Homeowners across the UK routinely turn to banks and specialist lenders for help with major home improvement projects.
One of the most flexible and versatile products available is a secured second charge home improvement loan, which can cover the costs of most types of major home improvements, renovations, and extensions.
What is a Secured Second Charge Home Improvement Loan?
As the name suggests, a secured second charge home improvement loan is a specialist financial product provided specifically for home improvement purposes. As a secured loan, the funds issued are taken out against an asset of suitable value – in this instance the home of the borrower.
The amount you can borrow will be determined by how much equity you have in your home – i.e., how much of your mortgage you have so far paid off. A loan is issued with the property used as security, after which the money is repaid over a series of monthly payments at an agreed rate of interest.
A secured second charge home improvement loan can be issued as an extension on your existing mortgage by your current lender. Alternatively, it can be taken out as a separate loan entirely with the lender of your choosing.
How is an Unsecured Home Improvement Loan Different?
Unsecured home improvement loans are those that are issued based on the applicant’s strong financial position and credit history. No security (i.e., property or assets) are required, as eligibility is determined purely by way of merit.
While unsecured lending may eliminate the risk of forfeiting your assets in the case of non-payment, it nonetheless has its limitations. Unsecured loans are considered higher risk on the part of the lender, which means you will not be able to borrow as much and may face much higher overall borrowing costs.
Qualifying for an unsecured home improvement loan is also impossible in the absence of an excellent credit history and proof of a strong current financial status.
How Much Can I Borrow on a Home Improvement Loan?
There are technically no limitations to how much you can borrow, as the maximum loan amount will be based on the equity available in your property. Secured loans typically start from around £25,000 upwards and are repaid over the course of an agreed number of years.
Your financial status and credit history may also be considered by the lender, when determining how much you can borrow.
What Can I Use a Home Improvement Loan For?
Most home improvement loans can be used for any major property improvement or extension project. Few lenders impose formal restrictions on how the funds can be allocated, so you are free to use the loan for any purpose you wish.
Some of the most common uses for secured home improvement loans are as follows:
- Extensions to create additional living spaces.
- Landscaping and major garden renovations.
- New kitchen and bathroom installations.
- Installation of conservatories or outdoor summer houses.
- Swimming pool planning and construction.
By spreading the costs of the project over several years, the major home improvement project you have been dreaming about could be more affordable than you think.
For more information on any of the above or to discuss your requirements in more detail, contact a member of the team at UK Property Finance today.