Spring is traditionally the time when we think about home improvements. Ann Francis of Cambrian Credit Union explains how to ensure upgrading your home doesn’t break the bank.
There’s something about spring that makes us all look at our homes in a new light.
Whether it’s the sunshine, the feeling of nature bursting back to life or simply the longer days, it’s a busy time of year for garden centres, DIY stores and builders.
We’re certainly noticing this at Cambrian, with members starting to tap into their savings and some applying for loans for home improvements.
As potentially your largest asset, it can make financial sense to invest in your home. However, expenditure on property can quickly escalate, so make sure you keep a tight rein on costs.
Whether it’s some new plants for the garden or a brand-new kitchen, the best way to stay on budget is to set one!
In an ideal world, we would all have the money already saved in the bank, but this isn’t always the case, leaving a number of available options.
Loans are the simplest choice although make sure you check that the APR (annual percentage rate). At Cambrian the interest rate you see advertised is the one we use for anyone accepted for a loan, but this isn’t the case with most banks and building societies.
Many people don’t realise that, legally, the rate you see on an advert may only actually apply to 51 per cent of people who apply. Always check the interest rate you will actually pay, the cost of repayments, the time period to clear the balance and the total amount repaid.
Monthly loan repayments will be less over a longer timescale, but this will push up the total amount repaid.
Many organisations offering loans, including Cambrian, include a repayment calculator on their website to help you make your decision.
Some home improvement companies will offer interest free credit for a set period, and this is great if you can pay off the balance within that time. However, if you don’t pay off the balance within the six or 12 months allowed, then you will go into a period where you have to pay interest, so check how much the rate will be.
You may want to consider a credit card. If so then look for an introductory zero per cent offer – but remember to pay off the balance in time and if you can’t check how much the interest rate will be (this can come as an unpleasant surprise!)
Credit cards also have the additional advantages of providing you with a level of protection. If the work turns out to be faulty or the company you use to undertake the home improvement goes bust, then you may be able to claim the money back from the card provider.
For larger improvements, you may want to add the cost of the work to your existing mortgage.
Using a mortgage will mean you pay back the amount borrowed over a decade or more and the repayments will be a lot less per month than your average loan.
However, check the total amount repaid and whether the rate is fixed or variable to ensure the deal will work out for you in the long term and remember all mortgages are secured against your home.