Borrowing for Home Improvements

Rosstifer25

Hi,

Not sure if this should be in loans or mortgages as it's a bit of both.

Looking to borrow to complete some home improvements. Some of which will improve the energy efficiency of my house (about £7k). Looking to borrow up to £15k total, but what is the best way to do this? 

I've had my mortgage with Nationwide for a year, so i've not paid off a huge amount yet. Is it still going to be an option to get a further advance on my mortgage, as this seems to be the best way to go? Otherwise is a personal loan the next best option?

Thanks

CliveOfIndia

It's always a bit of a balancing act.  On the one hand you're likely to get a lower APR on your mortgage compared to a personal loan.  However, if you let the additional borrowing run for the full term of the mortgage then you'll pay a lot more interest overall (depending, of course, on how long you've got left on your mortgage).  The best way of doing it is to get a further advance on your mortgage (if you're able to do so), but then make sure you make substantial overpayments so that you repay the extra borrowing in no more than 5 years - obviously, the sooner you can repay it the better.

You do, however, need to make sure you're allowed to make overpayments without any penalty.  Especially if you're on a fixed-rate deal at the moment, you may find you aren't allowed to overpay by more than 10% without penalty.

A personal loan is also an option, of course.  Interest rates are likely to be a bit higher than a mortgage, but you'll then only have the loan for, say, 5 years.

The best thing is to look at both options.  See whether, and at what rate, your mortgage lender will lend to you.  See what deals on loans you're eligible for.  It can be a bit more tricky with loans, as you won't know for sure what rate they'll offer you until you make an application.  But some of the eligibility checkers will give you an indication - though of course, the indicative rate is by no means a guarantee.

A third avenue to explore is credit cards.  If you can get accepted for a 0% purchase card, and if you are able to pay for the goods/services by credit card (many tradesmen, for instance, won't accept credit cards, but you should be able to buy fixtures and fittings from a shop), then this is another option to consider.  If you want to consider this option, just be aware that you must make sure you clear the card in full by the time the promotional rate expires.

Anyhow, I hope this gives you some food for thought.