Financing Your Loft Conversion

Jul 15

Deciding to carry out a big job on your home such as a loft conversion takes plenty of thought. You need to know that the work will be worthwhile in terms of its impact on how you live in your house, the value of your home and most importantly, whether you can afford it and how it will impact your finances in the long term. Huge renovations, such as a loft conversion, will often be done by home improvement companies as it’s such a mammoth task. It’s wise to have a professional on the job as their expertise is better than anything else, however, remember you need to pay for that expertise too.

Deciding how to pay for your loft conversion will depend on a number of factors, however you should think carefully about these before you embark on the project.

Can you really afford it?

A loft conversion is likely to cost you a significant amount. While the value of your home is likely to increase by more, this is cold comfort if you struggle to pay for it or have no plans to sell your home in the near future. You may be better looking at cheaper alternatives or moving house instead.

Options for paying for your loft conversion

Outright – Obviously the best way to pay for any home improvement is simply to save up the cash and pay for it outright. This will always save you money in interest and is the safest way to finance anything. However, it does mean you will need to put off your dream loft conversion until you can afford it and this may take some time. Also it gives you a set budget with very little flexibility.

Extend your mortgage – If possible, you could borrow the money required against your home by adding to your mortgage. This is a great option in terms of interest rates as mortgages are always cheaper than other borrowing methods. Banks may also be receptive to this option as they can see that the investment will be less than the added value to the home. Don’t forget to take into account any fees associated with re-mortgaging.

Get a bank loan – Home improvement loans are usually offered by banks and can be at very reasonable interest rates. They tend to be limited in terms of the size loan offered, but they could be good for adding to your own savings. Be prepared for the loan to be paid back (often over a period of 5-10 years) and the monthly payments which will be paid. Make sure you can afford this.

These types of loans are sometimes secured against your home and you could lose your house if you fail to pay. Try to avoid this being the case if possible, you should attempt to get a personal loan first which will not be secured against your house.

Finance from your installer – Your loft conversion builder or company may be able to arrange a loan on your behalf. These can be a good option as they often give special deals such as 0% finance or short term deals. Always compare the long term cost with the other options first to see which is best.

Credit cards – Definitely a no no unless you are making home improvements with a view to selling your home. Even then, credit cards are very risky. The interest rates are usually double that of other loans and if you default even once, the interest rates can sky-rocket. However if you are a careful and plan to sell your home, you could pay off the credit card within 2-3 months after completion of the project. But be sure that you will get enough from your house sale to cover the full cost including interest payments.