Renovating your home is a brilliant idea for a multitude of reasons. Firstly, it’s great for your mental health as you can improve your family home and feel more comfortable in it. Secondly, it’s a smart decision financially – on two accounts, actually.
A renovation can improve the value of your home, increasing its market value. If you intend to sell it in the future, this helps you get more money out of it. At the same time, renovating a home is more affordable than moving to a different one. Therefore, you save a lot of money if you want to make a little renovation instead of moving to a completely new property.
The benefits of this project are clear, but there’s one tiny little stumbling block in your way: the costs.
While it is cheaper to renovate than buy a new house, this can still be a sizable investment for you and your family. So, how can you afford this? Here are a few simple tips to help you out:
Figure out the costs and save money
The first tactic is to figure out how much the renovation will cost. Talk to different contractors about your renovation and receive as many quotes as possible. This lets you know the average price of this project. Take this figure, then add a little bit extra to it – maybe 10% or so, just to cover any additional costs that might come up during the process.
At this point, you have a concrete figure for your renovation project. For the sake of an example, let’s say this figure is £10,000. That’s a lot of money and you probably don’t have access to it right away. Now, you can start figuring out how to save up all of this cash.
Two things should be done:
- Work out a timescale
- Set a monthly budget
Working out a timescale means you look at how long you want to spend saving up for the renovation. Let’s say you want this to be done next year. Here, you take £10,000 and divide it by 12 months. It works out at around £833 per month for the whole year. Now, you have to look at your expenses and budget and figure out if it is possible for you to save this amount of money every month.
If it is, then start budgeting right away and you will hit your goal in a year’s time. If not, you have to slowly increase the timescale until you reach a monthly budget that’s actually feasible. So, yes, saving money isn’t ideal if you want to get the renovation done as quickly as possible. However, it is a good choice if you don’t really have a specific timescale in mind. If you’re happy to wait as long as possible, then you can easily save money each month and put it in a savings account to go towards this project in the future.
Apply for a loan
Your next option is to think about getting a loan to finance this home improvement project. There are plenty of personal loan options out there and home renovations are common reasons for people to borrow money. So, you shouldn’t struggle if you have a good credit score.
Ah, but there’s another potential hurdle. What happens if you have bad credit? We know that you can get payday loans for bad credit, but what about larger loans? Well…it is possible to obtain a loan when you have a bad credit score, though it will be very challenging.
Usually, you will encounter the following problems:
- Lenders don’t want to lend you the full amount you’re asking for, opting to give you a much smaller loan
- Lenders hike up the interest rate on your loan because they don’t trust that you can pay it back
- Lenders put more fees and rules on the loan, making it more expensive
Therefore, if you do want to get a loan, you should ensure you have a good credit score. Use any of the credit reference agencies in the UK to do this. See how you rate on their system – if you’re fair or good, then you should be fine. If you’re bad, you need to work on improving your credit score.
How do you do this? Here are some simple yet effective steps:
- Correct any incorrect information on your credit report
- Register to vote
- Pay your bills on time, every time
- Reduce the debt you have on your report
- Stop taking out lots of loans and reduce the credit you’re using
- Use a credit card to build your credit and prove that you’re able to repay borrowed money
- Check that you aren’t tied to someone else’s credit score, with their score affecting you negatively – this could be an ex-partner, for example
When you’ve done all of this, you should see improvements in your score, making it easier to get a loan for your renovation project.
Why is a loan a good option?
Some people don’t like the idea of loans as you hate the thought of owing people money. However, it can be a really good idea if you want to renovate your home.
Because it makes it so much easier to afford the project. Instead of paying the price in one go, you basically pay in instalments. Well, technically, the contractors get all of the money right away thanks to your loan. Then, you just repay the loan over time. It probably won’t take that long to repay either – you just make payments each month, and the lender agrees on the exact amount/schedule. They should put you on a repayment plan that’s easy to afford.
Thus, you don’t have to wait to save up for the home improvement; you can get it done ASAP. At the same time, you’re not departing with lots of money all in one go, making it easier for you to deal with the financial side of things.
Look at different financing options
The final tip is to look at different ways of financing the renovation. Here, you will have to contact the contractors themselves. Some companies will appreciate that spending a lot of money in one go isn’t a viable option for some households. Instead, they give you some options to finance the project.
Yes, one of these options could be a loan through the contractor themselves. But, you do have other finance options as well. One of the most popular is to split the cost of the project up into manageable chunks. Instead of spending all that money in one go, you pay for a third of it right away, then another third in a few months before paying the final third a few months later.
Why is financing a good idea?
A finance option like this can be a good idea for some households. If you can afford to make the big payments in instalments, then you should consider it. Compared to a loan, you won’t have to deal with things like interest rates or constantly monthly payments. Instead, you pay the initial chunk, then you can save money and get ready for the next couple of instalments.
Theoretically, it should cost less because of the lack of interest – and you don’t stay tied into this financial contract for as long as you would when you get a loan.
Which option is the best for you?
After seeing the different ways of affording your home renovation, it’s time to decide which one is the best for you. Realistically, this all depends on your financial situation. There is one other option that might be relevant to you: paying the whole cost upfront right away. If you’ve won money or inherited funds from somewhere, you could have a huge chunk of cash ready to spend immediately. Clearly, this is the dream scenario as you can get your renovation right away without worrying about any prolonged payments.
Naturally, this isn’t possible for most people. So, you have to weigh up the other options and decide which is the best for you. If you don’t want or need the renovation ASAP, perhaps it is better to just save as much money as you can. This way, you can raise the funds to pay for the renovation in full when you are ready.
But, there are reasons you might need a renovation right away. Perhaps you have problems in your home that only a renovation can fix? Or, you’ve got a new baby on the way, so you badly need an extension to give your family home more space. In these scenarios, look at the pros and cons of loans and other financing options. Which one do you think will be the easiest for your family to afford?
Ultimately, there’s no right or wrong answer here; it depends on your personal finances. Just make sure you do lots of research to ensure you make the correct decision. Now, you can sit back and prepare for a renovation that will improve your home and be a worthy investment.