Written by: Cally Worden
If you’ve ever dreamed of having more space in your home then chances are you’ve considered building an extension. Creating extra family space in this way may be more cost-effective than moving house, but will still make a significant dent in your finances – you may think it’s beyond your budget. But don’t give up hope just yet. There are various ways you can fund a home extension, adding value to your property should more than compensate the financial outlay.
Use your Savings
Savings in the bank are like a comfort blanket. Relatively accessible and nice to have. But with interest rates at an all-time low, the bank is no longer to best place to maximise the potential of your savings. Using your savings to finance a home extension can be the perfect way to add value to your property, thus ensuring your hard-earned cash actually works for you. Property prices may fluctuate, but investing in this way will generally create a better long-term return than savings that are taxed, they rarely increase in line with inflation.
Cashing in your Investments
Investing can be a risky business. When economic times are hard investments can take a hit, it may be many years before they return to the levels that attracted you to them in the first place. If this has affected you then you have a choice – leave your money where it is and hope that your investments retain their former glory, eventually, or cut your losses and cash them in now and invest in your property instead. You enjoy the benefits in the short term and as a rule of thumb, property prices tend to recover from hard times faster than shares or other investment vehicles. Always take advice if you’re unsure as to your best option.
People have become more credit-wary since the financial crisis, as a result banks are offering some very attractive deals to entice loan customers back through their doors. Sure, the banks make money out of you, but if you can hustle a great deal then you stand to benefit too. Just do your homework, don’t get pulled into extras like payment protection deals if you don’t need them, push as hard as you can for the lowest interest rate for the longest period. Paid back reliably, a personal loan can also work wonders for your credit rating.
Home Improvement Loans
Designed specifically for projects such as an extension, these types of loan fall somewhere between a mortgage and a personal loan. They can be more expensive than a personal loan and are generally secured against the property, be sure you are confident of meeting repayments before you go down this route. The big benefit is that you may be able to secure a larger sum of cash using this type of loan.
If your mortgage is at a point where you can renew it without penalty, it may be worth considering a remortgage for a higher amount. The cash this releases will then be yours to use to fund an extension. My husband and I have done this several times and have found it to be a relatively cheap and easy way to fund home improvements.