Why Use a Secured Loan for Renovations?
Home improvement projects can be expensive. A new kitchen might cost £10,000 to £20,000, while extensions and loft conversions can run to £50,000 or more. If your project exceeds what you can borrow through an unsecured personal loan — typically capped at £25,000 — a secured loan provides access to larger sums.
Secured loans also offer longer repayment terms of up to 25 years, which keeps monthly payments manageable even for substantial borrowing. And because the loan is backed by your property, interest rates are generally lower than credit cards or unsecured loans for equivalent amounts.
How Much Can You Borrow?
The amount you can borrow depends on the equity in your home, your income, and your credit history. Most lenders allow a combined loan-to-value ratio of up to 85% to 90% across your mortgage and secured loan. For example, if your home is worth £300,000 and your mortgage balance is £180,000, you might borrow up to £90,000 as a secured loan.
Lenders will also assess your ability to afford the repayments alongside your existing mortgage and other commitments. A broker can help you understand the maximum you could borrow and find the most competitive rate for your circumstances.
Will Improvements Add Value?
One advantage of borrowing for home improvements is that the work can increase your property's value, potentially by more than the cost of the project. Extensions, loft conversions, and extra bathrooms tend to add the most value, while purely cosmetic upgrades may not recoup their cost.
Before committing to a large project, research how much value it is likely to add in your area. Estate agents can provide guidance, and you may find that a well-planned improvement pays for itself when you come to sell — effectively making the loan self-financing in the long term.
Alternatives to a Secured Loan
Depending on your situation, you might also consider remortgaging to release equity, using an unsecured personal loan for smaller amounts, or applying for a 0% credit card for short-term borrowing. Some homeowners use a combination of these options.
If your current mortgage deal has no early repayment charges, remortgaging may offer a lower rate. But if you are in a fixed deal with penalties, a secured loan avoids those charges while still giving you access to the funds you need.
Important: Your home may be repossessed if you do not keep up repayments on your mortgage. There will be a fee for mortgage advice. The actual rate available will depend on your circumstances. Think carefully before securing other debts against your home.