The difference finance options for building and construction

The covid-19 pandemic has certainly changed perceptions about home living, with more and more people stuck at home and thinking about how to renovate their properties and improve their quality of life. From home extensions to home offices, conservatories and loft conversions, more and more UK households are considering their options – and making their homes more environmentally green too.

However, building and construction can come at a price. A new loft extension which includes two rooms and bathroom could set you back £50,000 minimum and an office refurbishment could start at £10,000 – so understanding your financial options is key to get the best value for money and even turn your building work into a positive return on investment.

What Funding Options are Available?
Using your own savings is going to be the first choice, so you can do any renovations at your own pace without worrying about the financial implications. This is perfect for doing the lower end jobs, such as re-doing a bathroom or building a conservatory at the £10,000 to £15,000 mark.

For larger jobs that cost £50,000 or higher, you have various options such as using home improvement loans or construction loans, with the option to borrow money secured or unsecured.

You can alway apply with your bank, especially if you have a good credit score and stable income. Or if you can use a broker or one of the hundreds of private lenders that are in the UK.

When using a secured loan, you are using the value of your home to borrow money, provided that you have some equity in it. This can be an effective way to borrow large sums and at low rates too (from 3% APR), but you risk potentially losing your property if you cannot keep up with repayments. This is known as a secured loan, but could also be considered a second charge loan or second mortgage if it is against your property.

You also have the option to borrow money as an unsecured loan and this is based on factors such as your income, credit status and affordability and being unsecured, you are not putting your property at risk. The best rates, also starting from around 3% APR are available to those with the best credit scores and low debt-to-income ratio.

How to Get the Best Rates and Avoid Overpaying
David Beard, founder of Lending Expert explains:

“Start by calculating all your construction costs, timeframes and exactly how much you need to spend on your home renovations. This should give you an indication of how much to borrow and how long for. It is about finding the perfect balance of not over-borrowing or holding onto the loan for too long – since you will be paying interest every month and you don’t want to find that you are paying for an extra year when you don’t need to.”

“Do not go with the first option you see. When you are looking for home improvement or secured loans, it is important to shop around to find the best rates. Consider using a broker if you are looking to borrow a large sum since you could make some big savings just by getting a slightly lower rate.”

“Be sure to check for any additional fees involved. Are there broker fees? Solicitor fees? Early repayment fees? These can start to add up and being aware of them and all of your options is always key to get the best rates.”