to why the UK has endured such a severe productivity problem over the last decade. Growth in productivity of just 2 per cent during that period would typically have been accomplished within a single year prior to the financial crisis, and thus the 'productivity puzzle' continues to confound economists
In the aftermath of the financial crisis back in 2008/09, the Bank of England (BoE) had considerable headroom in terms of monetary policy, and - rightly - it made full use of it.
While it has held up better than expected over the past year or two, the UK economy and its macroeconomic indicators make for anaemic reading.
It’s no exaggeration to say that the global financial system as a whole is predicated on the ability to buy something now, and pay for it later. Barely anyone would be able to make a substantial purchase such as a house without an instrument like a mortgage.
The decline of cash in recent years has been there for all to see, and the sound of a tap of a card seems far more common these days than the shuffling of notes and coins. But even still, the numbers make for remarkable reading.
With political parties jostling for position amid a series of Elections, and the ongoing spectre of a snap General Election looming large, the Labour Party put forward a policy last week which has proved to be a talking point: increasing the minimum wage to £10 per hour, and extending this to workers under the age of 18.
