home improvement loans

Which makes more financial sense – improve your home or move?

Posted by

In 2013, Hiscox Insurance released the results of a survey which revealed that only 3% of homeowners had made the decision to improve their home rather than move. In 2018, that figure was 15% and, among millennials, it was 25%. Underpinning this shift in attitude was the increasing cost of property and the difficulty it would cause financially to go from one rung on the housing ladder up to the next.

Speaking to the Independent newspaper, Phil Thorn, Hiscox’s home improvements spokesperson said that “(t)he decision to improve instead of move is a new normal for homeowners whose lifestyles are evolving. People are looking at ways to adapt their existing homes to meet their changing needs, whether that’s a growing family or the beginnings of a new home business.”

Does it make financial sense to stay where you are and make improvements? How much does it cost to improve your home and how much does it cost to move? 786 Loans finds out.

Does improving your home add value to your home when you come to sell it?

As well as the significant additional enjoyment you’ll get out of improving your home to just the way you want it to be, there are financial advantages waiting for you when you come to sell up.

When people are looking to move home, there are always some things that they consider as “must haves” if a property they visit is going to have a chance of being a contender. It might be plenty of floor space to accommodate a growing family, it might be a beautiful garden or an en-suite bathroom.

Research recently carried out by Towergate Insurance and reported in the Telegraph newspaper looked at the increase in house price value enjoyed by homeowners carrying out improvements to their property.

The average value of a home in the UK in March 2018 according to HM Land Registry was £225,261. Using Towergate Insurance’s online home improvement calculator, 768 Loans worked out the impact the most popular types of work carried out on properties would have on a property valued at the average UK home price. Here’s what we found:

Job % house price increase Average cost Increase in house price Profit
Convert garage into a spare room 20% £15,450 £44,216 £28,676
Energy saving – cavity walls, double glazing, solar panels 14% £10,720 £30,888 £20,168
Convert loft into a new room 15% £17,500 £33,095 £15,595
Repainting, rendering, repointing outside 10% £9,500 £22,063 £12,563
Make kitchen and dining room open plan 6% £2,100 £13,238 £11,138
Garden landscaping but keeping house not overlooked 8% £7,650 £16,547 £8,897
Modern central heating system installation 5% £3,225 £11,914 £8,689
Paint/decorate in neutral colours 5% £2,850 £11,032 £8,182
Install self-lighting/woodburning fireplace 5% £3,500 £11,032 £7,532
Adding extra or en-suite bathroom 5% £4,250 £11,032 £6,782
Updated kitchen with modern appliances 6% £8,000 £13,238 £5,238
Adding an extra storey 11% £20,000 £24,269 £4,269
Adding a conservatory 5% £7,000 £11,032 £4,032
Carpets cleaned or exposure of hardwood flor 3% £4,000 £6,619 £2,619
Replace worn out roof/flat roof with pitched roof 3% £4,150 £6,619 £2,469
Outdoor decking 3% £2,175 £4,413 £2,238

Now we’d be the first to admit that some of those increases in value look optimistic, especially the conversion of a garage into an extra bedroom, for example. There’s no doubt that it would push up the value of a property but we think a 20% increase is an optimistic prediction.

Nonetheless, in most cases, the decision to improve and not to move just yet will reward you and your family with a significant return on investment when the time does come to put it on the market. That’s because the changes that you make to your property will move the value of your home towards or beyond the particular price cap in your local area.

What’s the best way to plan home improvements?

Before you call any tradesperson in, be sure of what it is you want to do to your home. There may be ten or more areas for improvement which you can see but it may be impossible to fund them all at once.

Work out how much you can afford to pay for home improvement from your own savings. You may be able to increase your budget by topping up with a home improvement loan (more on that later). Once you know the maximum amount of money you want to invest, subtract 10% from it because home improvements always cost more and take longer to complete than you think. Now, prioritise on the top 3 or 4 areas that you want to make better.

Then, it’s time to call in the local tradespeople. Make sure you get 3 or 4 quotes on each of the improvements you want to make. Especially important is to do your due diligence into each company you invite around to quote you. Good things to find out the answers to include:

  • Are they members of any recognised and respected trade body?
  • How long have they been trading?
  • Are there any reviews of them from existing customers online and do they paint a positive picture of what it’s like to work with this company?
  • Do they offer insurance-backed guarantees in case they cease trading?

Once you have found the companies you want to work with, let them know you want to go ahead getting a firm start and end dates on each job.

How does all that compare with moving?

Moving home is more stressful than getting divorced, according to research by the energy company E.ON and as reported by the Express newspaper. Following closely behind was the anxiety and upheaval of a relationship breakdown and starting a new job.

It’s not the day of the move itself – the upheaval continues for weeks afterwards as you have to unpack everything and put things in the right place, the kids have to start at a new school, you’ve got to plan how you’re going to get to and from work in time to pick the little darlings up from their new school, and “just how long does it take to install broadband in this country?!”

Eventually, you settle down and the new place begins to feel like home but it’s not an instant transition. Moving home has cost you thousands of pounds to do. You can’t quite see what everybody involved in the process did to earn those thousands of pounds you had to pay them but it’s gone out of your bank account forever.

As we mentioned earlier, the average UK house price is £225,261. Let’s say that you’re trading up to a £275,000 home because there’s another kid on the way and you need to make room for them.

To sell your home, you’ll pay £600 in conveyancing fees, £90 for your Energy Performance Certificate, and, on the day of the move, probably around £600 for the removal van and the men. The average UK estate agent fee is 1.3% of the value of the home which, in this case, would equal £2,928. In total, that’s £4,218 you’ve spent before you’ve even got the keys to your new home.

To move into your new home, you’ll spend £870 on conveyancing, £450 on a property survey, and £197 on a mortgage valuation. If you used a mortgage broker, that’s another £750 and there’s also the product fee from the mortgage provider – probably another £999. Finally, the stamp duty on a home valued at £275,000 is £3,750. In total, the cost of purchasing your new home, before you’ve made the first mortgage payment on it, is £7,016.

Factoring in all buying and selling fees, your move has cost you £11,234.

What will £11,234 buy you if you improve and don’t move? According to Towergate Insurance, a mix and match of the following.

  • Energy saving – cavity walls, double glazing, solar panels
  • Repainting, rendering, repointing outside
  • Make a kitchen and dining room open plan
  • Garden landscaping but keeping house not overlooked
  • Modern central heating system installation
  • Paint/decorate in neutral colours
  • Install self-lighting/woodburning fireplace
  • Adding an extra or en-suite bathroom
  • Updated kitchen with modern appliances
  • Adding a conservatory
  • Carpets cleaned or exposure of hardwood floor
  • Replace worn out roof/flat roof with a pitched roof
  • Outdoor decking

If that’s put you off moving, what are the best ways of funding the changes you want to make to your home if you don’t have all the money in savings to do it?

How can you pay for home improvements?

There are dozens of Financial Conduct Authority-approved home improvement loan companies in the UK all of which have specific products to help homeowners carry out the work they want on their property.

Each home improvement loan provider has its own profile of client they like to lend money to. What that means is that each lender looks for a certain level of income, a certain level of outgoings, and other personal information from a potential borrower. The closer a borrower is to that profile, the better chance a homeowner has a chance of getting the loan they want.

The problem is knowing which home improvement loan providers want to work with borrowers whose profile is just like you. That’s where 786 Loans helps – we work with most home improvement loan lenders and they tell us all about their profiles which helps us to deliver them the type of applicant they want to work with.

786 Loans is a Financial Conduct Authority-approved broker. We don’t lend you the money – what we do is use our market know-how and our close relationship with lenders to match you up to the best home improvement loan on terms and at a rate, you’ll appreciate.

Get the right home improvement loan with 786 Loans

At 786 Loans, it’s our job to find you the most suitable home improvement loan at the cheapest rates possible and that’s even if you have a poor credit score.

The way we do this is that, when we receive your application, we package all the information you give us together with your credit report and send it to the home improvement lenders we know will be the most likely to want to lend you money. The information we send over includes how much you want to borrow, how long you want to borrow it for, and your income and expenditure details.

Within a few seconds, the lenders who are interested in working with you come back with their first home improvement loan offers. Each lender can see each other’s offer and what happens next is what makes 786 Loans different from every other broker.

This all happens in seconds so that you’re not kept waiting to get the cheapest interest rate on your home improvement loan you want.

To start your application, Please Click Here.