Financing home renovations: secured or unsecured

Your renovation, your funding strategy

Two-thirds of UK homeowners now prefer improving to moving, and the finance you choose determines how far your budget stretches. For substantial works, remortgaging is typically the lowest-cost route, as mortgage rates are usually below unsecured lending and the term can be spread over many years. For contained upgrades, unsecured personal loans are fast and flexible. Between these poles sits a toolkit of specialist products that can bridge gaps, release equity, or fund staged works.

Understanding APR is not just about percentages - it is about what you pay in pounds and pence over time. Secured borrowing ties debt to your property, often with lower rates but higher stakes if you miss repayments. Unsecured borrowing costs more, but your home is not used as collateral. The best option depends on project size, timescales, your equity, and your credit profile.

A clear plan and realistic costings make almost any financing route cheaper.

In the current UK market, high moving costs and steady property values mean many households are unlocking equity for extensions, loft conversions, and energy upgrades. Remortgaging can release larger sums at mortgage rates. For fast turnarounds or auction purchases, bridging finance fills short-term gaps, while refurbishment mortgages fund major works in stages against an agreed schedule. Alongside borrowing, green grants can reduce upfront spend on insulation, glazing, or heat pumps, improving comfort and long-term running costs.

Kandoo is a UK-based retail finance broker. We help UK consumers navigate these choices by comparing a broad panel of lenders and highlighting the practical trade-offs - speed, cost, risk, and flexibility - so you can proceed with confidence.

Who should consider each route

If you have significant equity, stable income, and a detailed plan for large-scale renovations, remortgaging or a refurbishment mortgage can deliver the lowest unit cost of capital. They suit extensions, conversions, and whole-home retrofits where budgets often exceed £25,000. If you are mid-fix on a competitive rate, a second charge mortgage can top up funds without disturbing your main deal, though at a higher rate and with your home at risk.

For contained projects like a new kitchen or bathroom under £25,000, unsecured personal loans are straightforward. They do not require property collateral, underwriting is typically quick, and terms are fixed. Where speed is vital - for example, auction purchases or pre-sale refurbishments - bridging loans offer rapid, short-term finance at higher monthly interest, best used with a clear exit such as sale or remortgage.

Know the language that matters

• APR - The annual percentage rate capturing interest and standard fees, useful for comparing like-for-like.

• LTV - Loan-to-value, the borrowing as a percentage of your property’s value. Lower LTV generally attracts better rates.

• Equity release via remortgage - Increasing your mortgage to unlock cash at mortgage rates, usually over a longer term.

• Second charge mortgage - A separate secured loan on your property that leaves the main mortgage in place.

• Unsecured personal loan - Fixed-rate credit not tied to your home; typically higher APRs but quick decisions.

• Bridging finance - Short-term secured borrowing with monthly interest, used for rapid transactions and renovations.

• Refurbishment mortgage - A product that funds purchase and works in stages, based on a detailed plan and valuations.

• Green grants and schemes - UK initiatives that subsidise energy efficiency upgrades and reduce project outlay.

The main ways to fund your project

1. Remortgage to raise capital - Often the most cost-effective for large budgets. Lower rates and longer terms reduce monthly cost, but you are extending debt against your home.

2. Unsecured personal loan - Ideal for upgrades under £25,000. Quick to arrange, fixed repayments, no property collateral. Higher interest than secured options.

3. Second charge mortgage - Releases additional funds without touching your main mortgage. Higher rates than remortgages and secured against your property.

4. Bridging loan - Fast, short-term funding with monthly interest, often 0.4% to 2%. Requires a strong exit plan such as a sale or remortgage.

5. Refurbishment mortgage - Suited to major works with staged drawdowns. Requires plans, costings, and lender oversight.

6. Green grants or energy schemes - Reduce upfront costs for insulation, glazing, heat pumps, and other efficiency measures, improving comfort and running costs.

What it could cost, and what you gain

Can you qualify and how lenders assess you

Lenders in the UK will look at your income, outgoings, and credit history to calculate affordability and risk. For secured borrowing, they also assess property value, overall loan-to-value, and whether planned works will increase or at least maintain the property’s marketability. If you are remortgaging, expect scrutiny of employment status, existing mortgage terms, and any early repayment charges that could offset the benefit of switching. With second charge loans, the combined loan-to-value after borrowing is crucial. Bridging lenders focus on exit strategy and may require a deposit up to around 35%, particularly for auction purchases. Refurbishment mortgages demand detailed plans, planning permissions where relevant, and staged valuations before each drawdown. For personal loans, decisions are typically faster, based on credit score, income stability, and requested amount. Across all options, accurate quotations from contractors and a sensible contingency help demonstrate control and may improve outcomes.

The process, simplified

1. Define scope, budget, and contingency clearly

2. Check your credit files and correct errors

3. Estimate property value and current LTV

4. Compare secured vs unsecured costs and terms

5. Gather quotes, permissions, and timelines

6. Choose product and prepare documents

7. Apply, respond to checks, and complete drawdown

Quick comparison of strengths and compromises

Pitfalls to avoid before you sign

Do not start borrowing without a full cost plan and timeline. Small overruns compound quickly, especially on higher-rate credit. Factor in fees, including arrangement, valuation, legal, and potential early repayment charges. For bridging, a credible exit plan is essential - a delayed sale or remortgage can be expensive. For secured products, remember your home is at risk if you do not keep up repayments. Check your current mortgage for portability and charges before switching. For energy upgrades, confirm eligibility and timing of grants to avoid gaps in funding. Finally, pressure-test affordability against rate rises and life events so repayments stay comfortable.

If the main routes do not fit

1. Credit union loans - Community-focused lenders with fair terms, helpful if your credit file is thin.

2. Cash loans - Fast access but higher costs and shorter terms, best for small, urgent needs.

3. Innovative retrofit finance - Options like guarantee funds or performance contracts that spread payments and tie them to energy savings.

4. Savings plus phased works - Reduce borrowing by splitting the project into stages funded partly from savings.

Frequently asked questions

Q: Is remortgaging always the cheapest way to fund renovations? A: For large projects it often is, because mortgage rates are typically lower than unsecured rates and terms are longer. Always compare total costs and any early repayment charges.

Q: When is a personal loan better than secured borrowing? A: When the budget is under £25,000, you want speed and simplicity, and you do not want to secure debt on your home. Expect higher APRs and shorter terms.

Q: What deposit do I need for bridging finance? A: Many lenders look for up to around 35% deposit, plus fees. You also need a clear exit route such as sale or a remortgage on completion of works.

Q: How do refurbishment mortgages release funds? A: Typically in stages as the build progresses. You will provide plans, costings, and allow valuations before each drawdown to confirm progress and value uplift.

Q: Are green grants really worth the effort? A: Yes, when available they reduce upfront costs and improve EPC ratings, which can lower bills and support property value. Check current schemes and eligibility in your area.

Q: What if I am mid fixed-rate mortgage? A: Consider a second charge mortgage to avoid breaking your fix. Compare costs carefully, as rates are higher than remortgaging but may still beat unsecured options for larger sums.

What to do next

Map your project scope and costings, then compare secured and unsecured routes side by side. Gather quotes, check your credit files, and model repayments under different rates. If you want a curated view of UK lenders and products matched to your circumstances, Kandoo can help you compare options efficiently and transparently.

Important information

This guide is for general information only and is not personalised advice. All borrowing is subject to status and affordability. Interest rates, eligibility, and offers change. Consider independent advice where appropriate and ensure you can afford repayments if rates rise.