Secured Home Improvement Loans
Secured Home Improvement Loans
Why take out a secured home improvement loan?
There can be many reasons why people take out home improvement loans and these are the most common that we see:
- Update Existing Rooms - Maybe some of the existing rooms are in need of an upgrade as they are heavily used and need a revamp. A good example of this is a kitchen or bathroom – These rooms are used daily and over many years can become damaged & outdated.
- Need More Family Space - As the family grows may be you need additional space and this could be achieved through a loft conversion, extension or re-working the layout of your existing property.
- Conservatory - By having a conservatory this will give you extra space within the property for you and the family to enjoy.
- Create an Office - Many people are now working from home either full time or part time and they need a specific area to work from.
- Full House Overhaul - May be you have recently bought the property and it is in need of a full overhaul, new windows, flooring, walls, kitchen, bathroom etc.
- Increase Property Value - May be you wish to sell the property in the near future and by making upgrades it could significantly increase the property value.
Ways in which I can borrow money for home improvements
When looking to borrow money for home improvements there are many ways in which this can be achieved. It is best to plan ahead and think carefully about how you will afford all the improvements rather than borrowing the money on credit cards which can be at rates of 20%+ and then realising you are then financially stretched. You should consider these options:
- Unsecured Loans - These can be taken out in a matter of days and the interest rate charged will depend upon the amount you are borrowing and your credit score. These loans are offered by high street banks and building societies plus there are online lenders also. Typically you can borrow from £500 to £25,000 over a term of up to 6 years.
- Secured Loans - These are offered by more specialist lenders and you can access these loans through a mortgage & loan broker. As these loans are ‘secured’ you can borrow larger sums of money up to £500,000 for example, and you could spread the payments over a longer term such as 25 years. Additionally if you have had any bad credit in the past such as missed payments, defaults &/or county court judgements, secured loan lenders are more flexible and could possibly still help you raise the home improvement money you require.
- Further Advance - Your existing mortgage lender may offer the facility of a further advance which is a top up mortgage, so basically you borrow the extra money as a mortgage normally under a separate account to your main mortgage on its own rate and term.
- Remortgage - You could remortgage with either your existing lender or source a new lender from the market and raise the money you require. Using a mortgage broker will help you review what remortgage options you have available.
- Gift from Parents - Rather than borrowing the money and having a financial commitment, would your parents be willing to help out?
- Savings - Do you have savings that you could use, or could you take your time and break the project down into stages to allow you to save and improve the property over time rather than having it all done at once and then having a financial commitment to pay over many years.
What are the advantages & disadvantages of a Secured Home Improvement Loan vs a Remortgage?
This is a common question people ask and it is important to take your time, understand all the cost implications and get advice from qualified advisers.
Here are the main advantages why secured home loans are taken out over a remortgage:
- Avoid Redemption Fees - If you were to remortgage you may incur an early redemption fee charge if you are in an initial fixed rate period for example. Early redemption charges can be expensive, so it maybe more suitable to avoid these charges by taking out a secured loan separately.
- Credit Profile - A remortgage may not be an option due to your credit profile. Secured Loan lenders are more flexible around more recent bad credit that may have been registered against you.
- Keep Existing Mortgage Deal - Your existing mortgage deal may be really suitable to you and you want to keep this running – for example it may be a low tracker rate and you feel rates will not change in the near future.
- Separate Loan - Possibly your main mortgage has 25 years left to run and you just want a separate loan over say 7years, so you can pay this off quicker.
And the disadvantages are:
- Higher Interest Rate - Your main mortgage will always be at a lower rate when compared to a secured loan rate.
- Fees - When taking out a secured loan there will be fees to pay to arrange this such as a valuation fee, lender arrangement fee, broker fee and possibly a consent fee to obtain permission from your existing lender to place a charge on the property.
- Secured Debt - If you are borrowing money which is secured against your home if you fail to keep up with the repayment you could lose your home.
I have bad credit and a low credit score – can you still help?
We have lenders that are able to provide secured loans to clients that have had bad credit registered in the past such as:
- Missed Payments - Maybe you a have missed some payments or made them late and these have been reported on your credit profile.
- Defaults - This typically happens when you are between 3 – 6 months in arrears on a credit agreement and the lender has registered a default against you.
- County Court Judgements - You may have been taken to court by a lender over an unpaid debt.
- Low Credit Score - Many secured loan lenders don’t have a credit score level that you have to pass, instead they will review your credit report to understand your credit worthiness.
Even though the lenders will accept clients that have had bad credit registered in the past, if you have outstanding debts which you are currently in arrears on – is it a good idea to borrow further money for home improvements?
Will I need a credit report?
It is always advisable to get a copy of your credit report. The main credit agencies are Experian and Equifax. Your credit report will show your payment conduct history over the last 6 years, any defaults &/or county court judgements you have registered, Address history if you have been on the voters all, financially linked persons and previous credit searches that have been done against you.
You should always keep a close eye on your credit report to make sure the data is correct, so in the event of you wanting to take out a secured loan against your house or flat you do not hit any barriers.
There is a company called CheckMyFile which shows your credit history data from both Experian and Equifax in one single report.
What documents would be needed?
When applying for a secured home loan the typical documents that we will request from you include:
- Proof of Identify – This is your passport or driving license to confirm your identity. These will need to be in date and be at your current address.
- Proof of Residence – This is to confirm your address. Acceptable documents would be a council tax bill, utility bill or bank statements.
- Bank Statements – This is to confirm your outgoings. We need to carry out a full income vs expenditure review and this will clarify your direct debits, standing orders and typical spend each month.
- Proof of Income – If you are employed this would be your last 3 months payslips and P60. If you are Self Employed this would be your tax overviews and tax calculations or your accounts.
- Lender documents – The lender will always have their own documentation which will need to be completed such as an application form and direct debit mandate.
The lender always has the right to request further information from you to complete their due diligence on the application.
How can I apply for a secured home improvement loan?
The experienced team of advisers at The Money Hub would be happy to help you review your options and give you some advice. You can get in touch with us by completing the above enquiry form or call the office on 0203 725 5830.
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THE ACTUAL RATE AVAILIABLE WILL DEPEND UPON YOUR CIRCUMSTANCES. PLEASE ASK FOR A PERSONALISED ILLUSTRATION.
LOANS MAY BE SECURED ON YOUR HOME. YOU WILL HAVE TO PAY EARLY REDEMPTION CHARGES THIS WILL VARY. A VARIABLE RATE LOAN MAY GO UP OR DOWN IN LINE WITH THE BANK OF ENGLAND BASE RATE. IF YOU ARE THINKING OF CONSOLIDATING EXISTING BORROWING YOU SHOULD BE AWARE THAT YOU MAY BE EXTENDING THE TERMS OF THE DEBT AND INCREASING THE TOTAL AMOUNT YOU REPAY.
THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR ANY OTHER DEBT SECURED ON IT.
WARNING: LATE REPAYMENT CAN CAUSE YOU SERIOUS MONEY PROBLEMS. FOR HELP, GO TO MONEY ADVICE SERVICE.
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This depends upon your circumstances and how much you want to borrow. Ways in which you could look to borrow money are:
- Unsecured Loans - These are provided by high street banks and online providers.
- Secured Loans - These are generally provided by specialist lenders through mortgage & loan brokers.
- Further Advance - From your existing mortgage lender.
- Remortgage - with either your existing or a new mortgage lender
You should explore all these options and get advice. Take your time to make sure you understand all the costs and implications of borrowing the money.
This depends upon a number of factors such as:
- Affordability - How much can you afford to borrow? The lender has to make sure any money you borrow is affordable over the term of the loan.
- Equity - As the loan is secured against a property the lender will want to make sure the secured debts (i.e. mortgage and new loan) does not exceed the property value and will want a buffer in place of possibly 15% (depending upon the situation).
- Credit Profile - If you have a low credit score and some bad credit you will have less options available.
Secured Home Improvement Loans
Product Name: Loans
Product Description: Secured Home Improvement Loans
Gary has been great from the start, very professional and friendly. this was my first commercial finance and he answered all of my questions no matter how small & explained everything very well, for me to understand the whole process. I would definitely recommend TMH & if needed use their services again.