Home improvement loan to improve or move?  

In this article, we look at home improvement loans, how they can be used, and other key considerations. 

As you live in your home over an extended period, there always comes a time when your living needs change from when you moved in. Whether that’s a growing family meaning an extra bedroom. You’re spending more time in the home, so you want to host friends and have an improved relaxation space. Or, a shift in working patterns means you need to carve out a suitable place for long-term home working. 

When this new requirement for your day-to-day living within your home comes along, you’re presented with a decision… Do you stay put and improve your current home or look for a new property that may already suit you?  

This can often be incredibly challenging as you battle with weighing up the potential upheaval of moving away from your home, and the allure of starting fresh in a new property. Before you head on to Zoopla and call your local estate agent, consider the implications if you do decide to sell up.  

Firstly, you’re going to need to go through the rollercoaster ride of purchasing your next property in a chain and then consider the costs of both selling and buying property. To start with, there’s Stamp Duty Land Tax, along with legal fees for both buying and selling, estate agency fees, moving fees, and more. 

There are also intangibles to consider, such as proximity to family and friends, or if you’re in an area with excellent schools that your children are already attending, you may reduce your pool of potential properties if you’re hoping to stay local. Plus, we tend to be quite a sentimental bunch, so even things such as the history and memories built up within the home can all count in favour of choosing to improve your property rather than sell. 

Home improvement loans explained

Once you and your family have committed to remaining at your current property, you can then begin to flesh out just what you are looking to achieve, but it’s important to exercise caution and plan methodically. 

If you’re looking to make home improvements, you may find yourself scouring the net for ideas on how you’d like your finished home to look, with colour swatches and layouts aplenty. Reality often sets in when you have priced up the project and you may need to raise more than you initially had thought to turn those dreams into a reality. 

If you’ve got cash savings that of course is likely to be your number one option, but if you are a little stretched or in need of tens of thousands, you may find that you need to borrow the money needed. 

A home improvement loan will do just that, and in this article, we’ll cover the options available to you in more detail to help you in the information-gathering process.  

A loan for the purpose of home improvements can be obtained through a variety of finance products, so you need to know what option could best suit your unique situation and project. 

Remortgage 

If you’re an existing homeowner with a mortgage, you could look to raise further funds by remortgaging. This can be particularly advantageous for you if you’re due to change to a variable rate from your current fixed rate, or if you’re already on a variable rate as you can fix your rate for the next two or five years.  

Plus, you could look to take advantage of the increased value of your home, by utilising the equity that you’ve built up over the years to borrow more. However, it’s important to remember that as you borrow more your Loan to Value will increase, which could mean that your rate increases.  

On the other hand, if you are still within your fixed-rate period, a remortgage for home improvements may not be suitable. You should seek out your current agreement with your lender to understand if you would need to pay an Early Repayment Penalty for remortgaging within your fixed term period. Also, you may lose your existing rate which may be lower than what is available right now as we are currently in a rising rate environment due to the increase in interest rates from the Bank of England.  

Unsecured loan 

An unsecured loan could be a suitable option for your home improvements if they are not significant renovations. When borrowing on an unsecured basis, typically the maximum you could borrow is £25,000 so this could be useful if you’re improving one area of your property or if you’re not looking for the best finish and workmanship.  

A key benefit of borrowing unsecured is that the loan is not secured against your property so if you default, your property won’t be at risk of being repossessed. An unsecured loan for home improvements may mean you repay quicker as the amount you’re borrowing will be less than a remortgage or homeowner loan.  

One key disadvantage of using an unsecured loan is that you may pay a high-interest rate on the borrowing. This is simply a consequence of not securing your borrowing against an asset, in this case your property. A prospective lender evaluating your application will therefore be taking a greater risk than a lender that secures the loan against your property. If you have excellent credit, you could be eligible for the advertised rate from the lender, but this is not always the case. 

Credit card 

Depending on the size of your home improvement project, a credit card may be helpful to fund certain elements of it, but this is extremely limited compared to the other finance options in this article.  

If you have an excellent credit profile, you may be eligible for a 0% credit card, which could enable you to borrow interest-free. However, it’s important that you clear the balance on your 0% card ahead of the interest-free period expiring as a credit card will then typically have an interest rate of 15-19%. 

Homeowner loan 

A homeowner loan for home improvements is another option that requires your consideration. You’re likely to be able to borrow more than you would be able to on an unsecured basis as the loan is secured against your property. It is important to remember that with a secured homeowner loan, you could lose your property if you are unable to make your repayments. With a Pepper Money homeowner loan, you could borrow from as little as £5,000 up to £1million. 

A quick way to find out what could borrow with Pepper Money. is to take your current property value and subtract your current mortgage balance. Unlike some lenders, we can consider lending 100% of the total equity you have built up against your home. 

For example: 

Property value is £500,000 with an existing mortgage balance of £120,000 would give a maximum borrowing of £380,000 for home improvements, subject to customer circumstances. 

Whilst you can typically borrow more with a homeowner loan, it’s important to consider that you may be making your repayments over a longer period, thus incurring more interest. As mentioned, a little earlier, a homeowner loan could be particularly beneficial for you if you’re currently on a fixed-term mortgage and have a rate that you’d like to keep.  

If you have existing unsecured borrowing such as credit cards or personal loans, you may wish to consolidate those outstanding balances into one repayment as part of your home improvement loan total borrowing. This is something that is quite common for our homeowner loan customers, who use this ability to borrow more to do improve their home and consolidate their debts. Before doing so, it’s important that you get financial advice to ensure it’s right for your circumstances. 

Plus, when making improvements to your home, you may want to consider the potential value that this could add to your property’s price, and thus you could then look to raise further capital when remortgaging in the future to clear your homeowner loan. 

Ready to get your home improvement project started? 

If you’re ready to take the plunge to make your home improvement blueprints a reality and would like assistance with funding your project, Pepper Money could help.  

If you want to know how much you could borrow with a home improvement loan, give our homeowner loan calculator a try. 

Once you’ve completed a quick calculation, you’ll be presented with the opportunity to request a call-back from one of our UK-based, fully qualified financial advisers for a no-obligation call.