Do It Yourself - Improve your home

The last ten years have been the boon years for a huge increase in DIY outlets, aided by the house price stagnation during early and mid-1990s. People thought of staying and improving the house instead of selling it. Even with house prices on the up again, there appears to be no let-up in the desire for DIY or improvement work. Home improvements are mainly driven by the desire to create a more comfortable house. A house which you can call as 'My Home' and feel it to be the best place on earth. However, the knowledge that the value of the property may also increase, gives an added incentive to continually improve. Clearly DIY plays an important part in improving the home and the enthusiast can easily undertake smaller jobs such as painting and decorating, shelving and cupboards, and laying patios. Moreover the satisfaction level in DIY is far better than from other sources. However, the bigger jobs fall usually in the domain of specialist firms. These include:

• Extensions
• Conservatories
• Double glazing
• Central heating
• Fitted bathrooms and kitchens
• Fireplaces
• Fitted bedrooms
• Rewiring and plumbing.

These larger jobs obviously lead to greater costs. So how are these improvements, both large and small, paid for? The Home Improvements are an easy solution for all your home improvement needs.

Funding small improvements

The costs of most smaller DIY projects are often paid from personal savings or by revolving credit options, such as credit or store cards. Paying from savings is the best and the cheapest option. The interest rates to savers are quite low and the interest rates are expected to fall more. Some instant saver accounts now offer little more than 1-2% interest per annum. No borrowing obviously means no repayments, which is the ideal and most loved situation. Credit or store cards can be a very expensive options if the borrowing runs on and on and leads to financial burden. The store card interest rates do not follow the falls in the Bank of England base rates and can sore as high as 30% or more than ten times the rate of inflation. Some credit cards offer the initial "teaser" rates of around 6% which last for only six months or so and then the borrowers end up paying 15-18%. If you cannot decide the term of the loan then a personal loan is the most disciplined and cheaper option.

Funding large improvements

Larger projects require more funding and cannot be easily met though personal sources or credit cards. So what are the other options available for raising cash to improve your home?

• Further advance on a mortgage
• Unsecured loan (flat rate)
• Unsecured loan (variable rate)
• Secured loan
• Remortgaging.

Take the Mortgage Advantage

Many major improvements are funded in this manner. The two main considerations of taking a further advance are:

1 ) One of the important consideration is your current equity. If it is 90% or upwards of the value of your property, then the chances of a further mortgage by the mortgage lender are remote. The lender will always look for an equity before agreeing to any new lending.

2 ) How long your mortgage has left to run. If you had say 15 years to go on your mortgage, then adding a further advance would not necessarily add too much to the monthly repayments. However, you must remember that you are paying interest on the borrowing for 15 years.

The costs of a loan

Let's take the following example to assess the costs of a loan

Average Advance-----£7,500
Repayment period---- 15 years
Monthly repayment--- £63.69 ( At a rate of 6.85%)
Lender's Fees-------- £75-£150
Cost of the valuation by the surveyor--- £125 for a £75,000

Fixed term borrowing

These types of loan are usually arranged through banks, building societies and credit institutions. The shorter the term of the loan, the higher the monthly repayments. The main type of personal loans are:

Unsecured Loans (Flat Rate) - The personal loan are on an average charged at a typical flat-rate of interest of 12-13%, although by checking best-buy tables in national newspapers, you may be able to find loans under 10%. Note, however, that loan companies check your credit rating at agencies such as Equifax, which may result in you being rejected if you have not had a good repayment record with former loans and credit cards. A five-year loan of £7,500, would cost approximately £175 per month.

Unsecured Loans (Variable Rate) - It is up to the borrower to decide whether to go for a fixed interest rate or the fluctuating variable rate. Often the borrowers opt for a variable rate sue to the expectation of falling interest rates. sometimes it is appropriate to opt for a variable rate. Generally taking the above example, but with a rate of 2% over base rate, the monthly cost would be around £150.

Secured Loan - These usually offer a lower interest rate than an unsecured loan, however, the loan is secured by way of a second charge on your property. A typical five-year secured loan of £7,500 at 6.85% (APR 7%) would cost £148 per month. Again, this is a variable rate. Generally a secured loan can be taken out over a longer period than an unsecured loan which will reduce the monthly outlay. Usually you will not have to pay a fee for personal borrowing, as all costs are built into the loan.