Popular Home Improvement Loan Tips

Home improvement loans are definitely big business in the UK. In 2004, owners of the nation’s 17 million homes spent over €58 billion in home improvements. According to experts, this has added over €85 billion worth of value to UK homes nationwide. One 2005 survey found that 76% of UK homeowners were planning  some type of home improvement within the next year with many planning on utilizing a homeowner loan.

Anthony Rafferty, commercial director of Direct Line Loans says “Home improvements can be worthwhile if you are planning to sell since even small changes can make a house or flat more attractive to buyers. However, we would advise anyone making major changes to do their homework first—it’s worthwhile checking with an estate agent or surveyor.”

What are the most popular home improvements?

A 2006 survey of homeowners found they ranked these as the most popular home improvements.
    1. Redecorating—including painting, wallpapering and window coverings---76%
    2. New furniture----particularly popular among younger homeowners-------52%
    3. New carpeting-----------------------------------------------------------36%
    4. Laminate flooring---------------------------------------------------------35%
    5. New or remodeled kitchen------------------------------------------------32%

Other popular home improvements noted included items such as conservatories, bathroom remodels and garden makeovers. Many of these improvements were done with homeowner loans.

Why do people take out home improvement loans?

Most people simply want to improve their living conditions. This may be as simple as painting a room to as complex as adding an extension. The top reasons people give for home improvement are:

  1. Make home more comfortable ---54% 
  2. Repairs that need to be done-----24%
  3. Need more space in home--------10%
  4. Increase value for sale-------------3%

Can homeowners increase home value through home improvements?

It is possible, if you choose the right improvements and do them in a quality manner. James Duffel, of mortgage lender One, says “There are no guarantees, but making the right changes can improve salability of your home. But it is much safer to make improvements for your own satisfaction, not because you think they’ll add to the value.”

Unfortunately, many home owners’ ideas about adding values are either mistaken or out of date. Home trends come and go just as fashion trends do.

       Andy Deller, director of Banking and insurance at Egg, says “Homeowners making improvements to their homes to increase their value seem to be missing out on the most valuable additions. With many people borrowing money via either a loan or remortgage, it’s essential that the work carried out genuinely increases the property’s value.”

Interestingly, one survey of the general public found that people listed items such as central heat and double glazed windows in the top home improvements, while estate agents disagreed. Peter Bolton King, CEO of the National Association of Estate Agents, says “Ten years ago, everyone was asking if a property had central heat and double glazing. Now they are virtually accepted as standard and people are instead looking for home studies, en-suite bathrooms and double garages.”

Before taking out a home improvement loan, do some research as to whether your proposed project will add value or is simply personal preference.

Which home improvements add value?

Although there is some disagreement on which home improvement actually adds the most value, these improvements rank near the top. Due to the cost of some of these projects, they are commonly financed with a home improvement loan.

Project      Cost    Value added

New/remodeled bathroom    €1,000-10,000   €1,000-15,000

New/remodeled kitchen    €3,000-25,000   €1,000-20,000

Loft conversion     €20,000-40,000  €10,000-30,000

Extension/addition     €10,000-20,000  €10,000-30,000

Redecorating whole house    €100-1,000   €1,000-5,000

And if you are among the 50% of UK homeowners who are avid do-it-yourselfers and are not afraid to tackle a major project, you can add value to your home easily. DIY projects with the highest return on cost include:

  1. Redecorating/painting whole house---220%  ROI (return on investment)
  2. Add garage--------------------------124% ROI
  3. Remodel bathroom-------------------116%ROI
  4. Remodel Kitchen---------------------101% ROI.

Which improvements do not add value?

Although nothing is absolute, there are certain home improvements that experts warn homeowners to avoid. If you take out a loan to add value to your home through improvements, you do not want to find out it was a waste of money. Sadly, DIYers in the UK have spent over ?150 billion on home improvements that could actually lower their property values. Examples include:

  • Installing cheap laminate flooring (done by 33% of DIYers)
  • Installing plastic pvc windows (done by 32% DIYers
  • Removing fireplaces (done by 20% DIYers)

Jon Sykes, head of mainstream mortgage lending at Halifax, says “If you are making improvements, remember any alterations must be sympathetic to the surroundings, done to a good quality and compliant with building and planning regulations.” And whatever you do, do not plan on adding a swimming pool. This is considered the worst home improvement idea around and estate agents note it “could well decrease the value of your home”.

How do people pay for home improvements?

There are a variety of ways people finance home improvements, with some people using savings or returns from investments. Home improvement is one of the top reasons cited for taking out a loan.

One survey in 2005 found that of the total financed for home improvements:

  • €4.04 billion was borrowed on personal loans
  • €3.52 billion was put on credit cards
  • €2.84 billion was obtained via remortgaging
  • €1.93 billion was obtained through overdrafts
  • €1.33 billion was borrowed from family embers