Taking Out a Loan to Repair or Improve Your Property
Getting on the property ladder is a goal or dream that may people have. However, there can be a few hurdles along the way of reaching for that first rung.
Properties are not cheap, and for the majority of us, will be the most expensive purchase we make in our lives.
Spending £100,000, £150,000 or more on one purchase is a purchase that needs to be thought through carefully. In addition, not many of us are going to have the full sale price, or even a fraction of the sale price, just sitting in our bank accounts. This means we need to get a loan to complete the purchase, which means a mortgage.
Getting a mortgage is not too difficult, you just need some form of a deposit, good credit (a good credit score), and be able to show affordability.
It really can come down to just those three (3) things.
Saving for a deposit can be difficult, but there are new mortgage loans/products available to help with little of no deposit.
So mortgage lenders are trying to work with first-time homebuyers in getting on the property ladder, but one thing we also must remember is that there are costs associated with owning our own homes.
As a homeowner, you are now responsible for repairs and any improvements you may wish to make. No more calling Mr. or Mrs. Landlord if something is in need of repair. You are responsible to deal with the repairs yourself.
Which means you should have some savings for such emergencies, such as a boiler needing to be repaired or replaced, roofs over time need to be repaired or replaced; some improvements such as double glazed windows, or better doors, may have an initial cost, but can save you money over time in lowering your utility costs.
So it can cost you money to get on the property ladder, and it can cost you money to stay on the property ladder.
However, all is not financially lost!
Properties usually appreciate in value, meaning the value goes up. And as you pay your mortgage your loan balance goes down. This allows you to gain equity in your property.
Equity is the difference between the value of the property and the amount left owed on the property.
Some homeowners could be sitting on a golden egg of equity, tens of not hundreds of thousands of pounds.
There are those that consider their property a part of their retirement plan. Which it can be, however, while there are many ways to access the equity in a property, the best option will depend on each person’s circumstance.
Properties Age: Repairs and Improvements
Just as we get older, so do our homes, and just as we need regular maintenance in the form of medical check-ups, our properties as they age can be in need of some repairs, or perhaps we want to add some improvements over the years.
Kitchens and bathrooms get old, and look tired, and by refitting and remodelling them, we can make the property look new again.
Some improvements also increase a property’s value. Adding a conservatory, updating the kitchen or bathroom, loft extensions, etc, all add value to the house.
They also can be costly. You need to weigh the cost of such improvements against what additional value they may add to the property.
There are also as mentioned are repairs that will need to be done over the years, boilers, windows, doors, roofing, landscaping, all of which can be costly. It can also be handled cheaply if you are handy and into DIY.
All of this leads us to the topic at hand, how to fund those repairs or improvements. Should you take out a loan?
If you have the money for the repair or improvement saved and in the bank, you still may want to consider taking out a loan, and keeping your savings liquid; meaning you still have access to the money.
And getting a loan for many of these repairs and improvements, can be done easily, especially if you have equity in the property.
You could take out a personal loan, which is unsecured, or a secured loan against the property.
The main issue in taking out a loan, secured or unsecured, is affordability. You need to be sure you can afford the new loan payment, and if the loan is secured against the property, if you for any reason could not afford the payment, your property could be at risk.
Credit Issues: Our Credit Scores Can Change Over Time
You’ve decided that there is an improvement you wish to do to your home, or perhaps there is a repair that you need to do and have been putting off.
You’ve decided that taking out a loan is the best way forward, and you have sat down, put pen to paper and calculated you can afford the loan payments.
However, over the years your credit score and credit history, may have suffered a bit.
You never missed a mortgage payment, but were late on a credit card a few times, never registered with the electoral role (which helps your credit score), applied for credit quite a few times, and in general over the years, your credit score has gone down.
Over time you can rebuild, or increase your credit score. However, that takes time, and you want to do the repairs/improvements now, so you need a loan now.
There are loans available for those with low credit scores, or even bad credit. However, not all of those loans are going to apply, or be the best to use for home repairs or improvements.
Payday loans are short-term loans and are required to be paid back within 30 days or less, in addition, the loan amounts are lower than what one may need for a home repair or improvement.
Log book loans require you have a car of value, and again, the loan amounts may not be sufficient to do the repair or improvement.
Guarantor loans are a strong contender for someone who has weak, poor, bad credit, or a low credit score, who is in need of a loan for a home improvement or home repair.
These loans can be as high as £10,000, and paid back over 60 months (5 years), which makes the repayments more affordable.
The two main criteria for being approved for a guarantor loan is affordability, and having a guarantor. Someone who knows you and knows you will repay the loan.
Deciding on which home improvements we want is a decision that we can make over time, some repairs need to be completed immediately, and not being able to qualify and get a loan can prove a real issue.
Guarantor loans can be the solution.
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