Home improvement projects can transform your property, making it a more comfortable and valuable space. One way to fund such projects is through secured home improvement loans, which allow you to borrow a substantial sum using your home as collateral. Whether your home needs some work or it’s simply time for renovation and redesign, there’s plenty to consider when financing the changes. Here, we’re exploring how secured home improvement loans work, the benefits they offer, and what to consider when applying. 

What is a secured home improvement loan? 

When planning large home improvements, you need some good, clear finance planning in place to make these happen. A secured home improvement loan is a practical option, enabling you to borrow a large amount by using your home as security. This kind of loan typically comes with lower interest rates and higher borrowing limits, than unsecured options because it’s backed by the value of your property 

How do secured home improvement loans work? 

Secured loans are based on the equity you hold in your home. This is the portion of your home’s value that you actually own, having paid off part of your mortgage. When you apply for a secured loan, lenders will assess your home’s value and your remaining mortgage to determine how much they can lend you. Because the loan is secured against your property, you may be able to borrow more at a lower interest rate, than other available lending options. But be mindful that if repayments aren’t met your home could be at risk 

What can secured home improvement loans be used for? 

A secured home improvement loan provides flexibility in terms of what it can fund. Whether you plan to stay in your home or are considering selling value-adding home improvements are a great long-term investment. Your loan can cover various projects: 

  • Renovations and extensions: For adding rooms, converting lofts or modernising your living spaces. 
  • Energy-efficiency improvements: Investing in double glazing, insulation or renewable energy solutions like solar panels. 
  • Essential repairs: Covering structural issues such as roof repairs or plumbing upgrades 

How much can I borrow? 

The amount you can borrow with a secured home improvement loan depends on how much equity you have in your property and your credit history. These loans often allow homeowners to borrow anywhere from £10,000 to £1m or more. It’s a good idea to use a homeowner loan calculator to get an estimate based on your specific situation. 

What are the pros and cons of secured home improvement loans? 

Secured loans have distinct advantages that make them a preferred option for many homeowners. However, you should weigh these benefits up against potential drawbacks before making any final decisions. 

Pros: 

  • Lower interest rates: Secured loans usually come with lower interest rates than unsecured options 
  • Higher borrowing limits: You can potentially borrow significantly larger sums, which is ideal for extensive renovations or high-cost projects 
  • Flexible repayment terms: These loans often allow repayment over a longer period, reducing your monthly repayment amounts.  
  • Increase home value: By using a secured loan for  home improvements, you may significantly increase your property’s value over time, recouping the investment when it’s time to sell 

Cons: 

  • Risk to your home: The main risk is that if you fail to make repayments, the lender could repossess your home to cover the debt. 
  • Fees: Some secured loans come with additional fees, such as arrangement, valuation or early repayment charges. 
  • Longer terms could mean you repay more: By extending the term of the loan to reduce your monthly repayments, you could repay more interest over the full term compared to unsecured loans with shorter terms. 

While the risk to your property is a significant consideration, these loans can only be arranged through an advised process which should ensure that you’re able to afford the repayments.  

Other things to consider for secured home improvement loans 

Before committing to a secured home improvement loan, there are several factors to keep in mind. Each of these can affect the terms you’re offered and your ability to repay the loan: 

Interest rate 

Interest rates for secured loans can vary depending on your lender, credit score and loan amount. Fixed-rate loans offer predictability with set monthly payments, while variable-rate loans can fluctuate with the Bank of England base rate, potentially lowering or increasing over time. Pepper Money offers both fixed-rate and variable-rate loans and you’ll have the chance to discuss the best option for your circumstances.  

Credit rating 

Your credit rating is a critical factor in determining both your eligibility for a loan and the interest rate you’ll be offered. A good credit score can secure you a better deal, while a lower score may result in higher interest rates or limited borrowing options. 

The amount you’re borrowing 

It’s important to carefully consider the amount you want to borrow. Although secured loans allow for larger sums, only borrow what you need to avoid taking on unnecessary debt. 

Loan duration 

The term of the loan affects both the total interest you’ll pay and the size of your monthly payments. A longer-term lowers monthly repayments but more interest overall, while a shorter term will increase your monthly payments but reduce the total cost of the loan. 

What are my other options for home improvement loans? 

If a secured loan doesn’t fit your needs or you’re looking for an alternative, an unsecured home improvement loan might be another option. Unsecured loans don’t require collateral, meaning your home isn’t at immediate risk if you can’t repay. However, defaulting on repayments will have a big knock-on effect when it comes to further borrowing, including remortgaging. However, they typically offer smaller amounts up to £25,000 and come with higher interest rates. Additionally, these loans have shorter repayment periods, meaning you’ll need to pay them off more quickly. 

For a tailored solution, consider speaking to a homeowner loan broker who can help you explore both secured and unsecured options that best suit your financial circumstances and home improvement goals. 

Ready to improve your home with confidence? 

At Pepper Money, we know home improvements can be both exciting and challenging, especially when it comes to financing. A secured home improvement loan can give you the flexibility to tackle larger projects, like extensions or essential repairs, with lower interest rates and higher borrowing potential. 

By borrowing against the value of your home, you can create the space you’ve always wanted while potentially adding value to your property. Whether you’re ready to start or just exploring your options, our broker partners are here to guide you every step of the way. 

With flexible repayment terms and expert support, Pepper Money is here to help you make your home improvement plans a reality.