Financing DIY

Posted on: 25 March 2008 by Gareth Hargreaves

The value of home improvements and ways of raising the funding to do so.

The value of home improvements and ways of raising the funding to do so.

If you're looking for a way to fill the current spate of rainy weekends, how about a spot of DIY? According to research by Halifax, more than half the population has undertaken some form of home improvements over the past 12 months, which is an increase of 12% on last year's figures.

Improvement Motivations

When improving their home, an increasing number if people are motivated by the value it adds. According to the Halifax survey, a quarter (25%) of people cited this reason compared with just 7% last year. Likewise, more people are seeking to increase saleability of their property through home improvements; 16% compared with just 2% last year. Redecorating is still the nation's most popular home improvement, with garden improvements and re-vamping the kitchen also popular.

Phil Jenks, head of mortgages at Halifax, says:

"Home improvements are becoming more popular with people looking to add value to their home and improve saleability. Whilst DIYers continue to favour the more simple home improvements, such as redecorating, there are also signs that people are beginning to view their gardens as an extension of their home and are investing more time and money in improving the outdoors as well as the indoors."

Adding Value

Consumers and estate agents are divided on what kinds of improvements add value to a property. According to Alliance & Leicester estate agents are more likely to favour improvements that create space or improve decoration, whereas consumers are more likely to support 'leisure add-ons' such as garden makeovers or hot tubs. Nearly three quarters (70%) of estate agents say the best improvement to increase the value of your home is to add extra living space downstairs, yet only 50% of UK adults see the value of this work.

The next best alterations, say agents, are a new kitchen, an extra bedroom or study, or a garage. Meanwhile consumers reckon their property value will soar if they add a conservatory, revamp the garden or install a hot tubor swimming pool.

If you don't want your property's value to fall, steer clear of poorly-fitted kitchens which 65% of estate agents claim will have negative effect on it price. 'Loud' external decoration, polystyrene ceiling tiles and the removal of period features will also see your property's value fall according to agents. They also advise against patterned carpets, woodchip wallpaper and paving over the garden.

Funding Options

But whatever improvement you decide to carry out you will need to fund it. And, unless you have a lump sum of savings at hand, this will probably result in some major borrowing. For this, essentially there are two main options; a remortgage or secured loan. Remortgaging can be a good option if the time has come to find a new deal for example, because you have come to the end of a fixed rate. Mortgage rates are generally lower than other forms of borrowing and if you have equity in your property, most lenders will be prepared to lend you a further advance. But if you have committed to a fixed rate deal there may be additional fees and charges for further borrowing - as well as a higher interest rate on the top up part of the loan. In the worst case scenario you might have to redeem the whole loan and remortgage and so incur early repayment fees if you are still tied in.

Secured Loans

In this situation a secured loan might be a better option. A secured loan is a loan where your property acts as collateral so your home might be at risk if you default on payments. One of the advantages of a secured loan is that you can choose the repayment terms from a couple of years to 25 years but bear in mind that the longer the repayment period, the more interest you will pay overall.

Protecting Payments

Another important thing to consider is Payment Protection Insurance (PPI) which most providers will try and sell you when you take out a loan. Although PPI can be a worthwhile policy which will cover you if you are unable to work through illness or lose your job, some policies sold alongside loans work out to be expensive and you would be better off shopping around for a cheaper PPI deal.

Not Everyone's At It
However, other research, this time by Woolwich, shows that many people don't actually like DIY with 75% of those questioned saying they are fed-up with watching makeover and DIY programmes such as Changing Rooms, Home Front and Home Improvement. Nearly half ( 40%) of respondents claim not to have the time for DIY, 37% are concerned they will do a botch-job while 22% see it as a chore.

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